Saudi Arabia has agreed, in principle, to defer payments for crude oil sales to Pakistan, expected to be worth about $5.9 billion during Pakistan's 2008-09 financial year, The Financial Times reported on Saturday.
The agreement would provide a significant boost to the country's economy just when it is coping with fast-mounting political and economic difficulties, the FT said. "There is an agreement in principle to defer oil payments. The modalities are being worked out," Pakistan's Finance Minister Naveed Qamar was quoted as saying in an FT interview on Friday night.
Qamar said he would not discuss the timespan for which payments on Saudi oil shipments would be deferred, but an official from the Petroleum Ministry told the FT that the agreement involved deferring payments until at least June 2009 when the financial year would end.
It was not clear if the deferred payments would be paid back. One western diplomat, familiar with Saudi ties to Pakistan, said that the Saudi government in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.
"In that previous case, after three years of deferred payments, the Saudis practically wrote off the payments. It would be interesting to see if there is going to be a write-off in future of the deferred payments now under discussion," he said.
According to Pakistani officials, Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan, or about 40 million barrels a year, which at Friday's new record above $147 a barrel would be worth about $5.88 billion, the Financial Times report said.
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