Pakistan has ordered its first shipment of crude oil from Russia, which will arrive in late May or early June. The initial order, carrying 100,000 tons of crude, will be shipped at a discount of up to $18 per barrel, a price that is lower than Platts’ crude oil prices. The purpose of this order is to examine the economic feasibility of refining Russian crude to produce petroleum products. While the United States has cautioned Pakistan about oil deals with Moscow and the price cap imposed by the Group of Seven (G7) rich nations, Russia has offered Pakistan the discount to match the price and freight of better quality Arab Light crude, which Pakistani refineries currently process.
According to Express Tribune report of Zafar Bhutta, Russian crude produces a different ratio of refined petroleum products compared to Arab Light crude. Arab Light produces 45% high-speed diesel (HSD) and 25% furnace oil while Russian crude churns out 32% HSD and 50% furnace oil. Therefore, Pakistan may require a higher discount on Russian crude if the current lower price fails to match the cost of Arab Light. The payment for oil imports will be made in Chinese yuan while letters of credit for oil imports will be opened by the Bank of China. This payment in Chinese currency will help avoid sanctions imposed by the US against Russia and will be a significant relief for Pakistan given the shortage of dollars in the country.