Sources in the media say that Russia had doubts about Pakistan's plan to buy crude oil from Russia and asked Islamabad to buy a single shipment to show that it was serious about the deal. 

In a recent development, however, Russia was dismayed to learn that Pakistan had not yet begun the procedure for the initial shipment of crude oil that it had pledged to begin in March this year. A Special Purpose Vehicle (SPV) was to be established by Pakistan to transport Russian crude oil to its refineries. Energy imports and payments would likewise fall under the purview of this state-owned company. Islamabad's failure to start implementing this plan and to register the SPV infuriated Moscow.

What obstacles are there?

Much debate is going on in the local media about why Islamabad is taking so long to buy Russian oil. One excuse given is that Islamabad is now having cash flow issues. According to experts, Pakistan failed to include its oil industry in the price and shipment mechanisms that were required to be developed before agreeing to the import with the Russian corporations.

Second, Pakistan cannot pay Russian businesses in dollars because it does not have enough of them. Because of the sanctions that the US put on Russia, Pakistani banks also stopped doing business with Russian banks. In exchange for the crude oil shipments to Pakistan, Russia has now agreed to accept payment in three different currencies: Russian rubles, Chinese yuan, and UAE dirham. According to sources, the State Bank of Pakistan (SBP) and the Russian counter bank are debating a payment system for the import of oil in three different currencies other than dollars.

Third, the US recently reminded Pakistan that it needs to follow the G7 oil price cap mechanism to get the best price. This is one of the most important parts of the crude oil pricing formula that is being negotiated with Russia. According to sources, settling on a crude oil price with Russia has been quite difficult.

Fourth, Russia's trade incentives on crude oil will be counterbalanced because Russian crude makes more furnace oil and less diesel. This drives up prices and hurts Russia's incentives for the import of crude oil. Pakistani refineries are already having trouble utilizing furnace oil. Pakistan needs crude oil that generates more diesel, like the Arabian crude that produces more diesel and less furnace oil.

Due to Pakistan's low reserve position, the opening of letters of credit for imports has recently been discouraged by commercial banks. This situation has an impact on industrial production and overall unemployment in the country. Pakistan had to halt its import of non-essential goods because the central bank of the country had a foreign exchange liquidity problem.

Experts say it will be a big relief for Pakistan if it can work out an oil deal with Russia and pay in currencies other than the dollar. This is because Russia will become Pakistan's second-largest crude oil supplier after Saudi Arabia, shipping about 100,000 barrels of oil per day. 

India reaps unexpected benefits from Russian oil

India is making a lot of profit from buying oil from Russia, but Pakistan hasn't figured out how to do the same thing yet. This has made it possible for India's refineries to send more diesel and jet fuel to Europe in 2022 and 2023.

The fact that cheap Russian crude is available has made Indian refineries more productive and helped them make more money. This has allowed them to export refined goods to Europe at prices that are competitive and gain a bigger market share. Before the Ukraine crisis, Europe usually bought 154,000 barrels of diesel and jet fuel per day (bpd) from India. After the European Union banned the import of Russian oil products, this number went up to 200,000 bpd.

India's diesel shipments to the continent increased 12–16% to 150,000–167,000 bpd in the most recent fiscal year, accounting for roughly 30% of India's total gas oil exports, up from 21-24% a year earlier, despite Europe's ban keeping Russian products out.

According to the data, Europe got almost half of India's jet fuel exports, or 70,000–75,000 bpd, in 2022–2023. This is an increase of 40,000–42,000 bpd from the previous year. France, Turkey, Belgium, and the Netherlands are the principal European consumers of Indian diesel.

Media reports said that India bought more oil from Russia in March for the seventh month in a row. This made Russia India's biggest oil supplier for the first time, overtaking Iraq.

Due to high shipping costs, Indian refiners had not bought much Russian oil in the past. However, in 2022 and 2023, they imported 970,000–981,000 bpd of it, which is more than a fifth of all imports at 4.5–4.6 million bpd.

Russian concerns

Geopolitical analyst Andrew Korybko tells Al Mayadeen English that around the same time that Pakistan was meeting with Russian officials for oil imports, the New York Times candidly reported on a US mercenary’s plot to purchase passports from Pakistani officials to facilitate the travel of Afghan fighters to Ukraine.

The New York Times (NYT), in one of its reports, gave an intriguing detail regarding the plot to recruit Pakistan-based Afghan refugees as fighters for Kiev. Former construction worker-turned-mercenary Ryan Routh brazenly told them about his plan to purchase passports from Pakistan to facilitate the shipment of fighters to Ukraine. 

"These three sequential developments very strongly suggest that Islamabad has tacitly recalibrated its stance towards the Ukrainian conflict in favor of the US proxies there, despite still abstaining from UN votes against Russia," he added.

Korybko says that this means that Russia is keeping its energy ties with Pakistan separate from any growing disagreements they might have behind the scenes about Ukraine, but that its "non-traditional South Asian partner" is unofficially connecting the two. "Russia remains interested in becoming Pakistan’s second-largest oil supplier, but that recipient state now appears to be reconsidering whether it still wants that to happen, which raises questions about the future of its deal with Moscow," he maintained.