Pakistan Receives First Russian Oil Shipment
Is Oil Diplomacy Going to Work to boost relations between Pakistan and Russia?
By: Omed Hajjana
Oil diplomacy has worked well in the past to boost relations between different countries. Is Russian oil diplomacy going to work now to boost relations between Pakistan and Russia?
Pakistan on Sunday received the first shipment of Russian oil that took one month to reach Pakistan.
Russia has been eagerly working to make her footprint in Pakistan.
However, she has not been successful due to the penetration of the United States (US) in Pakistan.
Russia has been an arch-ally of India. So the same case is about Pakistan regarding relations with the United States. Saudi Arabia, UAE agree to substantially increase oil production
However, the Indian tilt towards the US also raised alarms and sowed the seeds of distrust in Russia.
US tilt towards India also became a matter of serious concern for Pakistan.
So two aggrieved Parties-Pakistan and Russia decided to reshape their relations.
Therefore, the landing of Russian oil at Karachi port on Sunday is a row of hope for the two countries-Pakistan and Russia.
But the question is whether Pakistan will be able to bear the pressure of the United States (US) if it starts expanding relations in other spheres with Russia.
The answer may be no! United States (US) had conveyed to Pakistan that it could import Russian oil.
But Pakistan will have to follow a price cap of $60 per barrel that the US and G7 countries agreed on.
The US said that Russia and Ukraine war had led to fear of disruption of the oil supply.
Therefore, it did not want to disrupt oil and agreed with Pakistan and India to import oil from Russia to meet needs.
For example, the US said it had no objection to food items imported from Russia to avoid food security issues in the world.
Therefore, Pakistan imported Russian wheat.
Now, it imports oil.
There are some other questions attached to Russian crude oil.
The Russian oil cargo left Russia one month back and reached on Sunday.
So it took one month to reach Pakistan. Therefore, there are many concerns about higher freight of Russian oil that would eat up discounts Russia allows.
The cargo, carrying 100,000 metric tons of oil, first reached Oman.
From there, it was distributed in two ships, carrying 50,000 metric tons of oil each due to berthing constraints at Karachi port.
The Russian oil ship is scheduled to start discharging the oil on Monday, to be processed by Pakistan Refinery Limited (PRL).
The Russian oil shipment serves as a test case to examine the quality and composition of refined products derived from this crude oil.
The federal government will decide the future of Russian oil cargo.
Pakistan placed an order for the first cargo of Russian crude oil as a test case.
Pakistan receives discounts up to $18 per barrel. The price will be minus a discount of $16-$18 per barrel to Russia.
Arabian oil produces 45% high-speed diesel (HSD) and 25% furnace oil.
Russian crude produces 32% HSD and 50% furnace oil. The higher ratio of furnace oil production could disturb the economy.
Pakistani refineries have been facing challenges to dispose of furnace oil.
So, what will happen to furnace oil in heavy volume produced from Russian crude oil?
Pakistani refineries Pak Arab Refinery Limited (PARCO) and Pakistan Refinery Limited (PRL) have already borne Rs 30,000 per ton loss on exports.
Pakistan is going to pay in Chinese currency. So, Pakistan will also have to arrange dollars to buy Chinese currency to pay for Russian oil.
The truth is Pakistan does not have dollars as almost LCs in all sectors are barred right now due to the dollar issue.
