Pakistan has reportedly placed its first order for Russia’s discounted crude oil as part of a new deal between Moscow and Islamabad. It is expected that one cargo will dock at Karachi port sometime in May.
The recent development provides Russia a way to deal out its crude oil, given that many Western markets have turned away from the Eastern European country since the invasion of Ukraine. As a result, Russia has been searching for buyers outside India and China, who are already purchasing Moscow’s crude, per Reuters.
Pakistan has been in need of discounted oil since it finds itself in a cash-strapped situation which includes issues with balancing payments and severely low foreign exchange reserves. The majority of the country’s external payments come from energy imports.
Minister Musadik Malik reportedly said that Pakistan is set to only purchase crude oil, not refined fuels, with imports said to reach as much as 100,000 barrels per day, if the first transaction goes through without a hitch.
If Moscow’s crude oil does reach 100,000 barrels per day, it could mean a large drop for Middle East suppliers to Pakistan. Malik would apparently not comment on whether the Chinese yuan and the UAE dirham would be involved as currencies in the purchase, as Pakistan is short of cash. He also would not comment on the rate of imports, saying that he would “not disclose anything about the commercial side of the deal.”
The deal has apparently been in the works for a while, as Russian Energy Minister Nikolay Shulginov reportedly went to Islamabad in January to hold detailed talks on the deal. It was during these meetings that he suggested that exports of oil could start after March.
Malik also took a proposal to Moscow late last year, hoping to secure oil for Pakistan.
The Wall Street Journal reported that though Western countries have imposed a $60 per barrel price cap, it appears that India and China have been paying above the price cap. It is unclear if Russia has secured other buyers.
