All Pakistani commercial banks have refused to open letters of credit (LCs) for Russian-origin crude in the light of economic sanctions by the United States, United Kingdom, and European Union against Moscow for attacking Ukraine.
As the Dollar is Increasing day by day and the Economy of Pakistan is Falling, In this regard, Commercial Banks have stated that Payment in US dollars is not possible against the import of Russian Crude Oil.
The major reasons are:-
● Banks say payment in dollars is not possible against imports of Russian oil.
● Commercial banks cite the reason for the Russo-Ukraine war as not opening the LC.
● Oil refineries also cite a number of problems in importing crude oil from Russia
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. 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.
However, if the government manages to enter a G2G agreement with Russia for the import of crude oil under transaction mode based on the ruble — ensuring no impact of sanctions on Pakistan — the refineries can utilize crude oil up to 15-30%, keeping in view its technical suitability for making finished products.
