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All Pakistani banks refuse to open LCs for Russian crude oil import

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  • Banks say payment in dollars not possible against import of Russian oil.
  • Commercial banks cite Russia-Ukraine war reason for not opening LCs.
  • Oil refineries also cite several problems in importing crude oil from Russia.
ISLAMABAD: All Pakistani commercial banks have refused to open letters of credit (LCs) for Russian-origin crude oil in the light of economic sanctions by the United States, the United Kingdom and the European Union against Moscow for invading Ukraine, The News reported Saturday.
The commercial banks, according to the publication, have stated that payment in US dollars is not possible against the import of Russian crude oil.
However, if the government manages to enter a G2G agreement with Russia for the import of crude oil under transaction mode based on the rouble — ensuring no impact of sanctions on Pakistan — the refineries can utilise crude oil up to 15-30%, keeping in view its technical suitability for making finished products.
On the other hand, the refineries are in their short and long-term agreements with Abu Dhabi National Oil Company (ADNOC), Aramco, and Kuwait Petroleum Corporation (KPC) for crude oil imports.
More importantly, the current transportation freight for imports from Russian ports is estimated in the range of $3-3.5 million compared to the current freight of $0.8-1.0 from the Middle East ports and the sea voyage from the Black Sea would be around 16-26 days compared to 4-5 days from the Middle East.
This means that the freight charges, from Russia’s ports to Karachi, stand at $8 per barrel which is 8-12 times higher in comparison to the United Arab Emirates (UAE) ports.

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This is the essence of the written responses of four refineries — PARCO, BYCO (Cnergyico Pk Limited), PRL, and NRL — to the government against letters written to them on June 27, seeking recommendations on five issues, which included the technical suitability of the Russian crude oil, quality and grades, cost of transportation and freight charges, payment mechanism, and existing terms of the contract.

Can utilise Russian oil up to 15-30%: PARCO​

According to the copy of the written responses available with The News, Pak-Arab Refinery (PARCO) said that a detailed technical analysis of processing Russian crude oil can be assessed based on the crude oil blend of Russian grades along with the current grades.
The PARCO wants to ask for samples of Russian grades like SOKO, ESPO and URALA, and Serbia Light, saying it can utilise Russian crude oil up to 15-30% keeping in view its technical suitability for making the finished products.
PARCO said at the maximum, it can import one or two cargoes of 70,000MT to process in a month as most of the Russian crude oils are heavier than its imported grades, therefore, to manage product mix, these can be processed by replacing the Arab Light crude oil.

High freight charges​

BYCO refinery, which imported two Russian crude oil cargoes in the past, has said that the voyage time from Russian ports to Karachi varies from 28-37 days and freight charges are 8-12 times higher in comparison to the UAE ports.
Since a very limited number of vessels are reporting at the Russian ports due to the risk of sanctions, this can further increase the freight charges. Cnergyico also asked Pakistan and Russian governments to decide on an effective payment channel because as per prevailing conditions, it will be difficult for commercial banks to open LCs due to the risk of sanctions.
It also says that it's crude procurement maintains a balance between spot and term cargoes for a particular quarter based on market fundamentals. However, the BYCO refinery says it can absorb some of the Russian crude oil.
More importantly, the Russian crude oils vary from field to field and some of them are technically suitable keeping in view each refinery configuration.

Difficulties in product disposal​

PRL said that it has graded three Russian crudes that including SOKOL, ESPO, and URAL. SOKOL crude oil is the first preference in terms of quality grading, ESPO second, and URAL comes third in terms of preference.
While, the PRL said that SOKOL is a light and sweet crude, it has higher middle distillates and low fuel oil contents. SOKOL would always be the first-choice crude for PRL when compared with other available grades.
It said that the ESPO is fairly sweeter crude with a medium-light blend. However, its only demerit is the higher quantum of fuel oil, and its disposal will always be a daunting task the URAL, PRL says, it’s a mix of both heavy, light and sour crudes.
Urals Sulphur content varies from 1.4% to 2.%. Higher Sulphur content variation in this crude will naturally reflect in its product slate, thereby making it difficult for the refiner to stipulate product Sulphur specifications.
This crude also contains higher volumes of fuel oil and will always pose difficulties in product disposal. Mentioning transportation and freight analysis for import from Russia crude oil in comparison with the normal imports from the Middle East, the PRL said it imports a major chunk of its crude oil from the Middle East region, where freight varies between $1.0-1.5 per barrel. And Freight charges from the KOZMINO port of Russia to Karachi are $8.0/barrel as quoted by the national carrier as a provisional quote.
The PRL also mentioned that the sea voyage time from KOZMINO port to Karachi is approximately 22 days.
About the existing commitment to upliftment from the Arab Gulf region concerning term contracts, the PRL said that according to current term contracts with ADNOC, ARAMCO and KPC 1.2 million MT/ 9.0 million barrels per year are required to be uplifted.
The PRL said after fulfilling its current crude oil term, contract obligations can explore the possibility of processing an additional 300,000-400,000 MT per year.

Route likely to pass through war zones​

The NRL, in its one-page response, said that currently LCs are not being confirmed by the international banks because of the country's risk and commercial banks are not inclined to open LCs for the import of Russian crude oil in the presence of sanctions against Russia.
It also said that the normal sailing time from the Middle East is about four days, whereas it is estimated that the voyage time (one way) would be 20 days from Russia.
Moreover, the route is likely to pass through war zones owing to which risk factors will increase manifold. The NRL suggested the government carve out a doable payments mechanism.
 

Hyde

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as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

For a common Pakistani, The simple definition of Russia is that its friend of India. If we want to better our ties with Russia we should engage with them about future prospects but implement that vision after the war with Ukraine is over.
 

Lincoln

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as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

For a common Pakistani, The simple definition of Russia is that its friend of India. If we want to better our ties with Russia we should engage with them about future prospects but implement that vision after the war with Ukraine is over.

It's not about 'friendship,' it's about national interests.

Moreover importing oil from Russia won't jeopardize our relationship with the Arab world who are also maintaining a very neutral stance despite western pressure and leverage.


Youthias should read that. Youthias want friendship with country which supllies 68% percent of military equipment to India. They think Russia will ditch India for few millions of cheap oil for Pakistan. Such idiots na-insafians.

Russia 68%, USA 14% and Israel 7.2% are the major arms suppliers to India (2012-2016), and India and Russia have deepened their Make in India defence manufacturing cooperation by signing agreements for the construction of naval frigates, KA-226T twin-engine utility helicopters (joint venture (JV) to make 60 in Russia and 140 in India), Brahmos cruise missile (JV with 50.5% India and 49.5% Russia) (Dec 2017 update).[37] In December 1988, an India–Russia co-operation agreement was signed, which resulted in the sale of a multitude of defence equipment to India and also the emergence of the countries as development partners as opposed to purely a buyer-seller relationship, including the joint ventures projects to develop and produce the Fifth Generation Fighter Aircraft (FGFA) and the Multirole Transport Aircraft (MTA). The agreement is pending a 10-year extension.[38] In 1997, Russia and India signed a ten-year agreement for further military-technical cooperation encompassed a wide range of activities, including the purchase of completed weaponry, joint development and production, and joint marketing of armaments and military technologies.[39]

The co-operation is not limited to a buyer-seller relationship but includes joint research and development, training, service to service contacts, including joint exercises. The last joint naval exercises took place in April 2007 in the Sea of Japan and joint airborne exercises were held in September 2007 in Russia. An Inter-Governmental commission on military-technical co-operation is co-chaired by the defence ministers of the two countries. The seventh session of this Inter-Governmental Commission was held in October 2007 in Moscow. During the visit, an agreement on joint development and production of prospective multi-role fighters was signed between the two countries.

In 2012, both countries signed a defence deal worth $2.9 billion during President Putin's visit to India for the 42 new Sukhois to be produced under license by defence PSU Hindustan Aeronautics, which will add to the 230 Sukhois earlier contracted from Russia. Overall, the price tag for the 272 Sukhois - three of the over 170 inducted till now have crashed - stands at over $12 billion. The medium-lift Mi-17 V5 helicopters (59 for IAF and 12 for home ministry/BSF) will add to the 80 such choppers already being inducted under a $1.34 billion deal inked in 2008. The value of India's defence projects with Russia will further zoom north after the imminent inking of the final design contract for the joint development of a futuristic stealth fifth-generation fighter. This R&D contract is itself pegged at US$11 billion, to be shared equally by the two countries. So if India inducts over 200 of these 5th Gen fighters, as it hopes to do from 2022 onwards, the overall cost of this gigantic project for India will come to around US$35 billion since each of the jets will come for upwards of US$100 million at least.[31]

In October 2018, India inked the historic agreement worth US$5.43 billion with Russia to procure five S-400 Triumf surface-to-air missile defence system, one of the best missile defence system in the world ignoring America's CAATSA act. The United States threatened India with sanctions over India's decision to buy the S-400 missile defense system from Russia.[40]

India and Russia have several major joint military programmes including:

Between 2013 and 2018, Russia accounted for 62% of arms sales to India.[41]


Troops of the 'Tri-Services Guard of Honour' company, of the Indian Armed Forces, during the 2020 Moscow Victory Day Parade.
Additionally, India has purchased/leased various military hardware from Russia:


Not about friendship, just about national interests.
 

Crimson Blue

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as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

Have you listen to the coverage of meeting between Putin & ....... ah never mind..... :suicide:
 

Dalit

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Youthias should read that. Youthias want friendship with country which supllies 68% percent of military equipment to India. They think Russia will ditch India for few millions of cheap oil for Pakistan. Such idiots na-insafians.

Russia 68%, USA 14% and Israel 7.2% are the major arms suppliers to India (2012-2016), and India and Russia have deepened their Make in India defence manufacturing cooperation by signing agreements for the construction of naval frigates, KA-226T twin-engine utility helicopters (joint venture (JV) to make 60 in Russia and 140 in India), Brahmos cruise missile (JV with 50.5% India and 49.5% Russia) (Dec 2017 update).[37] In December 1988, an India–Russia co-operation agreement was signed, which resulted in the sale of a multitude of defence equipment to India and also the emergence of the countries as development partners as opposed to purely a buyer-seller relationship, including the joint ventures projects to develop and produce the Fifth Generation Fighter Aircraft (FGFA) and the Multirole Transport Aircraft (MTA). The agreement is pending a 10-year extension.[38] In 1997, Russia and India signed a ten-year agreement for further military-technical cooperation encompassed a wide range of activities, including the purchase of completed weaponry, joint development and production, and joint marketing of armaments and military technologies.[39]

The co-operation is not limited to a buyer-seller relationship but includes joint research and development, training, service to service contacts, including joint exercises. The last joint naval exercises took place in April 2007 in the Sea of Japan and joint airborne exercises were held in September 2007 in Russia. An Inter-Governmental commission on military-technical co-operation is co-chaired by the defence ministers of the two countries. The seventh session of this Inter-Governmental Commission was held in October 2007 in Moscow. During the visit, an agreement on joint development and production of prospective multi-role fighters was signed between the two countries.

In 2012, both countries signed a defence deal worth $2.9 billion during President Putin's visit to India for the 42 new Sukhois to be produced under license by defence PSU Hindustan Aeronautics, which will add to the 230 Sukhois earlier contracted from Russia. Overall, the price tag for the 272 Sukhois - three of the over 170 inducted till now have crashed - stands at over $12 billion. The medium-lift Mi-17 V5 helicopters (59 for IAF and 12 for home ministry/BSF) will add to the 80 such choppers already being inducted under a $1.34 billion deal inked in 2008. The value of India's defence projects with Russia will further zoom north after the imminent inking of the final design contract for the joint development of a futuristic stealth fifth-generation fighter. This R&D contract is itself pegged at US$11 billion, to be shared equally by the two countries. So if India inducts over 200 of these 5th Gen fighters, as it hopes to do from 2022 onwards, the overall cost of this gigantic project for India will come to around US$35 billion since each of the jets will come for upwards of US$100 million at least.[31]

In October 2018, India inked the historic agreement worth US$5.43 billion with Russia to procure five S-400 Triumf surface-to-air missile defence system, one of the best missile defence system in the world ignoring America's CAATSA act. The United States threatened India with sanctions over India's decision to buy the S-400 missile defense system from Russia.[40]

India and Russia have several major joint military programmes including:

Between 2013 and 2018, Russia accounted for 62% of arms sales to India.[41]


Troops of the 'Tri-Services Guard of Honour' company, of the Indian Armed Forces, during the 2020 Moscow Victory Day Parade.
Additionally, India has purchased/leased various military hardware from Russia:


Tera baap Amreeka he.
 

Silverblaze

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as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

For a common Pakistani, The simple definition of Russia is that its friend of India. If we want to better our ties with Russia we should engage with them about future prospects but implement that vision after the war with Ukraine is over.

Why does it make sense to buy wheat from russia then?
bottom line: Pakistan is missing out on cheap oil which india and china are not only using but exporting back to EU and north america.

We will see both indian and Chinese industries even more competitive in the future and this fiscal support is invaluable for them.

If pakistani bureaucracy spent 10% of time and resources in figuring out a way to bring cheap russian oil instead of proving it a futile attempt things would be different.
 

Hyde

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It's not about 'friendship,' it's about national interests.

Moreover importing oil from Russia won't jeopardize our relationship with the Arab world who are also maintaining a very neutral stance despite western pressure and leverage.



Not about friendship, just about national interests.
It is exactly about national interests. We have minimum diplomatic relationship with Russia let alone economic or defence ties. We have no border with Russia unlike sea-border with Arab world where they can easily transport the crude oil into Pakistan. We have no established routes with Russia and it takes years to build one that is economically viable.

Have you listen to the coverage of meeting between Putin & ....... ah never mind..... :suicide:
Say in clear words… I don’t understand the language that you are speaking to yourself.

Why does it make sense to buy wheat from russia then?
bottom line: Pakistan is missing out on cheap oil which india and china are not only using but exporting back to EU and north america.

We will see both indian and Chinese industries even more competitive in the future and this fiscal support is invaluable for them.

If pakistani bureaucracy spent 10% of time and resources in figuring out a way to bring cheap russian oil instead of proving it a futile attempt things would be different.
I don’t know when we imported Russian wheat but it is always going to be more expensive than importing it from neighbouring countries like India or Iran.

PS: Talking about importing wheat itself is a failure for Pakistan as we were historically self-sufficient in agriculture especially production of wheat
 

araz

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If a 35as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

For a common Pakistani, The simple definition of Russia is that its friend of India. If we want to better our ties with Russia we should engage with them about future prospects but implement that vision after the war with Ukraine is over.
If a 35% rebate on oil is agreed with the Russians we will still gain a huge amount of rebate . Even at 30% rebate you gain 39 dollars given a130 dollar price. Add 8 dollars as excess freight. We require 550 bpd and local refineries can refine 60% of this locally ( roughly 310bpd). Even if we can get 100Bpd via Russia at 99 dollars saving us 31 dollars it amounts to 1/5 of our requirements. Over all we will save roughly 5.5dollars per barrel. This amounts to 2-3% off of our export bills of 20billion dollars.A 600 million dollar rebate which is 600 million more than we currently have. A lot Of what is being said is in support of individual's properties in the US by towing the US line.
A
 

Enigma SIG

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Shehbaz Sharif can buy 6 months of oil from his personal expense but we all know he wouldn't because he hates the country.
 

MajesticPug

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View attachment 858599
  • Banks say payment in dollars not possible against import of Russian oil.
  • Commercial banks cite Russia-Ukraine war reason for not opening LCs.
  • Oil refineries also cite several problems in importing crude oil from Russia

In summary, Pakistan stands by America -- starving or not. America will reward Pakistan by rejecting Indian purchases of missiles, fighter jets, advanced radars, anti-air systems, frigates, 155mm guns, and AWACS.
 

Khan2727

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Nothing else can be expected from our cowardly "leaders" and "political" decision-makers.
It's not about 'friendship,' it's about national interests.

Moreover importing oil from Russia won't jeopardize our relationship with the Arab world who are also maintaining a very neutral stance despite western pressure and leverage.



Not about friendship, just about national interests.

Well put.
 

TheDarkKnight

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Where there is a will there is a way. People like OP and PDM just want Pakistanis to suffer with high energy costs because of their weaknesses in-front of some foreign powers - articles like these will be used as excuses and justifications.
 

my2cents

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It is exactly about national interests. We have minimum diplomatic relationship with Russia let alone economic or defence ties. We have no border with Russia unlike sea-border with Arab world where they can easily transport the crude oil into Pakistan. We have no established routes with Russia and it takes years to build one that is economically viable.


Say in clear words… I don’t understand the language that you are speaking to yourself.


I don’t know when we imported Russian wheat but it is always going to be more expensive than importing it from neighbouring countries like India or Iran.

PS: Talking about importing wheat itself is a failure for Pakistan as we were historically self-sufficient in agriculture especially production of wheat
Instead of wheat, you should import fertilizer from Russia. They are largest producer of fertilizer in the world. It won't be efficient to import crude oil from Russia which requires special refining process which your country does not have at present.
 

Clutch

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as I argued couple of weeks ago, it makes no sense to buy oil from Russia right now. Russia is not China where we can consider taking a risk of compromising our relationship with Arab World, Europe and USA.

For a common Pakistani, The simple definition of Russia is that its friend of India. If we want to better our ties with Russia we should engage with them about future prospects but implement that vision after the war with Ukraine is over.

Europe is still the worlds largest importer of Russian hydrocarbons. Fact.

America is importing Russian oil via Indian refineries. Fact.

Arabs still have positive relationships with India and China the 2nd and 3rd largest importers of Russian oil. Fact.


If you are a Pakistani Beggars Can't be Choosers Slave mentality.... Then I guess I'm your master as an American.
 

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