akistanis have long cherished a kind of independence in their trade with the world that has remained elusive since liberation from the British rule in 1947.

They have looked for the elusive freedom in some strange places. The spotlight currently is on a Russian oil tanker. Discounted oil from Russia and barter trade with Iran have been heralded as harbingers of the elusive freedom.

However, a gentle reality check is in order. The world is not a stage set for dramatic power shifts dictated by oil deals. True freedom is not to be gained by chasing some oil tankers or currency upheavals but through a commitment to build a robust, self-reliant nation.

Pakistan has negotiated a deal with Russia to procure discounted crude oil. It has concluded its first government-to-government import of discounted Russian crude oil, with payment made in Chinese currency, marking a substantial deviation from its previously US dollar-dominated payments policy. The first cargo of discounted Russian crude oil, secured under an agreement between Islamabad and Moscow, reached Karachi last Sunday.

The arrival of the cargo was warmly welcomed by Prime Minister Shahbaz Sharif, who saw this as a significant achievement for his government. He congratulated the nation and announced that the oil discharge would commence the following day. For Pakistan, the arrangement represents more than a good deal. It is being seen as a significant achievement and a testament to the country’s ability to engage in strategic diplomacy.

Government officials have been taking turns to make the nation believe that the economic implications of the Pakistan-Russia deal are of tremendous, particularly given Pakistan’s current financial difficutlies. Amidst an acute balance of payments crisis and a looming threat of defaulting on its debt obligations, the discounted crude oil offers some much-needed relief.

The official position is that energy imports constitute a major part of the country’s external payments. Thus purchase of oil at discounted prices from Russia promises to reduce its dependence on Middle Eastern fuel and ease pressure on its rapidly diminishing foreign exchange reserves. Pakistan has shown interest in purchasing liquefied natural gas (LNG) from Russia, despite the current limits in supply from Russian state-owned companies.

Pakistan has also approved a barter trade agreement with Iran, Afghanistan and Russia in a move intended to bolster its struggling economy. The new strategy, proposed by the Ministry of Commerce, could help stabilise Pakistan’s economy and reduce its dependence on the US dollars. Under the new barter trade mechanism, both public and private entities in Pakistan will be permitted to trade with the three nations in a business to business (B2B) mode. By utilising this system for its transactions with Iran, Pakistan can directly access the goods and services it requires, circumventing the need for US dollar transactions.

Pakistan’s export list for this trade mechanism is varied and extensive. The country could export a diverse range of merchandise including, but not limited to, dairy products, cereals, meat, fish, fresh produce, pharmaceuticals, textiles and various manufactured goods. In return, it will import essential commodities from Iran. The imports will include key energy resources, such as petroleum crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG).

For Pakistan, the Russian oil deal represents a significant achievement. It is a testament to the country’s ability to engage in strategic diplomacy.

Paying for imports in the Chinese yuan rather than the American dollar can reduce Pakistan’s reliance on the US dollar and mitigate exchange rate volatility. This could stabilise the cost of imports as long as yuan remains steady against the Pakistani rupee. However, given the yuan’s limited global acceptance there is also the risk of its potential depreciation and conversion issues.

For now the move to making transactions in the Chinese yuan instead of the US dollar appears to be mostly symbolic. However, this could potentially encourage other nations to explore similar arrangements, although it is unlikely to be a mortal blow to the dollar’s supremacy as the global reserve currency. Currently, the US dollar accounts for 40-50 percent of international transactions. Despite recent decline, it holds a vast share of global foreign exchange reserves (59 percent). Although the use of the yuan in international trade is increasing, compared to the dollar and the euro, its global share remains small.

Even with geopolitical changes and increased use of digital payments, shifting away from the dollar as the leading global currency would require significant changes in global economic structures, widespread confidence in the alternative currency’s stability and liquidity, and acceptance from multinational institutions and businesses. Thus, it would take more than a few country’s switch to destabilise the dollar’s position significantly.

A shift away from the US dollar has long been speculated about. One of the proposed alternatives has been an Islamic dinar. The inception of an Islamic dinar as a reserve currency to be used for trade among OIC countries, though theoretically advantageous, will face substantial challenges. Key among those will be consensus building among Islamic countries and an agreement on the exchange rate. The global financial system’s acceptance of the new currency is another considerable hurdle.

Coordination and consensus among the participating countries, establishing robust financial and regulatory frameworks, gaining international market acceptance, and ensuring the stability of the economies involved will all be vital for its success. Importantly, maintaining trust in the new currency will be essential. Therefore, while the Islamic dinar could theoretically serve as a stable and secure alternative for Islamic countries, reducing their reliance on the US dollar, the path to its creation and adoption is steeped in complex economic, political and technical considerations.

Pakistan’s recent leaning towards China and Russia could signal the US to continue to support Pakistan as it has done previously, especially in view of Pakistan’s role in Afghanistan. However, relying primarily on foreign aid and support can lead to a cycle of dependency, diminishing self-sufficiency and compromises on autonomy.

While the West, particularly the US and Europe, have had significant roles in Pakistan’s economic journey, shifting this dependence to China and Russia does not solve the problem. It merely changes the source of reliance without tackling the root problems of Pakistan’s own economic structures.

It is important to recognise that sustainable development stems from domestic reform; fostering diverse economic sectors; investing in education, healthcare and technology; and creating a conducive environment for domestic and foreign investments. Shifting the focus inward to address these foundational economic challenges can be a more beneficial strategy for long-term prosperity and stability.

The writer is an  associate professor in the Department of Economics at COMSATS University Islamabad, Lahore Campus