- Banks say payment in dollars not possible against import of Russian oil.
- Commercial banks cite Russia-Ukraine war reason for not opening LCs.
- Oil refineries also cite several problems in importing crude oil from Russia.
ISLAMABAD: All Pakistani commercial banks have refused to open letters of credit (LCs) for Russian-origin crude oil in the light of economic sanctions by the United States, the United Kingdom and the European Union against Moscow for invading Ukraine.
According to the publication, commercial banks have stated that payment in US dollars is not possible against the import of Russian crude oil.
If the government can reach a G2G agreement with Russia for the import of crude oil under transaction mode based on the rouble, the refineries can utilise crude oil up to 15-30%. This would have no impact of sanctions on Pakistan, and would be based on the technical suitability for making finished products.
The refineries have short and long-term agreements with Abu Dhabi National Oil Company (ADNOC), Aramco, and Kuwait Petroleum Corporation (KPC) for crude oil imports.
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.
This is the essence of the written responses of four refineries — PARCO, BYCO (Cnergyico Pk Limited), PRL, and NRL — to the government against letters written to them on June 27, seeking recommendations on five issues, which included the technical suitability of the Russian crude oil, quality and grades, cost of transportation and freight charges, payment mechanism, and existing terms of the contract.
The NRL provided a response indicating that currently, LCs are not being confirmed by international banks due to the country’s risk factor. Furthermore, commercial banks are not willing to open LCs for the import of Russian crude oil due to the sanctions against Russia.