Despite not involving China, the Chinese yuan is gaining traction in cross-border payments. Pakistan has become the latest country to indicate that it will use the Chinese currency Yuan paying for Russian oil across borders.
Pakistan is considering a new payment method for its first Russian crude oil order for 750,000 barrels that will arrive in the first week of June, according to The News International.
An unnamed Pakistani energy ministry official told the media outlet that Pakistan will most likely paying for the crude oil shipment in Chinese currency, the yuan.
According to Pakistan’s petroleum minister, Musadik Malik, if the first transaction goes smoothly, Pakistan will eventually import 100,000 barrels of Russian crude every day.
South Asian countries are lining up backup currencies to either trade with heavily sanctioned countries like Russia or to gain political leverage.
The sale of Russian oil by Pakistan comes amid sweeping sanctions against Moscow for invading 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, including China and India.
Currently, Russia’s flagship Urals crude is trading at around a $20 discount to benchmark US and Brent crude oil. Countries mired in economic difficulties – like Pakistan and Sri Lanka – are also joining the queue to buy Russian energy.
With soaring inflation, a sustained depreciation of its currency, and low foreign currency reserves, Pakistan has been experiencing an economic crisis since last year. For a country that imports about 80% of its crude oil and refined petroleum products requirements, all of these factors make payments difficult.
It is in such dire straits that it is seeking a bailout from the IMF.
Besides its economic difficulties, Pakistan has been mired in a political crisis since former prime minister Imran Khan was arrested on Tuesday.
A request for comment from Insider was not immediately returned by Pakistan’s energy ministry.
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