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- Pakistan, a country reliant on imported energy, is mired in an energy crisis.
- It’s in such dire straits that it’s joining a list of countries moving away from US dollar-denominated trade.
- An energy official signaled the country could use the CNY to pay for Russian crude oil, per a report.
The Chinese yuan is gaining traction in cross-border payments — even for trades that don’t involve China.
Pakistan, a country mired in an economic and political crisis, has become the latest to signal using the Chinese currency to make cross-border payments for Russian oil.
Islamabad is considering the new payment method for Pakistan’s first Russian crude oil order for 750,000 barrels that are scheduled to arrive in the first week of June, The News International, a prominent English-language daily, reported last Friday.
“Pakistan will pay the price of crude most probably in China’s currency — yuan,” an unnamed Pakistan energy ministry official told the media outlet. The official declined further comment on the pricing of the crude shipment.
The country has been indicating in recent weeks that it wants to snap up Russian oil. Petroleum minister Musadik Malik told Reuters in April that Pakistan will eventually import around 100,000 barrels of Russian crude daily if the first transaction goes smoothly.
The South Asian country’s potential shift to the yuan comes as countries globally are lining up backup currencies to either trade with heavily sanctioned countries like Russia or for political leverage.
Pakistan’s purchase of Russian oil comes also amid sweeping sanctions against Moscow over its invasion of Ukraine. Although the trade restrictions have hit Russia’s energy revenues, the energy giant has still been able to sell its energy at a discount to opportunistic buyers, such as China and India.
Countries mired in economic difficulties — like Pakistan and Sri Lanka — have also joined the queue as Russian energy is now being sold at a discount. Russia’s flagship Urals crude is trading at around a $20 per barrel discount to benchmark US and Brent crude oil currently.
Pakistan has been facing an economic crisis that started last year amid soaring inflation, a sustained depreciation of its currency, and low foreign currency reserves. All these factors make payments difficult for a country that needs to import about 80% of its crude oil and refined petroleum products requirement.
The South Asian nation is in such dire straits that it is trying to secure a bailout from the International Monetary Fund.
On top of its economic woes, Pakistan has been mired in a political crisis that recently intensified after former prime minister Imran Khan was arrested on Tuesday.
Pakistan’s energy ministry did not immediately respond to Insider’s request for comment.
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