The Russian "Special Military Operation" in Ukraine and the subsequent sanctions that followed on Russia by the West have left countries like Bangladesh in a fix. This is particularly true for one of the most important megaprojects in the country's history, the nuclear power project at Rooppur. Russia has been pressing Bangladesh to make payment to the tune of around US$300+ million but that had been difficult with the SWIFT banking system not being available for transaction. After lengthy deliberations, it has become clear that Bangladesh has found a way to use the Chinese currency (Yuan) as an alternative means to settle the payment to Russia.
Needless to say that this may be frowned upon by the West, but the payment had to be made. Some international pundits have already been pondering upon the issue whether this war is the beginning of the unravelling of the US dollar in international trade, but that would take decades and there are many 'ifs-and-buts' involved about China's Cross-Border Interbank Payment System (CIPS). It is simply too early to make any judgement on the dethroning of the dollar in international trade.
Bangladesh has had a difficult year. It has had to take out a loan from the International Monetary Fund (IMF) that came with strings attached. Beyond structural reforms, a precondition has tied the government's hands about maintaining foreign exchange reserve. So, with the dollar crunch in full swing, the country had no choice but to resort to the use of an alternative currency, because power from the nuclear power plant is crucial in the current energy landscape. A total of 2,400 megawatts of electricity is suddenly very big news for the country that is now haemorrhaging from power shortages. As reported by Nikkei Asia: "Under the pact, Bangladesh will resolve payments with Russia via a Chinese bank, likely drawing on Dhaka's own reserves of yuan. Russian beneficiaries will receive funds through China's CIPS, a yuan-driven alternative to the dollar-dominated SWIFT system."
Dealing with China is hardly an issue for Bangladesh because China is the country's largest trading partner. Since Russia is financing 90 per cent of the $12.65 billion nuclear power plant, and the fact that Russia and China already have CIPS in play, it makes sense for Bangladesh to skirt around sanctions on Russia to resolve the payment issue. That said, the move to a yuan-centric payment system is not without problems for Bangladesh. The United States (EU) and European Union (EU) are not likely to look kindly upon this development because the bulk of the country's export goes to the EU and the US.
But given the present circumstances, what choice does Bangladesh have? Other countries in the region, most notably China's arch rival in the region is also making a move towards de-dollarisation for certain aspects of import. According to reports published in that country's media, "Indian refiners have started using the Chinese Yuan instead of US Dollars to pay for oil imports from Russia, in a pragmatic move to diversify payment methods amid Western sanctions against Moscow."
Keeping Russia out of the SWIFT system has done more damage to the West than to Russia. It has been a boom for China and its fledging CIPS system. While the sanctions had sought to stop the flow of Russian oil supplies globally, Reuters reports that Russia "rerouted supplies to Asia and other destinations in response to the sanctions, which have been forcing Moscow and its customers to find alternatives to the dollar for payments." The longer the war in Europe continues, more and more countries that trade with Russia will join the alternative-currency club.
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