Kuwait and Saudi Arabia have turned down Pakistan's request to supply oil on long-term credit despite the rhetoric of long-standing and brotherly ties between the countries, according to a media report today.
Troubled by circular debt and high international oil prices, Pakistan had requested the two Arab countries to extend their credit term for oil payments.
During a visit to Saudi Arabia in August last year, the Prime Minister, Mr Yousuf Raza Gilani, had requested King Abdullah to either restore the “free oil facility” or to extend the credit term for payments from the existing 30 days to one year.
Saudi Arabia turned down the request on the ground that the other countries may demand similar treatment, sources told The Express Tribune. Saudi Arabia had granted Pakistan a “free oil facility” in 1998 in the wake of its nuclear tests and economic sanctions imposed by the US and the European nations.
Saudi authorities informed Pakistan that oil exports are a commercial business for them and they would offer it the same terms that are offered to other countries, sources said.
Pakistan also requested Kuwait to extend its credit term for oil payments to six months from the current two-month deferral period. A formal request was made during the President Asif Ali Zardari's visit to Kuwait on May 7 last year.
At that time, Kuwait said it would discuss the matter with authorities concerned and let Pakistan know later.
Kuwait is the only country that supplies oil to Pakistan on a two-month deferred payment plan, an arrangement secured during the 2008 financial crisis.
Other West Asian countries, including Saudi Arabia, export oil on a 30-day credit term.
However, the Petroleum Minister, Mr Asim Hussain, told the daily that he had no knowledge of requests to defer payments.
Earlier, Iran had supplied 45,000 barrels of crude oil to Pakistan on a three-month deferred payment plan until January 2011.
The UN-imposed sanctions halt imports from Iran due to difficulties in opening letters of credit from global banks. Since then, Iranian oil is largely smuggled into Pakistan.
Officials say the people of Balochistan province meet most of their requirements with smuggled oil.
The state-run Pakistan State Oil is in dire straits as it has to pay almost Rs 20,000 crore to local and international fuel suppliers as of January 6.
The largest public sector oil marketing company owes almost Rs 11,400 crore to international fuel suppliers, including Kuwait Petroleum Corporation.
PSO is facing an “emergency-like situation” and has no money to pay for oil supplies, sources said.
The situation was aggravated by non-payment of dues by the power sector and other clients. PSO is yet to receive payments of Rs 18,520 crore.
The company is mainly dependent on oil imports since oil refineries in the country are operating at 70 per cent of their capacity due to circular debt.