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The incumbent government is trying hard to manage cheap fuel for the inflation-stricken masses of Pakistan. Islamabad, amid BRICS collective de-dollarization efforts, has reportedly opened Letters of credit (LC) in Chinese Banks to purchase discounted oil from Russia.
As per the media reports LCs are opened in a bid to pay for the oil cargo – first ever oil purchase from Russia – for the first time in Chinese Yuan while ignoring the dollar’s hegemony. Pakistan will receive 100000 tons of Russian crude oil by the end of this month.
Islamabad is buying this oil on a free-on-board (fob) basis. Meaning oil refineries will pay for the imported crude oil. However, Pakistan is importing Russian oil on a cost, insurance, and freight (CIF) basis and payment will be made after the consignment is reached to the country’s port.
Mind you, this purchase in yuan will again put a burden on already-depleting foreign exchange reserves because yuan is not available in the country, and we’ll have to buy it. On the contrary, the payment would be easier if these were done in Saudi Riyal and UAE Dirham.
Russia gave Pakistan three options to make payments in UAE Dirham, Russian ruble, or Chinese Yuan. Islamabad decided to pay in the Chinese Yuan in the face of US sanctions on Russia. And Pakistan is hoping for a discount of $16 to $18 per barrel on Russian crude oil.
A couple of days ago, Secretary of Information Pakistan Petroleum Association Khawaja Asif Mehmood informed that petrol prices in Pakistan should have been reduced after the price of oil decreased in the global markets, but the government is trying to support the dwindling economic graphs by retaining fuel prices. Russian oil will reach Pakistan in the third week of this month on a trial basis, he added.
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