Alternative debt servicing for Rooppur nuclear power plant to skip US sanctions falters as Dhaka and Moscow couldn't yet execute a decision on payment in Chinese currency Yuan, insiders said Wednesday.
The failure in finalisation of the loan repayment through byways-decided at a bilateral meeting in April last-is affecting the smooth execution works for the megaproject, they said.
The April meeting between Bangladesh's Economic Relations Division (ERD) and Russian authorities had decided on repayment the loan in Yuan, as the sanctions against Russia blocked the international-payment system SWIFT.
Following a request from Moscow in March 2022, the meeting was held to clear the dues of the stalled outstanding debt servicing after losing access to the global payment channel, SWIFT, due to the western sanctions.
Meanwhile, the Russian contractor at the Rooppur power plant, Atomstroyexport, has requested Bangladesh government for resolving the swift-code tangles for repayment of the outstanding loans.
It has recently written to Bangladesh Atomic Energy Commission and other relevant authorities for giving permission to repay the arrears and bills owed to local subcontractors to keep the project works uninterrupted, central bank officials said.
At least four local companies have been working with the Russian firm, Atomstroyexport, as subcontractors over the years.
The US sanctions on Russian banks over the Ukraine war have pushed the two nations to opt for settling payments by using the Chinese currency, moving away from the US dollar in what is dubbed de-dollarization process.
According to the plan, under the new arrangement Bangladesh will make payment settlement with Russia through a Chinese bank, and Russian beneficiaries will receive payments using China's Cross-Border Interbank Payment System (CIPS), a limited alternative to SWIFT for Yuan-based payments, officials involved with the developments had said earlier.
SWIFT or the Society for Worldwide Interbank Financial Telecommunications is a Belgium-based secure messaging platform that facilitates cross-border payments.
Asked about complications, ERD officials said some $318 million worth of repayment had been pending till the first half of the current calendar year against a total loan of nearly $11.38 billion that Russia has provided for the Rooppur nuclear power- generation project.
"Although we cannot repay the loan pending finalisation of the payment system, we have already deposited the outstanding amount into an Escrow Account at the central bank. When both countries will finalise the payment system in Yuan, we can pay from the escrow account easily," says a senior ERD official.
"The outstanding debt to Russia will not be a burden for Bangladesh as we are depositing the necessary funds which were to be paid in the last few installments," he told the FE.
A Bangladesh Bank official told the FE that they would repay in Yuan or in any currency when the government will instruct them.
"We haven't got any instruction yet. So we are not repaying the loan to Russia in Yuan," he said.
Under the loan agreement with Russia, Bangladesh had to pay a commitment fee of 0.5 per cent on unused allocation.
If even the Russian contractors fail to implement the project in time and then the fund is not utilised, Bangladesh will have to pay a commitment fee.
Russia has provided $11.38 million in loan for construction of the nuclear power plant in Bangladesh, and the project is being implemented by a contractor led by Rosatom State Atomic Energy Corporation.
Repayment of some part of the loan for this project has begun, and it is being done through Sonali Bank. Pay of Russian workers in Bangladesh is also being defrayed through the banks.
However, due to the SWIFT ban, Russian banks have stopped all transactions.
In 2020, Moscow offered Dhaka a bilateral currency-swap arrangement for trade settlement, but the move was put on the backburner following US sanctions.
Russia then offered Bangladesh Bank to join SPFS, a payment channel developed by Moscow, but Bangladeshi banks demurred. Bangladesh proposed that Russia settle trade in the Chinese currency as Yuan became a reserve currency in 2018.
In response, Russia claimed a conversion loss of currency, which the Bangladesh Bank did not agree to pay. After long-drawn discussions, both sides have now agreed to settle trade in Yuan-the currency of world's second-largest economy, also known as renminbi.
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