Sri Lanka shelves plan to procure fuel direct from Russia
Politically and financially affected-Sri Lanka is running out of options in importing discounted fuel directly from Russia following the refusal of the two of its companies sanctioned by the Russian Ambassador Yury Materiy to enter into procurement agreements with local authorities this week.
The Energy Ministry had taken every possible step to convince the two representatives of Russian companies who visited the country last month to enter these petroleum procurement deals on favourable terms and conditions, a senior ministry official revealed.
However these two Russian companies have conveyed their inability to supply oil on long term credit as well as the financial transaction issues of banks owing to Sri Lanka’s declaration of foreign debt default, Ceylon Petroleum Corporation (CPC) sources said.
The other reason was the refusal of foreign banks to open letters of credit (LoC) for purchases from the Russian Federation, sources added.
Thus Sri Lanka has no other option other than placing orders with third parties who may be procuring the oil from Russia. There was also the risk of international banks refusing to underwrite LoCs when they come to know about the origin of the fuel.
A top CPC official told the Business Times that the direct fuel imports from Russia may trigger US secondary sanctions against the island nation as the procurement of fuel from a US sanctioned country even for its ‘best economic interests ‘will not be an excuse.
Discussions with Russian petroleum companies on fuel procurement on long term credit conducted by Education Minister Susil Premajayantha who visited Moscow recently were also not fruitful, he revealed.
The CPC is continuing the ongoing practice of importing Russian crude oil and gasoline from a third party Dubai-based company in accordance with the proper procurement procedure as it is the only favourable way to tackle the crude oil shortage, he pointed out.
The Sapugaskanda refinery can use Siberian Light crude, one of several grades of crude compatible for processing at the refinery, alongside Abu Dhabi’s Murban and Iranian Light oil, he said.
It’s still unclear how Sri Lanka will be paying for the fuel shipments ordered by the Dubai-based company the only supplier of Russian fuel to the island nation.
The refinery will resume operations on August 15 for the second time since March 20 upon the anticipated arrival of a crude oil shipment on August 13, Power and Energy Minister Kanchana Wijesekara said.
He noted that Russia has not made any proposal to provide fuel to Sri Lanka with a discount of 35 per cent as claimed by opposition MPs.
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