06/06/2022, 16.58
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Colombo talking cheap fuel with Moscow

by Arundathie Abeysinghe

Russian crude is currently the cheapest option for Sri Lanka after it defaulted a few weeks ago. The country now has to be concerned about a possible European embargo. As long queues form at petrol stations, bus companies and schools cut their services.

Colombo (AsiaNews) – Sri Lanka is talking with Russia ways to get Russian crude oil, coal, diesel and gasoline, despite the sanctions imposed by the United States and its allies on Russian banks after the invasion of Ukraine.

The island nation wants to buy Russian oil worth US$ 73 million to restart the large Sapugaskanda oil refinery.

For Sri Lanka, which has defaulted on its foreign loans weeks ago, importing basic necessities is becoming increasingly hard, and Russian crude is currently the cheapest option for fuel.

Yet, for Colombo, any deal with Moscow might have negative consequences in terms of diplomatic relations with the West. The European Union is in fact discussing a new round of sanctions against Russia, including an oil embargo.

According to some economic analysts, Colombo should not reach a deal with Moscow since Russian crude oil could soon be subject to a European embargo.

Sources in the Energy Ministry said that Sri Lanka needs US$ 568 million to pay for a dozen fuel shipments in June. However, “Crude alone will not fulfil our requirement, we need other refined [petroleum] products as well,” Energy Minister Kanchana Wijesekera said.

The state-run Ceylon Petroleum Corporation (CPC) needs US$ 735 million to clear letters of credit for previous oil purchases and no one has come forward to even bid for its oil tenders.

Despite this, Sri Lanka will call for fresh supply tenders in two weeks before its stock of Siberian light runs out. The latter is one of the few grades the local refinery can treat, along with Abu Dhabi’s Murban and Iranian light grades.

Although the Siberian grade is not ideal for the refinery, which is optimised for Iranian light, no other supplier would extend credit. In the end, Russian oil will be processed at the Sapugaskanda refinery.

Currently, the country is going through its worst economic and financial crisis since independence in 1948.

As a result, the government has urged people not to queue for gasoline at gas stations because stocks are already low.

Likewise, only half of all buses are in operation and the Lanka Private Bus Owners’ Association expects fewer will take to the road today because of high fuel costs.

Although the second quarter of the school year begins today, many school bus drivers have decided to extend their holidays or retire altogether.

Based on his own analysis, economist Steve Hanke of Johns Hopkins University measured “inflation at 122 percent year on year”. this, he added, “is crushing the poorest in Sri Lanka”.

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