Bangladesh moves to repay Russian loans with yuan

[beijingwalker]

Bangladesh moves to repay Russian loans with yuan​

Staff Correspondent | Published: 00:07, Apr 16,2023

Bangladesh has taken initiatives to repay loans to Russia with Chinese currency yuan after the regular system of making repayments through US dollars has remained suspended for the past several months.

Dollars will be converted into the yuan for paying back the loan, said officials referring to decisions taken in a meeting by the Economic Relations Division on Thursday.

Many Russian banks have been excluded from SWIFT, the leading global banking-transaction facilitating entity, after the country waged war on neighbouring Ukraine in February.

Since then, Dhaka has been facing problems in maintaining financial transactions with Moscow.

The disruption in banking transactions has delayed the repayment of more than $300 million by Bangladesh to Russia against more than $12 billion borrowed from that country for the construction of a nuclear power plant in Ishwardy.

Officials attending the ERD meeting, however, termed the initiative to be in a very initial stage,

A lot of things will need to be done before introducing the repayment of loans with a new third currency instead the traditional dollar, they said.

Science and technology ministry secretary Ziaul Hasan said that payment clauses in two loan agreements between Bangladesh and Russia on the Rooppur Nuclear Power Plant needed to be changed.

The clauses will be modified to include a new third country currency in the payment system, he said on Saturday.

Besides, Dhaka has to rely on the cross-border interbank payment system through the yuan launched by China in 2015 as an alternative to SWIFT.

Economic Relations Division officials said that much of the initiative depended on Bangladesh Bank.

While commenting on the ERD decision, BB spokesman Mezbaul Haque said that they were yet to know about it officially.

‘I cannot make any comment on the issue right now,’ he said.

Other BB officials, however, said that the execution of the ERD decision would not be a big task for the central bank.

In fact, the BB has suggested a number of ways to solve the repayment-related issue after Russia wanted payment in its currency ruble.

According to ERD officials, Russia wanted repayments in the ruble, bypassing the normal global system.

Several rounds of virtual meetings were held between the two sides but without any conclusion yet, they said.

Move to repay Russian loans with yuan

Bangladesh has taken initiatives to repay loans to Russia with Chinese currency yuan after the regular system of making repayments through US dollars has remained...

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[beijingwalker]

Bangladesh to pay off Russian nuclear plant loan in Chinese currency​

By Anant Gupta
and
Azad Majumder
Updated April 17, 2023 at 10:24 a.m. EDT|Published April 17, 2023 at 7:59 a.m. EDT

Russia lent Bangladesh $12 billion to built a nuclear power plant in Rooppur, shown here under construction in Nov. 21, 2022. (Md Maruf Hassan/Getty Images)

NEW DELHI — Bangladesh has approved a payment of $318 million to a Russian nuclear power developer using the Chinese yuan, according to a Bangladeshi official, offering the latest instance of countries bypassing the U.S. dollar and using the Chinese currency to conduct international payments.

The decision to use the yuan was made at a meeting in the Bangladeshi Finance Ministry’s economic relations division on Thursday, Uttam Kumar Karmaker, who heads the ministry’s European affairs wing, told The Washington Post.

Karmaker said that although the decision was made, the transaction is yet to be completed because payment details still need to be resolved. He declined further comment, citing the diplomatic sensitivity of the issue.

The decision resolves a payments deadlock between Bangladesh and Russia that has lasted for more than a year. The South Asian country has been unable to pay Russia for the power plant using dollars after Russia was banned from accessing the Society for Worldwide Interbank Financial Telecommunications (SWIFT) international money transfer system last year due to sanctions over President Vladimir Putin’s invasion of Ukraine.

The transaction, a payment for a $12 billion loan Bangladesh obtained from Russia to develop a nuclear power plant in Rooppur, will now be completed instead using yuan via the Cross-border Interbank Payment System (CIPS), developed by the Chinese in 2015 to combat the dominance of the dollar in international trade.
A representative for Rosatom State Atomic Energy Corporation, the Russian contractor in charge of building the Rooppur nuclear power plant, confirmed the plan to use yuan for the loan repayment on the condition of anonymity because of the sensitivity of the subject.
The Chinese online news outlet Sina reported on Monday that a Bangladeshi official said that paying for the plant in yuan would be the most feasible option.

The majority of cross-border trade is denominated in dollars and flows through the U.S. banking system, which gives the United States the unique ability to sanction and freeze the assets of rival governments, such as Russia, Iran and Taliban-led Afghanistan. But critics of the sanctions accuse the U.S. government of “weaponizing” the greenback and undermining its global status.

The Bangladesh deal comes after several other countries signaled recently that they would opt for yuan payments to circumvent the need to use dollars. In March, Brazil said it would abandon the dollar for trade with China, a development that Chinese officials and state media celebrated as a step in the world’s gradual “de-dollarization” and the eventual collapse of American hegemony.

Chinese President Xi Jinping is also pushing Persian Gulf countries, including Saudi Arabia, to accept yuan for oil, a vital commodity that has been priced almost exclusively in dollars for decades. Still, only a small fraction of trade is invoiced in yuan.

Paying for the nuclear plant in yuan could pave the way for resumption of trade as usual between Russia and Bangladesh, which has been paralyzed since the former’s invasion of Ukraine. The lack of a payment mechanism has been among the foremost reasons for the declining trade relations, experts and officials say.

Earlier attempts to address the payments problem between the two countries such as a currency swap or the Russia-backed System for Transfer of Financial Messages (SPFS) had been thwarted by U.S. sanctions last year.
The possibility of a Chinese solution to the payment problem began to take shape last year when China made a currency swap offer to Bangladesh, which in turn authorized a set of Bangladeshi banks to settle deals with China in yuan.

Mezbaul Haque, the spokesman of the central bank of Bangladesh, declined to confirm or deny the decision to pay Russia in yuan.
“The yuan is one of our official currencies,” he said when reached by telephone. “We have some of it in our foreign exchange reserves too. It is an option.”
Ahsan Mansur, executive director of the Policy Research Institute in Bangladesh, said the nuclear plant could not be delayed. Bangladesh needed to be “pragmatic” and proceed with the project even if it meant circumventing the dollar, he said.
“The interests of Third World countries like Bangladesh are not the same as that of China and the U.S.,” Mansur said. “We have to maintain relations with both.”

https://www.washingtonpost.com/world/2023/04/17/bangladesh-russia-yuan-china-loan/