Why aren’t we buying Russian oil? Many other countries are benefitting. But a host of reasons make it difficult for Pakistan By Asad Ullah Kamran
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uch has been made of the suggestion that Pakistan could have avoided the current economic crisis it is in if it had managed to import cheap crude oil from Russia. Former Prime Minister Imran Khan has made it the cornerstone of his political campaign - claiming he had reached an understanding with the Russians and was deposed by an international conspiracy as a result. While the claims may be a tad bit on the fantastical side, particularly ever since the Russian Ambassador to Pakistan recently confirmed that no MoU was signed on the trade of wheat and oil at cheaper prices with Pakistan, could looking towards Moscow for cheap fuel be our ticket out of this crisis? Here is the crux of it - Countries like India are indeed importing cheaper fuel from Russia and in turn undercutting the global economic crisis domestically by having cheaper oil. In fact, India is even exporting the oil at higher rates than they get from Russia. Similarly, China is also taking full advantage of the situation. So why can’t Pakistan? The problem is three-fold. For starters, given our particular dire-straits it might prove to be more economically disastrous to test the patience of the United States and other Western powers that have put sanctions on Russia. It would also jolt the relationship we have built with the Arab world over decades if we started buying Russia’s Ural blend of crude oil over the Arab blend. The second part of the equation is the fact that currently we do not have the facilities to process
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Russian crude oil in Pakistan. And lastly, even if these issues were set aside, Pakistan as a market is not large enough for Russia to consider selling their oil at a discounted price. Of course, there are always going to be hitches in any plan. Setting aside the obstacles and the fact that Prime Minister Imran Khan was wrong in his claims that an MoU had been signed with Russia, how viable would it be if Pakistan decided to go ahead and buy Russian oil anyways - even if not at discounted prices.
Why buy Russian?
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imply put, because Russian oil is cheaper generally and on top of that the Russians are desperate to sell. Waging war isn’t cheap, and Russia will very much be looking for markets to sell to as it tries to shore up revenues. That is why the impulse to turn towards Russia for oil is not entirely unfounded. As of this moment, many European countries are also importing Russian oil and gas despite public condemnation and sanctions. Consistent posturing by EU member states to strip Russia of its oil and gas revenues have been little more than words. In 2021, the EU imported 155 billion cubic metres (bcm) of natural gas from Russia. This accounts for over 40% of the EU’s overall gas consumption, with Germany’s reliance reaching 65%. Russian oil and gas sales to the EU directly fund the Kremlin’s military budget. Russia has exported €63 billion worth of fossil fuels since the start of the war, with the EU accounting for 71% of that, according to a research released by the Centre for Research on Energy and Clean Air. In absolute terms, Germany, Italy, and the Netherlands are among Europe’s top importers. At the same time, China and India are
taking full advantage of the predicament as well. Indian refineries, both public and private, have increased their purchases of Russian crude on the back of the sanctions and trade restrictions from the west, which have driven most purchasers to back out of deals with Russia. This has made Putin’s Russia somewhat desperate to increase revenues as waging a war is not cheap, this led to offers at lucrative discounted rates. According to Bloomberg projections based on trade data, India purchased upwards of 40 million barrels of Russian oil from late February to early May, accounting for 20% higher flows for the entire year of 2021. According to Kpler statistics, Russian oil arrivals in India increased to 740,000 barrels per day in May, increasing from 284,000 barrels in April and 34,000 barrels a year ago. Access to low-cost crude is already helping to enhance India’s petroleum imports, which increased by over 16% in April alone compared to the previous year. According to Indian government data, the Eurasian (including Russia) region’s oil contribution increased to 10.6% in April from 3.3 percent a year earlier. Cheaper oil therefore gave the BJP government fiscal space to reduce domestic petrol and diesel prices while the prices in the rest of the world continue to inflate. At the same time China continued to acquire considerable energy from Russia, with imports of oil, gas, and coal increasing by 75% by almost $6 billion in April. According to Chinese customs data, imports of Russian liquefied natural gas increased by 80% year on year to 463,000 tonnes. Imports of crude followed a similar trend, increasing by 4% to 6.55 million tonnes for the year.
