Amid Economic Crisis, Pakistan Pays For Discounted Russian Crude Oil In Chinese Currency

Pakistan made the payments for its first government-to-government import of discounted Russian crude oil in Chinese currency.

This move marks a departure from Pakistan's usual US dollar-dominated payments policy.

Pakistan has been grappling with an economic crisis, which has severely affected its balance of payments, raising concerns of a possible default on its external debt.

With foreign exchange reserves held by the Pakistan's central bank sufficient to cover only a month of controlled imports, the import of discounted crude oil offers a much-needed respite to the cash-strapped country.

The first cargo of discounted Russian crude oil arrived in Karachi on Sunday and is currently being offloaded at the port in the southern city.

The commercial details of the G2G deal between Pakistan and Russia, including the pricing or discount received by Islamabad, are not known.

However, Pakistan's Petroleum Minister Musadik Malik was quoted by news agency Reuters as saying that the "payment (was) made in RMB".

The renminbi (RMB) is the official currency of the People's Republic of China.

He added that the purchase under the government-to-government deal, consisting of 100,000 tonnes of Urals, was made by Pakistan back in April and that only 45,000 tonnes had docked at Karachi port, with the rest en route.

According to the Petroleum Minister, Urals is one of the lighter grade crudes available.

In a move that adds to Moscow's growing sales to India and China due to the redirection of oil from Western markets because of the Ukraine conflict, Pakistan's purchase provides Russia with a new outlet.

Meanwhile, China's Foreign Ministry has reportedly characterizsed the Pakistan-Russia crude deal as "normal trade cooperation" between two sovereign nations.

The Chinese foreign ministry has expressed its openness to settling crude oil trade in RMB.

Pakistan is seeking new ways to trade commodities without relying on dollars.

To this end, Islamabad has recently announced that it plans to open barter trade with Russia, Afghanistan and Iran. This move has been seen as a possible shift in trade from West to East.

According to the Pakistani petroleum minister, Pakistan's Refinery Limited (PRL) will be refining the Russian crude initially.

Earlier, he had referred to the purchase of the shipment as a trial run to test both the financial and technical viability of the operation.

However, the minister on Monday announced that all the necessary tests and trials have been completed, and it was found that the Russian crude was fit for refining and marketing locally.

The minister also played down concerns regarding the financial viability and the ability of local refineries to process the Russian crude, as the country has predominantly imported petroleum products from the middle eastern nations in the past.

Although the exact amount of change the crude would make at the gas station price in the local market was not disclosed, Malik said that the presence of the crude would undoubtedly "make a difference".

Pakistan's external payments comprise primarily of energy imports.

Kpler's data for the year 2022 indicated that the country imported 154,000 barrels per day of oil, which is consistent with the previous year's figures.

According to the minister, they plan to focus on Russian crude for one-third of their total oil imports.

The majority of Pakistan's crude was previously sourced from Saudi Arabia, the top exporter in the world, with the United Arab Emirates following as the second largest supplier.