In a strategic move, the first shipment of Russian oil arrived in Karachi, after undergoing refining at an Indian refinery in Gujarat. To address sensitivities, the oil was transported via the United Arab Emirates, keeping in mind Islamabad's concerns.
Moscow's approach serves two purposes. Firstly, it safeguards India's relationship by avoiding any concerns over the oil deal with Pakistan. Secondly, it strengthens Russia's negotiating position with the IMF by offering discounted oil to Pakistan.
The discounted source of oil to Pakistan enables the country to negotiate with the IMF from a stronger standpoint. The negotiations revolve around the potential removal of subsidies on pump prices, a measure that could lead to increased fuel costs. The Pakistani government aims to avoid such cost increases as it could result in unpopularity among the population.
By utilizing this oil deal and facilitating Pakistan with discounted oil, Russia supports Pakistan's efforts to navigate the negotiations with the IMF and potentially retain subsidies on pump prices.
As per reports, Russia pursued a dual objective through this strategic move. Firstly, it aimed to maintain positive relations with India by ensuring that the discounted oil deal with Pakistan did not create any discontent.
Secondly, Russia intended to leverage this arrangement in negotiations with the International Monetary Fund (IMF) regarding the removal of subsidies from pump prices. The avoidance of subsidy removal would prevent a potential increase in petrol and diesel prices, which could adversely impact the popularity of the current government.
According to reports, Russian oil was offered at a 20% discount, with conditions including sourcing from an Indian refinery and payment in Chinese Yuan instead of US dollars.
After some delay, the Pakistan government eventually acquiesced to the conditions. However, in his statement, Pakistani Prime Minister Shahbaz Sharif did not mention the specific conditions. He simply stated, "A deal for one lakh tonneof oil has been signed with Russia. We have received 45,000 tonnes of it."
Pakistan's Minister of State for Petroleum, Musadik Malik, also acknowledged the pre-condition and expressed his fulfillment of another promise made to the nation. In a tweet, he stated, "This is the first-ever Russian oil cargo to Pakistan and the beginning of a new relationship between Pakistan and the Russian Federation." The supplied oil is reportedly being provided to Pakistan at a rate of $64 per barrel, which is lower than the market price of approximately $80 per barrel.
In May, Russian oil embarked on a journey from Primorsk, Russia, to Wadinar in Gujarat, India, for refining. It was then shipped to the UAE and subsequently arrived in Karachi in early June.
Image Source: The Tribune