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Pakistan's case: US ready to allow Russian oil trade

  • US Embassy in Islamabad has expressed willingness to meet officials of Petroleum Division to explain to them the mechanism to cut a short-term cut rate deal for Russian crude oil
Published October 1, 2022
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ISLAMABAD: The United States (US) has reportedly showed willingness to allow trade of Russian oil at discounted rates for a specific period, well informed diplomatic sources told Business Recorder.

In case of Pakistan, US Embassy in Islamabad has expressed willingness to meet the officials of Petroleum Division to explain to them the mechanism to cut a short-term cut rate deal for Russian crude oil. Pakistan has already requested a deal with Russia to import wheat and oil at discounted rates.

The new regime, sources said, has conveyed by the US in a demarche to its partners including coalition partners on Russian oil.

The sources said US Embassy has conveyed during a demarche about bans on services related to maritime transportation of Russian crude oil and petroleum products. A coalition of US, the G-7, and the EU will implement a policy to ban a range of maritime services and transportation related to Russian origin crude oil (from December 5, 2022), and petroleum products (from February 5, 2023). However, an important exception to this policy ban is that a jurisdiction may purchase seaborne Russian oil at or below a price cap.

According to demarche, the goal of the price cap is: (i) to keep Russian oil flowing in the global market at lower prices; and (ii) reduce Kremlin’s revenues. In this regard, the main beneficiaries of this lower-price oil will be developing countries in Africa, Asia, and Latin America.

The sources said, as per US, Russia has the choice to either: (i) sell under the price cap and keep Russian oil flowing in the global markers; or (ii) find alternative markets to keep their oil flowing which may not be a reliable choice; or (iii) refuse to sell.

Difficult to imagine buying Russian oil at this time: Miftah Ismail

As per reports, Russia is already trying to secure long-term cut-rate contracts with countries at discounts of 30 percent or more, for their concern over the price cap,” the sources maintained.

The policy intends, sources said, to encourage oil trade, not deter it, including Russian oil at lower prices. In this regard, if importers and refineries want to avail necessary services including insurance, brokering, bunkering etc. from any of the coalition country members, they must purchase the seaborne Russian oil at a price at or below the set price cap. The U.S. and majority of G-7 countries have banned the import of Russian oil and will not be buying oil made available by the price cap.

In terms of compliance a record-keeping and attestation model will be followed by US Treasury’s Office of Financial Asset Control (OFAC) to track whether oil transactions below the price ceiling. OFAC will also advise about red flags for sanctions and price cap evasions to maritime and other relevant departments of the importing entity.

The sources maintained that proposed incentives to developing countries include:(i) buy Russian seaborne crude oil and petroleum products at a lower price;and (ii) address inflation and lower energy costs in their country.

The “price cap” has not yet been decided, and will be set by international consensus with countries that agree to implement the services ban and price cap exception.

The sources further stated that the U.S. side has conveyed that a country may partner with the coalition to cap the price of Russian oil to limit Russia’s revenues. U.S. has conveyed that a country may decide not to join the coalition but still benefit from purchasing the Russian seaborne oil at a lower price set by the coalition.

Ministry of Foreign Affairs, sources said, has also sought some clarifications from the U.S Embassy in Islamabad on this issue. On MoFA’s inquiry whether a long-term cut-rate contract may be established by a country to purchase Russian oil before a price cap has been established, the U.S. side did not appear to have any strict objections on the matter.

The sources said, MOFA has requested Ministry of Energy to facilitate meeting with U.S Embassy officials on this issue and also seek clarification inquiry whether a long-term cut-rate contract may be established by a country to purchase Russian oil before a price cap has been established.

Copyright Business Recorder, 2022

Comments

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Rebirth Oct 01, 2022 07:23am
The Russians are already selling it at least half the price of the dollar rate, in roubles. Buying it at a “capped” price would have to be even less than half. And even at the rouble rate, reports show that Russia’s revenue has already increased much more than before the war. It’s quite clear that there’s no strategy, here. It’s just buying Russian energy. It’s like saying I am going to buy stuff at a clearance sale at Wal-Mart to hurt America’s revenue. Or I will go for that buy one, get one deal from McDonald’s to decrease American corporate profits. Firstly, they made that deal available themselves and the money you’re giving them is still going to go in their banks. After the referenda, their response was nada. All they got left is the UN that never solved any problems anyway, including Ukraine and the greenback, which if not being used for energy trade by densely populated nations like India and China, it’s not really useful as a reserve currency. So, where do we go from here?
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Abdullah Oct 01, 2022 01:29pm
Thats the way to move forward.we need to get it cheaper.lets do it the prooper way so we dont face international isolation as we are not strong like india because the rich in pakistan and the educated here dont pay taces.
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KUKhan Oct 01, 2022 03:18pm
Oh.......puleeez, thank you United States of America for permission to buy Russian oil. Indians too must have asked for the permission, we are sure......no, we are certain......yup, the US Secretary of State went to India to give this permission, yeeeah, now we know how the world goes around n around.
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Abdul Sheikh Oct 01, 2022 06:51pm
What about Iranian oil?
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Majid Oct 02, 2022 03:16am
What an embarrasing situation.....seems like US embassy in Isloo is now running the country
thumb_up Recommended (0)
Neutral Oct 03, 2022 12:33pm
This Government is totally slave!
thumb_up Recommended (0)

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