‘Pakistan won’t be able to achieve goal of importing cheap Russian oil’

ISLAMABAD: Pakistan will not be able to achieve its goal of importing two-thirds of its oil requirement from Russia at discounted prices due to financial and technical constraints, experts say.

According to them, the country faces several challenges in securing a long-term oil deal with Russia, such as its limited foreign exchange reserves, the limited capacities of its refineries and ports, and the lack of a direct pipeline or rail link between the two countries.

Pakistan and Russia signed an agreement in April 2023 for the supply of Russian crude oil and petroleum products, with the first consignment of 45,000 metric tonnes arriving in Karachi in June.

The second cargo of 50,000 metric tonnes is expected to arrive later this month.

However, the agreement is not a government-to-government deal, but a commercial arrangement between Pakistan Refinery Limited (PRL) and Russian state-owned oil company Rosneft.

The deal is based on spot prices and does not offer any deferred payment or credit facility to Pakistan.

Pakistan’s Minister for Energy Mussadik Malik had said in May that the country aimed to import 35 per cent of its total crude oil requirement from Russia by the end of 2023.

He had also claimed that the Russian oil would be cheaper than the oil imported from other sources.

However, experts say that this target is unrealistic and impractical, given Pakistan’s financial situation and its dependence on oil imports from Saudi Arabia and other Gulf countries.

“Pakistan is a distressed customer for Russia. It does not have enough foreign exchange reserves to pay for the oil imports. It also does not have enough refining capacity to process the Russian crude oil, which is heavier and more sulphurous than the Arab light crude,” said Dr Farrukh Saleem, an economist and energy analyst, while talking to Al-Jazera.

He said that Pakistan also faced logistical challenges in transporting the Russian oil from Karachi to other parts of the country, as it lacked a pipeline or rail network to do so efficiently.

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“Pakistan needs to invest in upgrading its refineries, expanding its port facilities, and building a pipeline or rail link with Russia if it wants to benefit from the oil deal in the long run,” he said.

Dr Saleem also questioned the claim that the Russian oil would be cheaper than the oil imported from other sources, saying that the price difference was negligible and did not justify the additional costs involved.

“The price of Russian crude oil is based on Brent crude, which is an international benchmark. The discount offered by Russia is only around 2 per cent, which is not significant. The transportation cost of bringing the oil from Russia to Pakistan is also higher than bringing it from Saudi Arabia or other Gulf countries,” he said.

He said that Pakistan should focus on diversifying its energy mix and reducing its reliance on oil imports, rather than chasing unrealistic deals with Russia or other countries.

“Pakistan should explore alternative sources of energy, such as renewable energy, hydropower, nuclear power, and coal. It should also improve its energy efficiency and conservation measures. These steps will help Pakistan reduce its energy import bill and save its foreign exchange reserves,” he said.