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Pakistan to Buy Discounted Russian Oil to Ease Economic Pains

Pakistan to Buy Discounted Russian Oil to Ease Economic Pains

Pakistan to acquire discounted Russian oil from 2023, economic relief.

Musadik Malik, Petroleum minister of Pakistan, visited Russia last week to negotiate, as Moscow faces increased global export curbs as punishment for its invasion of Ukraine. On his return to Islamabad on Monday, Malik told reporters that “Russia has decided to provide Pakistan crude Russian oil at discounted rates, as well as gasoline and diesel at lower prices.”

Despite a serious gas shortage as winter approaches, Pakistan will most likely have to wait until at least 2025 to reach an agreement with Moscow for liquefied natural gas. In response to international pressure, Malik claimed that Russia was low on LNG. To start negotiations on long-term contracts for 2025 and 2026, they have invited Pakistan.

About the plans to aid Pakistan

which is in need of foreign reserves, and downplayed worries that doing business with Russia may harm Islamabad’s critical relationship with the United States. The specifics of the transaction are yet unclear.

According to Taimur Fahad Khan, research associate at the Institute of Strategic Studies Islamabad’s (ISSI) Center for Strategic Perspectives, the agreement will be extremely advantageous for Pakistan. He added that getting energy at a discount will help relieve some of the pressure on Pakistan’s foreign reserves.

The transactions, according to Khan, will also increase mutual understanding and provide each nation a “good sense of reliability” as a partner.

Pressure is mounting on the troubled Pakistani government to expand energy procurement. Malik estimated that in order to maintain a gross domestic product growth of 5% to 6%, supply would have to increase by 8% to 10% annually.

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Senior Fellow James M. Dorsey

The oil will need to be transported by ship because there isn’t a pipeline that connects Pakistan and Russia, according to the Rajaratnam School of International Studies in Singapore. According to him, shipping oil by water would be more expensive logistically and financially.

Even so, the unnamed Pakistani official acknowledged that the hefty shipping expenses for oil imported from Russia will be readily offset by the reductions.

Experts have expressed concerns about the refinery’s need for resources and the quality of Russian crude. They claimed that specific Russian oil kinds would cause the equipment in oil refineries to deteriorate more quickly.

The officials

The government disagreed with this as well, claiming that “the majority of the oil Pakistan expects to acquire from Russia will already be refined.”

Undoubtedly, Pakistan needs a quick influx of natural gas. However, Dorsey doubted that making purchases would even be possible after 2025. According to him, the planned LNG agreement “depends on the outcome of the Ukraine conflict and Russia’s capacity to manufacture and sell LNG in the future.” “In the case of LNG, there is no immediate relief for Pakistan.”

Khan, the leading specialist on Russia for the ISSI, was more optimistic. According to him, Russia “plans to open additional LNG plants, increasing the volume of LNG that it may export to new clients, including Pakistan.”

Experts speculated that Pakistan’s advances toward Russia would have an impact on relations with the U.S., which has spearheaded the effort to isolate Moscow over the Ukraine crisis.

Before approaching Russia for energy, Islamabad informed the United States of its plans, and Khan was certain that Washington was aware of Pakistan’s situation. The U.S. recently expressed its support for Pakistan as it battles the growing menace of terrorism.

In its interactions with the South Asian area, the United States “understands that it has to maintain a certain balance,” Khan added. “And as India also able to buy Russian electricity without any issues or limitations, Pakistan should given same chance.”

Source: “Nikkei Asia”

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