WPB: Pakistan has signed an agreement with the Saudi Fund for Development to defer the payment of $1.2 billion for petroleumimports from Saudi Arabia by one year.
Prime Minister Shehbaz Sharif’s office welcomed the signing of this financial relief package, stating that the initiative would ensure a stable supply of petroleum products while easing immediate financial burdens and strengthening Pakistan’s economic resilience.
Since 2022, Pakistan has been grappling with an economic crisis characterized by high inflation, mounting debt, job losses, and financial difficulties. At one point, the country faced a severe shortage of foreign exchange reserves and the risk of defaulting on its debt obligations.
Three years ago, Pakistan set a goal to replace two-thirds of its petroleum imports with cheaper Russian crude. However, due to foreign exchange shortages and limitations in refining and port infrastructure, it failed to meet this target. Facing a liquidity crunch, Pakistan became a buyer of Russian petroleum after Moscow began offering discounts on its Urals crude in response to Western sanctions.
Previously, Pakistan’s Petroleum Minister, Musadik Malik, revealed that the country had, for the first time, paid for Russian petroleum imports using Chinese currency. According to Malik, this government-to-government purchase involved 100,000 tons of crude oil.
The decision to use the Chinese yuan instead of the U.S. dollar came after Russia announced that it would no longer accept U.S. dollars for its energy exports, opting instead for transactions in Chinese and Emirati currencies. Moreover, extensive Western sanctions over the Ukraine war had cut Russia off from global payment systems dominated by the U.S. dollar.
According to Oil Price, in addition to these challenges, Pakistan incurs significantly higher transportation costs for Russian crude oil. However, it still prefers Russian petroleum over Saudi crude, as Saudi Arabia’s light crude costs Pakistani refineries $10 to $11 per barrel more than Urals crude.
By WPB
Crude, Petroleum, Bitumen, market
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