Russia has expressed disappointment with Pakistan’s slow progress in importing crude oil from Moscow, according to sources. Pakistan had committed to importing one cargo of crude oil from Russia next month, but the delay in setting up the required Special Purpose Vehicle (SPV) company means that the first shipment is now expected to arrive in May. The delay has caused frustration for Russia, which had requested Pakistan to import one crude oil cargo to demonstrate its seriousness.
One of the critical issues in crude oil pricing negotiations with Russia is the G7 Oil pricing cap mechanism, which the United States has recently reminded Pakistan to follow to negotiate the best possible price. However, complications have arisen due to differences in the composition of Arabian and Russian crude oil. Pakistani refineries require crude oil that produces higher diesel oil, which will increase costs and erode incentives on crude oil from Russia.
To finalize crude oil pricing with Russia, sources suggest that the oil industry should be involved. If both countries sign a deal, Russia will become Pakistan’s second-largest crude oil supplier after Saudi Arabia, exporting around 100,000 barrels of crude oil per day.
Pakistan faces a dollar crunch, making it a challenge to pay for Russian crude oil in the same currency. Russian authorities have agreed to receive payment in three currencies – Russian ruble, Chinese yen, and UAE dirham – against the supplies of crude oil to Pakistan. The State Bank of Pakistan (SBP) and the Russian counter bank are considering a payment mechanism for oil import in three currencies other than dollars.
Pakistan’s success in striking an oil deal with Russia and making payment in currencies other than the dollar would provide significant relief for the country. It is crucial for Pakistan to take the oil industry on board to finalize crude oil pricing with Russia and work towards striking an oil deal to benefit both countries.