Time News Desk: Bangladesh and Russia have struck a preliminary agreement to make loan payments for the $12.35 billion Rooppur nuclear power plant in yuan -- a development that breaks the impasse between the two sides over the stalled repayments following Western sanctions on Russian banks.
In a meeting recently between Economic Relations Division and Russian officials, it was decided that the payments would be made in yuan in a Chinese bank account, The Daily Star has learnt from officials informed on the proceedings. They spoke on the condition of anonymity due to the sensitivity of the matter.
"The Chinese currency is an official currency for us since 2019 and we have been doing regular trade settlements with this. We settle many Japanese loans in yen. And we invest a portion of our reserves in yuan."
— BB Spokesman Md Mezbaul Haque
At present, the government has been setting aside the amount due to Russia with the Bangladesh Bank.
Payment will begin after a final agreement between the two governments, they said, adding that about $300 million would be paid this way.
The modalities of the payment method are yet to be thrashed out between the sides.
Russia is insisting that Bangladesh bears the currency conversion risks and costs of converting the yuan to rouble. But Bangladesh is unwilling to agree to this condition as it will inflate the loan servicing costs.
The move to solve the impasse comes after the International Monetary Fund has stipulated no arrears on foreign loan payment as part of its $4.7 billion loan programme.
Contacted, ERD Secretary Sharifa Khan, who chaired the meeting, said: "I am not authorised to speak on the matter -- only the science and technology ministry can. We [at ERD] have done the negotiations on behalf of the ministry."
The central bank, which would ultimately be shouldering the responsibility to arrange the payment in yuan, has not been informed officially of the development by the ERD, which is handling the matter, said its spokesman Md. Mezbaul Haque.
"The Chinese currency is an official currency for us since 2019 and we have been doing regular trade settlements with this. We settle many Japanese loans in yen. And we invest a portion of our reserves in yuan," he added.
As per the loan agreements signed with Russia for the power plant, Bangladesh was supposed to repay the loan in dollars.
But after Russia invaded Ukraine in February last year, loan servicing in dollars became unfeasible: some of the largest banks of the Soviet nation were expelled from the SWIFT financial system, which handles the vast majority of cross-border payments.
The Bank for Development and Foreign Economic Affairs (VEB), a Russian state-owned institution handling transactions for the Rooppur project, was among those expelled.
Although payment for the $11.39 billion loan for the nuclear power plant's construction would not begin from March 2027 or two years after commercial operation begins, Bangladesh is currently servicing a $500 million loan agreed upon in 2013 for the project's primary work.
Subsequently, in June last year, Moscow sent a proposal to Dhaka seeking loan repayment in the rouble, which was not agreed upon by the Economic Relations Division, the finance ministry wing that negotiates foreign loans.
Under the proposed arrangement by the Bangladesh Bank, Bangladesh would deposit money in a Chinese bank account of the Bank of Russia. But Russia has been insisting on direct payment in roubles.
Now it appears Russia has softened its stance on this.
