Pakistan to import cheap Russian crude oil amidst a growing balance of payments crisis. This move marks a new outlet for Moscow, who have been redirecting oil from western markets due to the conflict in Ukraine. The deal struck between Islamabad and Moscow will see Pakistan importing crude, not refined fuels. If the initial transaction goes smoothly, the nation will look to import 100,000 barrels per day of Russian crude oil. The purchase of discounted crude offers respite to Pakistan, who are facing an acute balance of payments crisis that risks a default on its debt obligations. The country's foreign exchange reserves are scarcely enough to cover four weeks of controlled imports. Energy imports make up the majority of the country's external payments, and therefore, the import of crude oil from Russia offers a much-needed lifeline to the nation.

Pakistan's purchase is expected to significantly reduce the need for Middle Eastern fuel, which previously dominated the country's imports. Pakistan imported 154,000 bpd of oil in 2022, predominantly from Saudi Arabia, followed by the United Arab Emirates. This latest move offers a diversification of oil imports for Pakistan, with Russia joining the mix. The impact of the Russian imports on local pricing will only be apparent once the crude has been refined and is ready to sell.

The deal was reached in recent days between major Russian oil companies and Pakistan. Two trading sources familiar with the talks stated that Russia plans to supply Urals crude to Pakistan. Under the deal, Pakistan will initially refine the Russian crude in a trial run, followed by Pak-Arab Refinery Limited (PARCO) and other refineries. It remains unclear which currency will be used for transactions, but Minister Musadik Malik declined to comment on the rate of imports and the commercial side of the deal. The deal comes amidst ongoing negotiations between Pakistan and the International Monetary Fund (IMF) for the release of a $1.1 billion tranche of a $6.5 billion bailout agreed in 2019.

The import of cheap Russian crude oil offers a much-needed respite to Pakistan's ailing economy amidst a balance of payments crisis. It also marks a new outlet for Russia, who have been redirecting oil from western markets due to the Ukraine conflict. The impact of the Russian imports on local pricing remains to be seen, but it offers a diversification of oil imports for Pakistan, reducing their dependence on Middle Eastern fuel.