Russia rubbishes claims of ‘special’ oil discount

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

(MANEND NEWS): Russian Energy Minister Nikolai Shulginov has dismissed reports of Pakistan receiving any “special discount” in oil exports.

Russia has confirmed that it has started exporting oil to Pakistan and that it had agreed to accept Chinese currency as payment, while simultaneously clarifying that Islamabad did not receive any exclusive discounts on the purchase deal, Voice of America (VoA) reported on Friday.

Notably, Prime Minister Shehbaz Sharif announced last week that the first “Russian discounted crude oil cargo” had arrived and offloaded at the port in the southern city of Karachi.

Pakistan has purchased 100,000 metric tonnes of Russian crude oil, of which 45,000 tonnes arrived earlier this week, said Petroleum Minister Musadik Malik.

He told the media on Monday that the payment was made in Chinese yuan and said that there would be a reduction in local oil prices in a few weeks. But Malik did not disclose details such as pricing or the discount Islamabad received, as claimed by Sharif.

However, according to the Russian media agency Interfax, the Russian energy minister said that “oil deliveries to Pakistan have begun, [but] there is no special discount; for Pakistan, it is the same as for other buyers”.

“We believe that Pakistan is just as important a partner for us as India. A shipment was recently shipped, and there will be more deliveries in the future,” he said.

Commenting on information from the Pakistani media that payment is in yuan, Shulginov said, “We agreed that the payment would be made in the currencies of friendly countries.”

The minister also confirmed that the issue of barter supplies was also discussed, “but no decision has been made yet.”

The countries did not separately agree on the supply of oil products – Pakistan has its own refineries and buys either oil or oil products, depending on its needs, Shulginov said.

He also noted that “for the export of liquefied natural gas, the countries have not yet found an understanding on prices – the discussion is about long-term contracts, but so far we are talking about spot supplies and spot gas prices are now high.”

Earlier, sources had told the Express Tribune that the shipment was a test case to examine the quality of the crude oil and the ratio of refined products, adding that a report would be sent to the federal government for future decisions regarding the long-term commercial oil deals.

Pakistan had placed the order for the first Russian crude oil cargo at a discounted rate of up to $18 per barrel. Islamabad followed the Platts crude oil prices, which meant Platts minus a discount of $16-18 per barrel, the sources said.

The sources also said that Pakistan would examine the economics of refined petroleum products based on the discounts. They added that Pakistan had received specifications of the Russian oil, which were not too good.

Additionally, the freight of the Russian oil was too high. According to the sources, Russia had offered discount rates of $16-18 to match the quality and the freight of Arabian light oil, which the Pakistani refineries were currently processing.

The procurement of crude oil has long been at the centre of local politics, particularly after the visit of former Prime Minister Imran Khan only a day before Russia launched its war on Ukraine on Feb 24, 2022.

Khan, ousted through a no-confidence vote in parliament in April last year, claimed that his Moscow visit was one of the reasons behind his ouster.

Currently, Pakistan meets 80% of its oil requirements, or roughly 154,000 barrels per day, through traditional Gulf and Arab suppliers, mainly Saudi Arabia and the United Arab Emirates.

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