Russia is now preparing to expand its trade with Bangladesh through Indian rupees. The sanctions imposed by the US have almost excluded Russian banks from the international payment system, due to which it has become difficult to conduct dollar-based transactions. In such a situation, Moscow has proposed to Bangladesh to use the Indian rupee while looking for an alternative to the dollar. Besides, a plan to create an independent payment system between the two countries and open a branch of a Russian bank in Dhaka has also come to the fore. Since the Russia-Ukraine war, there has been a huge decline in trade between the two countries, and now efforts are being made to revive this business through a new payment system. Apart from this, Russia is also proposing to supply urea fertilizer at cheaper rates and easy payment terms, which can directly benefit Bangladesh. All these proposals are expected to be discussed in detail in the high-level meeting to be held between the two countries in the coming months.
Russia’s compulsion and entry of Indian rupee
US sanctions have almost isolated Russia’s banking system internationally. For this reason, sending money to Russia or receiving money from there through traditional means has become a challenge for Bangladesh. To deal with this problem, Russia has suggested making the Indian rupee an alternative payment medium. It is noteworthy that India and Russia have already been settling a part of their bilateral trade in rupees without any formal currency agreement. Bangladesh also does limited amount of rupee transactions with India. Based on this experience, Russia wants that a similar system should be implemented with Bangladesh. According to the Economic Relations Division of Bangladesh, this proposal will be discussed in depth in the bilateral commission meeting to be held in September-October, and preparations are also going on before the meeting.
Business reduced to half after the war
Before the start of the Russia-Ukraine war, Bangladesh used to export more than 500 million dollars to Russia every year. But due to restrictions and payment related problems, this figure came down significantly. Between July and May of the current financial year, Bangladesh sent goods worth only about $245 million to Russia, which means the trade remained less than half. Despite this, Bangladesh is still importing essential commodities like fertilizer and wheat from Russia. Russia hopes that if the rupee-based payment system and a separate payment system are implemented, the financial constraints created by the sanctions will be removed and the business of both the countries will be able to get back on track.
A major reason behind this initiative is the loan taken for the Rooppur Nuclear Power Plant, the installments of which Bangladesh is not able to repay on time due to sanctions. Initially the option of payment in Chinese yuan was tried, but due to fear of sanctions, Bangladeshi and Chinese banks refused to participate in it. At present, as an interim arrangement, the loan installment is being deposited in the account opened in the name of Russia in Sonali Bank, but this amount has not yet reached Russia. To solve this dilemma, both sides are now seriously considering alternative payment systems. A similar proposal had also come during the previous Awami League government, on which Bangladesh Bank had also sought opinion from the Ministry of External Affairs, but then this plan could not be implemented. Now this issue is again in the headlines and this time there are signs of moving forward seriously.
Cheap urea, easy payment… what will Bangladesh get?
To give new strength to trade relations, Russia has expressed its desire to supply about 2 lakh 80 thousand tonnes of urea fertilizer to Bangladesh at a price about $ 10 per tonne less than the international market rate. This proposal came to the fore in a meeting between the Commerce Minister of Bangladesh and the Russian diplomat present in Dhaka. Apart from this, Russia has also shown interest in increasing the supply of sunflower oil, wheat, gram, yellow peas and various pulses. In the upcoming Inter-Governmental Commission meeting, Russia is also going to put forward many more proposals related to increasing trade and investment. These include creating a Russia-Bangladesh Business Council, creating a registered list of reliable Bangladeshi textile exporters, enhancing cooperation between small and medium enterprises, and helping to establish special economic zones in Bangladesh.
On the other hand, technical transfer will be kept on top in this meeting from Bangladesh side. Dhaka will also make proposals to increase cooperation in areas such as renewable energy, power generation, energy security, e-commerce, digital economy, innovation, agriculture, food security, agro-processing industry, technical-vocational education, skill development, connectivity and logistics. Overall, Russia, which is facing the brunt of sanctions, is now trying to give a new direction to its economic relations with Bangladesh with the help of Indian rupee, while for Bangladesh it can also become an opportunity for many benefits like cheap fertilizer, easy payment and technical cooperation. Now everyone’s eyes are on the important meeting to be held in September-October, where the picture of these proposals will be clear.
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