Oil purchases from Russia: Payments will be in currencies of ‘friendly’ states

ISLAMABAD: Russia will start exporting crude oil to Pakistan after March which Islamabad will pay for in currencies of “friendly countries”, Russia’s energy minister said on Friday, a move that could bring relief to the energy-starved South Asian country.

Pakistan has been battling a balance of payment crisis with foreign exchange reserves falling to $4.6 billion, barely enough to cover three weeks of imports - mostly for oil.

It said in October it was considering buying discounted Russian crude, citing neighbouring India which has been purchasing from Moscow. Pakistan officials and Russian Energy Minister Nikolay Shulginov, who is in Islamabad for an annual inter-governmental commission on trade and economy, did not specify the size of the planned purchases.

“We have agreed that the payments will be made in the currencies of friendly countries,” Shulginov said at a joint news conference with Pakistan’s Economic Affairs Minister Ayaz Sadiq, without elaborating.

PM and Russian minister discuss oil and gas

He said the two sides have drafted an agreement to sort out issues like transportation, insurance, payments and loadings, adding: “We have already established a timeline of this agreement in our joint statement which is late March.”

Russia calls “unfriendly” countries, especially the United States and from the European Union, which imposed sanctions against it following Moscow’s invasion of Ukraine last year.

Pakistan junior oil minister Musadik Malik told local Geo News TV separately that Islamabad wanted to import 35% of its total crude oil requirement.

Energy purchases account for most of Pakistan’s import bill.

Shulginov said Russian gas companies might not be in a position at present to extend any supplies to Pakistan.

“We have decided that it would be a good idea for Pakistan to approach Gazprom and Novatek, two largest LNG producing companies in late 2023 to discuss the conditions when they have spare capacities,” he said.

Historically Pakistan has had no major commercial relations with Moscow, unlike neighbouring India, and as a traditional US ally, it had also been hesitant to do trade or any business with Moscow in the past.

It depends on oil from Gulf countries which often extend facilities like deferred payments and because imports from there are cheaper logistically given proximity to the Strait of Hormuz.