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President Putin to ‘decide’ on Russian oil price discount for Pakistan

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  • Putin labels Pakistan ‘key partner’ in special message to Shehbaz.
  • Sources say there will be no decision on discount in crude price during ongoing talks.
  • Moscow will announce price of Russian crude once MoU is signed.

LAHORE/ISLAMABAD: Pakistan could secure crude oil deal with Russia on desired discount rate if Prime Minister Shehbaz Sharif contacts Russian President Vladimir Putin, The News reported on Friday citing sources.

Pakistan is interested in buying around 100,000 barrels per day of Russian crude oil and if the country’s refineries get synchronised well with the blended Russian crude oil, then the quantity of crude from Russia would be increased accordingly.

Amid ongoing talks with the Russian Federation, the two sides are working to finalise a Memorandum of Understanding (MoU) or a protocol that may be signed today at the end of three-day talks.

However, Moscow clearly communicated to Islamabad that it would announce the price of Russian crude for Islamabad once an MoU or a protocol was signed for energy trade (crude oil, petroleum products and liquefied natural gas), which would show the seriousness of the Government of Pakistan towards the energy trade.

“The experts from Russia also asked Pakistan counterparts not to mention the price cap of $60 per barrel imposed on Russian oil by G7 countries while discussing the crude import,” the officials involved in the talks told The News.

However, sources told the publication that the issue of discount as desired by Pakistan on crude oil would be decided by Russian President Putin if the Pakistan government’s top man contacts him.

It should be noted that the Russian oil price in the international market currently hovers between $70-75 per barrel whereas Brent is priced at $81 per barrel. However, Pakistan hopes that it will get crude oil below $60 per barrel from Russia under the government-to-government mode.

As far as the $3 billion Pakistan Stream Gas Pipeline (PSGP) is concerned, Pakistan is of the view that it will erect the pipeline but it is linked with the supply of more LNG and infrastructure at the port. Russia wanted to initiate the project and move forward in finalising the shareholding under the existing intergovernmental agreement. 

But now Pakistan wants it to execute the project on a BOOT (build, own, operate and transfer) basis.

Overall, the officials said that the talks under the inter-governmental commission level are moving forward on a positive trajectory, but after the signing of the MoU for energy trade, Russia will come up with the price for Pakistan. 

Officials said this means there will be no decision on the discount in crude price and life of the government-to-government agreement during the ongoing talks.

However, Pakistan State Oil (PSO) mandarins are engaged on behalf of Pakistan with Russian officials and experts on the issue of import of crude, finished products and LNG issues and officials of Oil and Gas Development Company and Mari Gas Company are in talks on the issue of building LNG storages.

“PARCO can process the Russian blended oil by up to 30%, Pakistan Refinery Limited 50% and the Cynergico Refinery can process the maximum. As for the LNG import, the private companies of Russia have told Pakistan that they can offer it after 2025-26 on a long-term basis,” the sources revealed.

Putin views Pakistan as ‘key partner’

In a separate development, a delegation led by Russian Energy Minister Nikolay Shulginov called on PM Shehbaz in Lahore and discussed cooperation in various fields to strengthen Pakistan-Russia relations.

Welcoming the delegation, the prime minister highlighted the importance Pakistan attached to its relations with the Russian Federation.

He recalled his meeting with President Putin in Samarkand in September 2022 and said that the meeting had reached important decisions to strengthen bilateral relations. He further noted with satisfaction the keen desire on both sides to upgrade the bilateral cooperation in trade, investment and economic matters.

The Russian minister reciprocated the PM’s sentiments and delivered a special message of President Putin to his host.

In his message, President Putin, referring to Pakistan as Russia’s important partner in South Asia and the Islamic world, reiterated his strong interest to deepen the bilateral relationship.

Both sides agreed on the importance of the energy sector for the development of bilateral economic and trade relations. In this regard, views were exchanged on supplying oil and gas from Russia to Pakistan on a long-term basis. Matters related to gas pipelines were also reviewed.

PM Shehbaz also provided guidance for the work of the eighth round of the Pakistan-Russia inter-governmental commission meeting, scheduled to be held in Islamabad on January 20.

Federal ministers Sardar Ayaz Sadiq, Syed Naveed Qamar, Minister for State for Petroleum Musadik Malik and Special Assistant to the Prime Minister Tariq Fatimi were also present.

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Pakistan receives a $2 billion loan from China, according to the finance minister

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The $2 billion loan was one year ahead of schedule and became due in March. According to reports, Beijing had informed Islamabad of the decision.

The International Monetary Fund granted Pakistan’s cash-strapped economy a $3 billion standby arrangement last summer, but the country is still battling to recover from the financial crisis.

According to ratings firm Fitch, one of the top concerns confronting the next administration would be obtaining funding from bilateral and multilateral partners due to Pakistan’s precarious foreign situation, as was stated last week.

This event occurs one month after Anwaar-ul-Haq Kakar, the acting prime minister, asked for a $2 billion loan to be rolled over for a year in a letter to his Chinese counterpart.

In his letter, Kakar also expressed gratitude for China’s efforts to lessen Pakistan’s load

of foreign payments.

It is to be noted that Pakistan acquired safe deposits of $4 billion from China to address the balance of payments issue.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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In a new IMF agreement, Pakistan would “raise” the FBR tax-to-GDP ratio to 15%.

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The state bank reserves will be maintained at a level equivalent to three months’ worth of import bills, according to sources in the Finance Ministry.

According to sources, the ministry has also set a goal to maintain the primary balance surplus and reduce the current account deficit.

The ministry insisted that once the existing agreement expires, a new one would be negotiated with the IMF, and that the IMF will also be guaranteed that the requirements will be implemented prior to the agreement being finalised.

The founder of Pakistan Tehreek-e-Insaf (PTI) demanded that an audit of the election results be conducted before the International Monetary Fund (IMF) approved any additional loans for Islamabad. However, the IMF showed earlier today that it was eager to cooperate with the new administration in Pakistan by disregarding the demand.

According to Bloomberg News yesterday, Pakistan is to apply for a fresh $6 billion loan from the International Monetary Fund to assist the next government in paying off billions of dollars in debt that comes due this year.

According to the article, the nation would attempt to negotiate an Extended Fund Facility with the IMF, and it was anticipated that discussions with the international lender would begin in March or April.

Thanks to a short-term IMF bailout, Pakistan avoided defaulting last summer. However, the plan expires next month, and the next administration will need to negotiate a long-term deal to keep the $350 billion economy steady.

The IMF forced the South Asian country to enact a number of reforms prior to the rescue, including raising its benchmark interest rate, changing its budget, and raising the cost of natural gas and electricity.

According to a fund spokeswoman, the IMF staff is still in communication with authorities on the necessary longer-term reform initiatives. The fund is also prepared to assist the post-election government in addressing Pakistan’s ongoing issues by means of a new arrangement, should that request be made.

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