Discounted crude oil


Following indications by Russia to sell crude oil to Pakistan on discount has raised hopes among the government as well as the citizens, sensing a likely respite from soaring oil prices, which have compounded the fiscal woes of the cash-strapped nation.
The energy crisis, which followed hot on the heels of the spread of Covid-19 pandemic and Russia’s invasion of Ukraine, has stricken Pakistan like all other nations hard, forcing the country to scramble its economic wizards to secure oil deals with energy-rich countries, like Russia, to stave off a crippling economic crisis. The situation turned uglier after the Oil Producing and Exporting Countries (OPEC) and its partner Russia declined calls not to curtail the oil production, spurring concerns that the Ukraine war would result in a more aggravated energy crisis.
As the demand for oil and its consumption have increased, the prices of oil see an upward trajectory following China’s reopening of its borders after three years of strict Covid restrictions.
Last week, Pakistan’s state minister for petroleum, Musadik Malik, visited Moscow to secure an oil deal with Russia and on return announced that the Kremlin has agreed to sell crude oil on discount to the country in 2023.
As Russia is facing an intensifying global sanction regime for its invasion of Ukraine, Mr Malik told reporters that “Russia has decided to provide Pakistan crude oil at discounted rates”. But, Islamabad will have to wait until at least 2025 to secure a deal with Moscow for liquefied natural gas (LNG). “Russia was short on LNG because of international pressure,” Malik said. “They have invited Pakistan to begin talks on long-term contracts for 2025 and 2026.”
The minister announced during his presser that arrangements, both technical and financial, have been made to finalize a deal with Russia in the coming weeks to sell crude oil to the country on discounted rates. The deal, which is about to be finalized in the next week as a Russian delegation is visiting Pakistan, could save the recipient country from a persistent current account deficit and boost its refinery’s investment in the new market of oil.
While elaborating the prospects of the accord, Mr Malik has assured that national interest would be safeguarded before giving the final nod to the matter.
Pakistan’s oil and energy products imports make up 25 percent of its total imports bill. Being the 35th largest importer of crude oil in the world, the country imported $1.92 billion worth of crude oil.
In a constant struggle with an unprecedented cash crisis and a severe energy crunch round the year due to price shocks and global disruptions, buying cheaper oil from Russia will definitely ease pressure on the troubled Pakistani economy.