Russia unhappy with Pakistan’s delay in setting up Special Purpose Vehicle to handle payments, shipments

Islamabad : Russia is unhappy with Pakistan’s delay in setting up a Special Purpose Vehicle (SPV) to handle payments and shipments, Dawn reported.

With this, Pakistan’s plan to import Russian crude oil under a government-to-government (G2G) mechanism has hit a snag. Dawn is a Pakistani English-language newspaper.

Last week, a Russian delegation visited Karachi to discuss the quality and pricing of its Ural grade crude oil, but was not satisfied with the progress made by Islamabad in creating the SPV, which is essential for bypassing U.S. sanctions on Russia.

An official aware of the development told The News that the Russians also did not offer any special discount to Pakistan, which had hoped to get a lower price than the prevailing market rates for Ural crude.

One official said: “The government wants the supply of crude oil of 100,000 tonnes a month, knowing the fact that the evaluation report about its yields and commercial analysis is not up to the mark.”

The Pakistan government earlier managed a pilot cargo containing Russian crude of 100,000 tonnes, but the Pakistan Refinery Limited (PRL) will have to export 60,000 tonnes in the form of furnace oil at 75 per cent of the crude, with a 25 per cent loss.

More importantly, the PRL could only make ten per cent petrol and 15 per cent diesel out of Russian crude.

The impact in the form of relief is only Rs 0.25 per liter on petrol price, and if it is not extended to consumers, then per cargo the country's economy can have the benefit of USD 5-6 million.

The National Refinery Limited (NRL) has, however, refused to be part of refining the Russian crude, and Pak-Arab Refinery (PARCO) has also communicated to the government that unless its board gives a nod, it cannot give any commitment to process some of the Russian crude volume.

Russian officials told Pakistani authorities that Ural is available in the international market and many countries are using it. Right now, Ural's price stands at USD 62 per barrel, which is over USD 60 per barrel—the price capped by G7 countries against Russia for its invasion of Ukraine, according to Dawn.