ISLAMABAD: The much-talked-about Russian oil imports intended for cost savings may not materialise at institutional level as the cons outweigh pros, coupled with Moscow’s disinterest.

Informed sources told Dawn all the refineries had the technical capacity to the extent of 30 to 35 per cent to process Russian crude grades with minor adjustments. None of the Pakistani refineries can handle 100pc Russian crude of any grade. This simply means that imports from Russia can help diversify oil sources.

As rising global oil prices took a heavy toll on all sectors of the economy, former prime minister Imran Khan floated the idea of buying discounted Russian crude. However, after the current coalition government came to power, Finance Minister Miftah Ismail claimed that Russia had not replied to the previous administration’s communication regarding the offer.

A financial arrangement in the given political and regional environment is the key challenge. In fact, one of the big refiners had recently on its own arranged a couple of cargoes of Russian crude, but this was done through a third-party deal. This means a private trader provided Russian crude at different ports to Pakistani refiners and hence payments did not go directly to any Russian entity.

However, a senior industry executive said such an arrangement on a larger scale was not sustainable. That is a major challenge because Pakistani importers — currently struggling to arrange normal letters of credit (LCs) for oil imports under the country risk profile and limited foreign exchange reserves — have no financial backing to take a plunge.

Leading Pakistani banks like the National Bank of Pakistan and Habib Bank could not take a risk in the given circumstances because their operations mostly aligned with western countries.

Relatively smaller banks like Faysal, Meezan and Habib Metro, having Middle Eastern or Swiss shareholding, could opt for such arrangements, but then a strong political will in Pakistan and even stronger commitment from Russia was required.

Several refining experts agreed that the government was doing an exercise to explore Russian oil imports, but it was more for optics than actual interest in imports given the tilt of leading coalition partners towards the West than Russia.

The sources said a recent foreign ministry meeting discussed exploring energy imports, particularly crude from Russia, but no conclusive direction could be adopted.

Based on discussions in that meeting, the Ministry of Energy asked its four refineries — three coastal and another in Multan — to give their input and analysis regarding crude imports from Russia.

They were asked to respond to the technical suitability of crude grade in view of each refinery’s configuration, yield, quantity and the grade of the subject crude required by the respective refineries.

The refineries were also required to give a transportation and freight analysis for imports from Russia compared to regular imports from the Middle East on cost and benefit analysis and possible payment methodology.

The refiners were also asked to give feedback on existing commitments of upliftment from the Arab Gulf region under various term contracts.

Published in Dawn, June 30th, 2022

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