On Sunday, Prime Minister Shehbaz Sharif announced that the first shipment of discounted crude oil from Russia has arrived in Pakistan. The oil discharge is scheduled to commence on June 12, according to a tweet by the premier. Shehbaz Sharif expressed satisfaction in fulfilling another promise to the nation and stated that this development signifies progress towards prosperity, economic growth, energy security, and affordability.
The arrival of the inaugural Russian oil cargo in Pakistan marks the beginning of a new relationship between the two countries, as stated by the prime minister. He commended all those involved in this national endeavor and appreciated their contributions to translating the promise of Russian oil imports into reality.
The consideration of purchasing discounted Russian oil was announced by Finance Minister Ishaq Dar last year, highlighting that neighboring India had been procuring oil from Moscow, and Pakistan also had the right to explore this possibility. Subsequently, State Minister for Petroleum Musadik Malik engaged in talks in Moscow to discuss issues related to oil and gas supplies. Following these discussions, the government confirmed its decision to purchase discounted crude oil, petrol, and diesel from Russia.
I have fulfilled another of my promises to the nation. Glad to announce that the first Russian discounted crude oil cargo has arrived in Karachi and will begin oil discharge tomorrow.
Today is a transformative day. We are moving one step at a time toward prosperity, economic…
— Shehbaz Sharif (@CMShehbaz) June 11, 2023
In January 2023, a Russian delegation visited Islamabad for further discussions to finalize the deal. After addressing technical issues related to insurance, transportation, and payment mechanisms, the two countries aimed to sign an agreement by late March that year, as mentioned in a joint statement.
In April, Musadik Malik announced that Pakistan had placed its first order for discounted Russian crude oil under the agreed deal. He also stated that imports were expected to reach 100,000 barrels per day (bpd) if the initial transaction proceeded smoothly. Pakistan’s Refinery Limited (PRL) would be the first to refine the Russian crude in a trial run, followed by Pak-Arab Refinery Limited (Parco) and other refineries.
While the crude deal might have been challenging for Pakistan to accept due to its long-standing alliance with the West and its rivalry with neighboring India, which historically has closer ties with Moscow, the country’s substantial financing needs played a significant role in this decision. The discounted crude provides some relief as Pakistan faces a severe balance-of-payments crisis, which poses a risk of defaulting on debt obligations. Energy imports constitute a major portion of the country’s external payments.
At present, around 80% of Pakistan’s oil requirements, approximately 154,000 barrels per day, are met by traditional suppliers from the Gulf and Arab regions, primarily Saudi Arabia and the UAE. The anticipated 100,000 bpd from Russia could significantly reduce Pakistan’s dependence on Middle Eastern fuel.
For Russia, Pakistan’s purchase offers a new market outlet, expanding its sales to India and China amid the redirection of oil from Western markets due to the Ukraine conflict.