Pakistan pays for first shipment of Russian oil in yuan
Signaling a dramatic break in the South Asian country's policy of paying for exports in US dollars and ushering in a new chapter in Islamabad-Moscow ties, Pakistan has made its first payment in Chinese Yuan.
The G2G purchase of Russian oil was for 100,000 tonnes, and "payment was made in RMB," Pakistan's Energy Minister Musadik Malik said on Tuesday, without divulging the business details of the arrangement, such as price or the discount that Pakistan obtained.
The Russian oil Islamabad received came under an earlier agreement this year between Pakistan and Russia, arriving at the port of Karachi on Sunday.
Pakistan's acquisition provides Moscow with a fresh chance to supplement its burgeoning sales to India and China, as the Ukraine crisis shifts oil from Western to Eastern markets.
According to the Chinese Foreign Ministry, "This is normal trade cooperation between Pakistan and Russia and within the scope of their sovereignty." "As a matter of principle, we are open to the settlement of crude oil trade in RMB," the ministry added.
Large supplies of oil purchased in non-US currencies at reduced rates arrive at a critical juncture for Pakistan, which is dealing with a balance of payments crisis that puts the government at risk of defaulting on foreign debt.
Energy imports account for a significant portion of Pakistan's foreign payments and the Central bank of the country has insufficient reserves to support one month of restricted imports.
According to China's envoy to Iran, developing countries are eager to abandon the US currency.
'A new relationship'
Pakistan presently imports the majority of its oil from Saudi Arabia and the United Arab Emirates, and pays for it in US dollars. However, the oil minister stated that “We’re looking to target one-third of our total oil imports at the Russian crude,”or around 100,000 barrels per day, in the future.
Pakistan's Prime Minister Shahbaz Sharif described this as the beginning of a "new relationship between Pakistan and the Russian Federation."
“Today is a transformative day. We are moving one step at a time toward prosperity, economic growth, energy security, and affordability. I commend all those who remained part of this national endeavor and contributed to translating the promise of Russian oil import into reality,” he announced.
In January this year, the two countries agreed on all commercial terms of imports of Russian gas, including payment in the Pakistani national currency, and other issues concerned with logistics, insurance, and export volumes set to be agreed upon by the start of the shipments.
The country's energy security plan said that crude oil, LNG, pipeline gas, and other fuels are planned to be imported from Russia. This agreement will allow Pakistan to cover up to 35% of its crude oil needs.
In March, Russian and Pakistani companies negotiated contracts regarding supplies of Russian oil and a pilot shipment of fuel being discussed.
Russian Foreign Minister Sergei Lavrov issued a video message on Wednesday emphasizing his country's willingness to enhance relations with Pakistan.
“We are aware of the profound interest and respect the Pakistani people hold for Russia and President Vladimir Putin. We greatly appreciate it,” Lavrov expressed, adding that their relationship is based on "trust" and "founded on the concurrence or proximity of approaches to the key issues of the international agenda. Together with our Pakistani partners, we stand for shaping a more just and democratic multipolar world order."