Pakistan and Russia are expected to hold discussions this week about the import of oil and LNG.
A three-day visit by a Pakistani delegation to Moscow will be made under the direction of Dr. Musadik and Minister of State Petroleum Division and Capt. Mahmood, Additional Secretary In-charge (Petroleum Division), to discuss, among other things, the import of fuel at a discount, the means of payment, and the cost of shipment.
Aside from fuel imports, both parties are expected to discuss the Pakistan Stream Gas Pipeline (PSGP) and a gas pipeline from Russia to Pakistan via Kazakhstan. Remember that Pakistani refineries can separate Russian oil at a lower cost than the global price of oil, and that one private refinery has previously used Russian crude oil to produce finished goods.
It is worth noting that, as a result of Moscow’s confrontation with Ukraine, Western allies have prohibited Russian ships from transporting petroleum to other countries. Traders presently buy Russian oil and sell it to a buyer nation for a higher price. This is how trader commissions and transportation expenses affect Russian product pricing.
Given this, the biggest problem if Pakistan imports Russian oil will be the payment method. Russia’s currency is the ruble, which is linked to the price of gold. Local refineries will begin importing Russian oil once the payment method is determined and the price of Russian crude oil at the point of delivery in Pakistan remains competitive. Everything will be determined by the conditions of the agreement reached by Pakistan’s official team with the Russian government about price, payment method, and shipping expenses.
While Pakistan initiates talks with Russia, it is widely known that the South Asian country currently lacks a long-term LNG supplier, and the market’s spare supply is rapidly running out due to rising European demand. Given this, any agreement will allow the South Asian country to save billions of dollars if energy projects with Russia are implemented, while purchasing petroleum items from Moscow would reduce the government’s reliance on foreign exchange reserves.