Cash-strapped Pakistan hopes it can pay for future Russian crude oil deliveries in Chinese yuan, Pakistani Minister of Power, Khurram Dastgir Khan, told Bloomberg in an interview published on Wednesday.
Pakistan has so far ordered just one crude oil cargo from Russia, expected to arrive this month.
Pakistan expects to receive in May its first cargo loaded with discounted Russian crude after placing its first order for oil from Moscow under a new bilateral deal, Pakistan’s Petroleum Minister Musadik Malik told Reuters at the end of April.
The payment for the first cargo of Russian oil was made in U.S. dollars.
Pakistan is desperate to import energy at low costs after it was outspent on the market last year when oil and gas prices surged while its foreign exchange reserves dwindled. The country has a currency swap with China, which would make it easier to pay for crude than using the little U.S. dollar reserves it has.
“We hope that if this becomes a long-term arrangement, it’ll become a rupee and Chinese currency transaction,” the Pakistani minister Khan told Bloomberg, commenting on the imports of Russian crude oil (ZH: before he was arrested).
A yuan payment would benefit both China and Russia.
China has been looking for years to establish more trade deals in yuan to increase the relevance of its currency on the global markets and challenge the U.S. dollar’s dominance in international trade, including in energy trade.
In March, China’s President Xi Jinping met with Vladimir Putin in Moscow, and the Russian president not only endorsed trade in yuan with China but also with other countries.
“We support the use of Chinese yuan in payments between Russia and countries of Asia, Africa, and Latin America,” Putin was quoted as saying by Russian media.
Over the past year, Russia has turned to trade in yuan in the wake of the Western sanctions on its exports, imports, and energy trade, as the Chinese currency has become Putin’s only alternative to reducing exposure to the U.S. dollar and the euro, and limiting the fallout of the sanctions that have seen Russian state assets seized in Western countries.