Pakistan hopes to buy Russian crude oil with Chinese yuan

(ECNS) -- Pakistan hopes to buy Russian crude with Chinese yuan, given the nation has a currency swap arrangement with China, said its power minister Khurram Dastgir Khan.

Pakistan has placed an order for a single cargo of Russian oil, with the first batch dealt in the U.S. dollar, but it hopes to pay for the crude in Chinese yuan in next deals, the minister said.

“We hope that if this becomes a long-term arrangement, it’ll become a rupee and Chinese currency transaction,” he said. “And perhaps that currency swap needs to become larger in order for us to take advantage of other opportunities that might arise.”

According to the National Business Daily, the first cargo of 750,000 barrels is expected to arrive in Pakistan as soon as June, purchased at a discount. The country had agreed to pay between $50 and $52 a barrel for crude oil, while G7 countries capped prices for Russian oil at $60 a barrel, and the deal would be backed by Bank of China, said the media outlet.

Bloomberg on Wednesday pointed out that such a deal would be conducive to the Chinese yuan going global.

“It would also offer some relief to Pakistan, which is heavily reliant on energy imports and is trying to revive a stalled $6.5 billion bailout package with the International Monetary Fund to avoid a default,” it said.

The deal shows that the Chinese yuan is increasingly being used for bulk transactions in third-party markets and has been recognized by many countries as an alternative to the U.S. dollar in international settlements, said Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology.

"Some trading parties in bulk transactions are worried about the unilateral sanctions imposed by the US. The accelerated internationalization of the Chinese yuan, its stable exchange rate and China's strong economy all make it a reliable international settlement currency."