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Leading Pakistani state-owned companies are set to partner with Saudi Aramco in the giant $10-billion Greenfield Refinery project at Gwadar Port. Pakistan’s Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO) and Government Holdings Private Limited (GHPL), will collaborate through a joint investment strategy in setting up an integrated refinery petrochemical complex with a processing capacity of a minimum of 300,000 barrels per day (BPD).
The project is likely to secure Pakistan oil supplies from a more friendly nation.
Last month, Pakistan’s petroleum minister Musadik Malik revealed that the south Asian country paid for its first imports of discounted Russian crude in Chinese currency. According to Malik, the purchase, the first government-to-government (G2G) deal between Pakistan and Russia, consisted of 100,000 tonnes of crude. The new arrangement is convenient for Pakistan considering that the country has been facing a severe shortage of foreign exchange reserves and risks defaulting on its debt obligations. Pakistan has long been a close Western ally and an arch-rival of neighboring India, which itself has massively ramped up imports of cheap Urals.
The decision to pay in Chinese currency instead of the traditional U.S. dollar comes after Russia last year said it will no longer accept the American currency as payment for its energy commodities but will instead switch to Chinese and Emirati currencies. Further, Russia was cut off from the US dollar-dominated global payments systems following sweeping sanctions off the Ukraine war.
But Russia ditching the greenback is not without its own headaches.
Business Insider has reported that Russia is accumulating $1B in Indian rupees per month and struggling to trade in the currency since India imports far more from Russia than the reverse. Overall, Bloomberg has estimated that Russia accumulated a staggering $147 billion in net foreign assets built up over 2022 alone due to sanctions and the new currency regime.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.