In a not-so-surprising rejection, Russia has refused to sell its crude oil to Pakistan at a discounted rate. Russia rejected Pakistan’s request to give crude oil at a 30-40% discount, saying that it will not be able to offer anything at present as all volumes are committed.
During talks in Moscow, a Pakistan delegation led by State Minister for Petroleum Musadik Malik, a joint secretary, and officials from the Pakistan Embassy in Moscow requested a discount, as per Pakistani media.
The talks ended without a clear conclusion, but the Russian state assured that they will consider Pakistan’s plea and share its decision later via diplomatic channels.
According to media reports, Russia can offer crude at the same rates it offers to its large client countries, which have reliable and sound economies, at a suitable time. They stated that all volumes are currently committed with big buyers.
Notably, the Russian side urged Pakistan to honour its commitment to the Pakistan Stream Gas Pipeline, which will run from Karachi to Lahore and Punjab.
During the talks, the Pakistani side desired to alter the PSGP project’s model. According to the Russian side, the project model under the GtG arrangement has already been finalised, with only a few clauses of the shareholding agreement remaining to be finalised.
On November 29, a representative delegation from Pakistan flew to Moscow for a three-day visit with Russian officials to discuss the possibility of importing crude oil at a reduced price and discussing payment options and shipping costs.
While Pakistan is requesting Russia to consider its demand for discounted crude oil supplies, India has been increasing its oil imports from Russia significantly in recent months.
India’s imports from the Middle East fell 16.2% to about 2.2 million bpd in August, while imports from Russia increased 4.6% to about 896,000 bpd in September.
China and India now account for two-thirds of all Russian crude exports by sea, with China receiving at least half of all Russian crude exports through pipelines too.
India typically imports just 2 to 5% of its crude from Russia, which is about the same amount as the United States did prior to its announcement of a complete ban on Russian energy products. In 2021, India imported only 12 million barrels of Russian crude, with the vast majority of its oil coming from Iraq, Saudi Arabia, the United Arab Emirates, and Nigeria.
“Today, the Indian government’s motivations are economic rather than political.” In their oil import strategy, India will always look for a bargain. “It’s difficult not to take a 20% discount on crude when you import 80-85% of your oil, especially in the aftermath of the pandemic and the global slowdown,” Samir N. Kapadia, head of trade at government relations consulting firm Vogel Group, told CNBC.
It is pertinent to note here that India has saved 35,000 crores after it began purchasing discounted Russian crude.
Recently, the European Union failed to draw a consensus on approving a price cap on Russian oil. EU governments have disagreed over the price level at which the cap should be set. The price cap is the West’s effort to wipe out Russia’s oil revenues as retaliation for its invasion of Ukraine while maintaining global oil supplies and mitigating an increase in global energy prices. Poland, Estonia, Latvia, and Lithuania, the bloc’s easternmost members, objected that the proposed $60-$70 per barrel for Russian crude is too modest and far above the rates at which Russia currently sells crude. The EU officials have sought time to design a better deal.
With volumes of crude committed to buyers such as India and China, as well as the looming threat of the West’s attempts to ‘punish’ Russia for invading Ukraine, it will be interesting to see if Russia agrees to provide discounted crude to Pakistan in the near future.
