Pakistan Keen On Long-Term Deal To Buy Russian Oil With Chinese Yuan: Report

The move will offer some relief to Pakistan which is trying to revive a stalled $6.5 billion bailout package with the IMF to avoid a default. The country is heavily reliant on energy imports

Pakistani Energy Minister Khurram Dastgir Khan has said that his country is keen on a long-term deal to buy Russian crude oil via Chinese currency, reported Bloomberg. The comment comes as the cash-strapped nation has placed its first order for a single cargo of Russian oil. According to the report, Pakistan’s first cargo of discounted Russian oil will arrive within a

Khurram Dastgir Khan told Bloomberg, "We hope that if this becomes a long-term arrangement, it’ll become a rupee (Pakistani rupee) and Chinese currency transaction. And perhaps that currency swap needs to become larger in order for us to take advantage of other opportunities that might arise."

The report says that this move will offer some relief to Pakistan which is trying to revive a stalled $6.5 billion bailout package with the International Monetary Fund to avoid a default. The country is heavily reliant on energy imports. 

Additionally, buying Russian oil in the Chinese yuan matches the ambitions of both Russia and China. Russia is looking to move away from using the dollar or euro for its exports. China wants to take the yuan globally to chip away at the dollar’s dominance.

The report notes that China and India, the biggest importers of Russian oil, have been increasingly using yuan, rubles, or UAE dirhams to pay for shipments.

Earlier this month, Russian Foreign Minister Sergey Lavrov said that Russia has accumulated billion of rupees in Indian bank accounts but to use this money it needs to be transferred to another currency and this is being discussed now.

Although still a fraction of the size of the dollar, there seems to be a growing trend toward using the yuan in international trade, the report said. Suzano SA, a Brazilian hardwood pulp manufacturer, is contemplating the possibility of transacting its goods to China using the yuan.

Additionally, the report said that Bangladesh has recently reached an agreement with Russia to settle a $300 million payment associated with the construction of a nuclear power plant near Dhaka in the renminbi.

In the meantime, Pakistan has been trying to restart bailout talks with the IMF for about six months.

Petroleum Minister Musadik Malik in a Bloomberg TV interview on Tuesday said that IMF has expressed reservations about a plan to raise fuel prices for the wealthy to finance a subsidy for those on lower incomes.

He also said that Pakistan's energy crisis isn’t as severe as last year because of weaker demand for electricity caused by relatively cool weather and higher power prices. That’s put the country in a better position ahead of peak demand over summer, with Pakistan being able to produce more electricity from oil it’s stockpiled recently and with additional coal generation coming on stream.

According to Khan, it is anticipated that the government will approve a proposal for Saudi Arabia to construct an oil refinery in Pakistan in the near future. In 2018, the two nations had tentatively agreed to establish the refinery, the report said.