Saudis Hold off on Pakistani Oil Discount until after Elections

Saudi Arabia has decided to wait until after the elections for a new Pakistani president, which are scheduled for September 4, before deciding on whether or not to extend its oil credit to Islamabad, the Pakistani newspaper the Daily Times reported.

Under the current agreement Pakistan is allowed to purchase oil from Saudi Arabia for a subsidized price and on deferred payments.

Pakistan is currently in political turmoil as the country faces a three-horse race for the presidency after the resignation last month of previous president and ruler of the country for the last nine years, Pervez Musharraf.

In addition, in recent months there has been a surge in attacks on government forces in the Northern Eastern region’s so-called tribal areas by local fighters loyal to the Taliban.

According to the paper, the Pakistani government is under considerable economic pressure due to the record price of oil and increased oil consumption at home, and is seeking similar deals with other oil-rich countries in the Gulf such as Kuwait, Qatar and the United Arab Emirates.

It is estimated that the country’s oil bill is $14.5 billion. Pakistan imports around 110,000 barrels of oil per day.

If the two countries agree on the extension to the oil credit facility, Pakistan will receive around 40 million barrels of oil in one year from Saudi Arabia, providing a foreign exchange cushion of $6 billion.