Russia Proposes Trade With Bangladesh in Indian Rupees as U.S. Trade Deal Looms Large

Special Correspondent

Russia has proposed to settle bilateral trade with Bangladesh in Indian rupees to overcome the transaction complications caused by US sanctions. At the same time, Moscow has also brought forward the proposal to establish a separate payment infrastructure between the two countries and to open a branch of a Russian bank in Dhaka. According to sources in the Economic Relations Department (ERD), these proposals will be discussed at the Bangladesh-Russia Joint Commission meeting to be held in September or October.

Why is Rooppur’s money stuck?

Since the start of the Russia-Ukraine war, conventional financial transactions with Russian banks have been practically disrupted due to US sanctions. This has had a direct impact on the repayment of the Rooppur Nuclear Power Plant project – Bangladesh is unable to send the loan installments to Russia due to the sanctions. Although an attempt was initially made to pay the money in Chinese currency, yuan, banks in China and Bangladesh were not interested in it due to the risks associated with sanctions. Currently, as an interim measure, the loan installments are being deposited in an account opened in Russia’s name at Sonali Bank, but it is not possible to transfer the money to a Russian bank. Even though this deposit was offered to be invested in Bangladesh, Russia did not agree to it.

Rupee proposal as a solution

To break this deadlock, Russia is now looking for an alternative way to transact in the Indian rupee. Notably, India and Russia themselves conduct a portion of their bilateral trade in the Indian rupee without any formal currency swap agreement, and Bangladesh has already been trading with India in the rupee alongside the dollar — so structurally, this is nothing new.

But this is where the question becomes complicated. Analysts fear that expanding trade in currencies other than the dollar, especially in currencies that facilitate transactions with sanctioned countries like Russia, could complicate Bangladesh’s trade relations with the United States and any future trade agreements — although the government has yet to publicly comment on these specific concerns.

Other proposals

Some other proposals have been made by Moscow:
– Formation of a “Russia-Bangladesh Business Council” to expand and diversify bilateral trade
– Preparation of a registered list of reliable Bangladeshi garment exporters for Russian importers
– Assistance in establishing special economic zones in Bangladesh
– Supply of urea fertilizer at lower prices than international market prices

Current picture of trade

Bangladesh’s annual exports to Russia, which were over $500 million before the war, have declined significantly since the war. Between July and May of the current fiscal year, Bangladesh exported goods worth about $245 million to Russia, while Bangladesh still imports various essential goods, including fertilizer and wheat, from Russia.

Bangladesh’s main priority in the upcoming meeting will be ensuring technology transfer, while proposals will also be made to strengthen cooperation in sectors such as renewable energy and the digital economy.