Pakistan has successfully secured a monumental partnership deal with Saudi Aramco for the ambitious $10-billion Greenfield Refinery project at the strategic Gwadar Port. Joining forces with the leading Pakistani state-owned enterprises, namely the Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO), and Government Holdings Private Limited (GHPL), this collaboration will revolve around a joint investment approach aimed at establishing an integrated refinery petrochemical complex with an impressive processing capacity of no less than 300,000 barrels per day (BPD).
This landmark initiative not only holds the promise of immense economic growth but also carries the potential to secure Pakistan’s oil supplies from a more amicable nation, ushering in a new era of energy stability. Notably, last month, Pakistan’s petroleum minister, Musadik Malik, disclosed a noteworthy development as the country opted to pay for its initial imports of discounted Russian crude using the Chinese currency. A groundbreaking step, this marked the first-ever government-to-government (G2G) deal between Pakistan and Russia, with the transaction encompassing a substantial 100,000 tonnes of crude.
Given Pakistan’s pressing predicament of limited foreign exchange reserves and the looming threat of debt default, the alternative payment arrangement in Chinese currency is proving to be a pragmatic solution. In stark contrast to the traditional practice of using the U.S. dollar, Russia has decided to discontinue accepting the American currency for its energy commodities, instead shifting its focus to the Chinese and Emirati currencies. This decision comes in the wake of sweeping sanctions following the Ukraine war, which led to Russia’s exclusion from the US dollar-dominated global payment systems.
However, as with any major shift in financial dynamics, Russia’s move away from the greenback is not without its challenges. Reports from Business Insider indicate that Russia is now accumulating a substantial sum of $1 billion in Indian rupees every month, highlighting the complexities of trading in a currency where India imports significantly more from Russia than the reverse. Notwithstanding the hurdles, Bloomberg has estimated that Russia managed to amass an astonishing $147 billion in net foreign assets over the course of 2022 alone, a remarkable feat achieved despite the sanctions and the implementation of the new currency regime.
In conclusion, the Pakistan-Saudi Aramco partnership for the $10-billion refinery project holds immense potential for both countries, not only fostering economic growth but also securing Pakistan’s oil supplies from a more favorable source. The shift towards Chinese currency for energy transactions signifies a notable departure from the traditional U.S. dollar-dominated system, reflecting the evolving dynamics of global trade and geopolitics. While Russia’s decision to abandon the greenback presents its own challenges, it has managed to accrue substantial foreign assets, showcasing its resilience in adapting to changing circumstances.
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