February, 24, 2024
Price Cap Strains Russian-Pakistani Oil Deal: Talks Underway

Price Cap Strains Russian-Pakistani Oil Deal: Talks Underway

Infostani Sources- The Russian delegation plans to arrive in Pakistan today to resolve the deadlock in the agreement for importing crude oil from Russia. Notably, in October, officials from Pakistan Refinery Limited reached a mutual understanding with Russian authorities on a long-term oil supply agreement during the Russian Energy Forum. Although both parties signed the agreement. Negotiations reached a deadlock because Russian authorities refused to commit to a long-term arrangement within the specified price cap limit.

To resolve the deadlock, the Russian delegation is arriving in Pakistan today. It’s worth mentioning that the European Union and the United States imposed a price cap of $60 per barrel on Russian oil in the context of the Ukraine war. Washington supported Pakistan in purchasing Russian oil within the price cap, but Russia rejected the proposal. Sources indicate that Pakistan is unwilling to be part of any deal that violates the price cap and risks US sanctions.

Price Dynamics: Pakistan’s Strategic Shift to Russian Oil at $60 per Barrel

Price Cap Strains Russian-Pakistani Oil Deal: Talks Underway

It is crucial to note that the Pakistani government signed a long-term agreement with Russia at the rate of $60 per barrel in October. While Pakistan seeks Russia to cover the freight charges for oil supply. It has chosen to engage the commercial company Pakistan Refinery Limited (PRL) on a commercial basis. Instead of signing a government-to-government contract. After both countries designated PRL as the procuring agency under the agreement. PRL entered into a long-term oil procurement contract in December of this year. PRL successfully imported 100,000 tonnes of Russian oil, yielding a profit.

Experts suggest that Pakistan can benefit if it continues to import oil from Russia. During the last trial cargo order, Russian oil was 32 percent higher than others, priced at $7 per barrel. The refinery produced 50% high-speed diesel and 50% furnace oil initially. However, after blending 35% Russian oil with 65% Arabian oil, the results improved, and furnace oil production decreased. While Pakistan traditionally depended on Arabian oil, the collaboration with Russia presents a new opportunity. PRL is also working to increase its production capacity from 50,000 barrels per day to 100,000 barrels per day. With a construction contract awarded to a company for this purpose.

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