Oil Imports From Russia; A Ray Of Hope For Cheaper Fuel

ISLAMABAD, (UrduPoint / Pakistan Point News - 28th May, 2023 ) :Fluctuating global oil prices, devaluation of the Currency, taxation on oil imports and very low local oil exploration put a heavy strain on the fragile economy of a country like Pakistan which heavily relies on oil import for power generation industrial production and transportation.

The soaring prices of petroleum products have a trickle-down effect on each and every segment of society from a daily wager to a farmer, and from a government servant to a businessman.

When petroleum prices are increased, the cost of transportation rises, taking the rates of daily-use items to a new height, thus affecting the buying power of consumers which has already gone down a lot in recent years.

Similarly, the majority being run on oil, the power plants generate high-cost electricity which ultimately put a burden not only on consumers but also affects industrial production costs bringing a new wave of inflation.

Recognizing the magnitude of this challenge, the incumbent government took some measures to alleviate the impact such as providing subsidies to public transportation and food producers. However, it was clear that these measures alone were insufficient to fully mitigate the effects of the price hike.

Then, in a game-changing move, the government struck a deal with one of the biggest oil exporters, Russia, not only to alleviate people's suffering but also to stimulate national economic growth and expansion. The deal aims at ensuring a continuous supply of crude oil from Russia at discounted rates.

"The first shipment of discounted oil from Russia is on its way and is expected to dock at the Karachi Port sometime in May," this encouraging news was shared by State Minister for Petroleum Dr Musadik Malik, during a press conference here on May 18.

In April, he informed the media that Pakistan had placed its initial order for discounted Russian oil as part of a signed deal with Moscow.

The announcement of the agreement provided a ray of hope for the masses, who had been grappling with inflation and increased oil prices since the ouster of Nawaz Sharif from the government in July 2017.

The development also started off debates with some arguing that importing crude oil from Russia would not benefit Pakistan due to the lack of refineries here, but they were unaware that the petroleum ministry and the Prime Minister (PM) office had already addressed this issue.

On April 29, after confirming Pakistan's first order of discounted Russian crude oil on April 20, Dr Musadik revealed that PM Shehbaz Sharif had approved the construction of an oil refinery worth $10 to $14 billion.

Faheem Khawaja, an Economics professor, believed that the current government's efforts to obtain Russian oil would play a significant role in putting the country back on track.

He emphasized the pivotal role energy, especially petroleum products, play in fostering socio-economic development in any country and regarded Pakistan's decision to turn to Russia for meeting its oil demands as a much-needed step and a victory for the present regime.

Shahzad Paracha, a business reporter and analyst, said that importing Russian oil would also address the balance of payment crisis faced by the country.

He explained that energy imports constitute the majority of Pakistan's external payments, and importing Russian oil would help maintain the foreign exchange reserves, which had been depleting over the past few years.

According to Musadik Malik, Pakistan, "Under the signed deal with Moscow, will only purchase crude oil not refined fuel." "If the initial transaction goes smoothly, imports are expected to reach 100,000 barrels per day," he added.

When asked about the potential benefits of the oil deal with Russia, an official from the Oil and Gas Regulatory Authority (OGRA) stated, "We are a net importer of oil and spend billions of Dollars each year on oil imports. The discounted Russian oil can help us save money and reduce the trade deficit, which can boost the economy and create jobs." He said importing Russian oil could help end Pakistan's energy crisis, adding by importing discounted oil from Russia, the oil supply in Pakistan would increase, leading to a reduction in the prices of petroleum products thus ultimately improving the lives of people and strengthening the national economy.

Despite the positive aspects of the Islamabad-Moscow oil deal, some analysts believed that there were risks involved especially regarding Pakistan's relations with the United States (US). However, these risks were dismissed by Ambassador to the US Masood Khan during a conference at the Wilson Center's South Asia Institute in Washington on April 27.

He made it clear, "We have placed the first order for Russian oil, and this decision has been made in consultation with the United States government. There is no misunderstanding between Washington and Islamabad regarding this matter." It was a bold and tough decision to struck a deal with Russia at this critical moment when the Russia-Ukraine war was at its peak, but the courageous leadership of the government took the decision solely for the welfare of the masses and to take the country forward.