Bangladesh will pay a Russian nuclear power developer $318 million in Chinese yuan, highlighting a growing trend of countries using the Chinese currency for international transactions, while sidestepping the US dollar, Washington Post reported citing a Dhaka official.
Uttam Kumar Karmaker, the head of the European affairs wing in the Bangladeshi Finance Ministry, has informed the newspaper that the choice to utiliSe the yuan for the payment was made during a meeting in the ministry’s economic relations division on April 13.
Karmaker mentioned that while the decision has been taken, the transaction has not been finalised as the payment specifics are still being worked out. He refrained from providing further information, citing the diplomatic sensitivity surrounding the matter.
By using the yuan, Bangladesh has resolved a payment impasse with Russia that had been ongoing for over a year. Due to sanctions over Russian President Vladimir Putin’s actions in Ukraine, Russia was prohibited from accessing the Society for Worldwide Interbank Financial Telecommunications (SWIFT) international money transfer system, making it impossible for Bangladesh to pay for the power plant using dollars.
As part of a $12 billion loan from Russia for the development of a nuclear power plant in Rooppur, Bangladesh will now complete the transaction using yuan instead of dollars. The payment will be made via the Cross-border Interbank Payment System (CIPS), developed by China in 2015 to counteract the predominance of the dollar in international trade.
Plan confirmed on condition of anonymity: Report
A representative of Rosatom State Atomic Energy Corp, the Russian contractor responsible for constructing the Rooppur nuclear power plant, confirmed the decision to use yuan for loan repayment on the condition of anonymity due to the sensitivity of the matter.
According to a report by the Chinese online news outlet Sina on April 17, a Bangladeshi official stated that paying for the nuclear power plant in yuan would be the most practical option.
The US dollar is currently the dominant currency for cross-border trade, with most transactions passing through the American banking system. This gives the United States a distinctive capability to enforce sanctions on and freeze the assets of adversary nations, including Russia, Iran, and Taliban-led Afghanistan. However, critics of these sanctions accuse the U.S. government of “weaponising” the dollar and jeopardising its global standing.
Numerous nations attempt to circumvent US dollar
The decision by Bangladesh to use yuan for loan repayment follows a growing trend among other countries to avoid using dollars. In March, Brazil announced its decision to abandon the dollar for trade with China, which Chinese officials and state media regarded as a milestone in the world’s gradual “de-dollarisation” and the eventual weakening of American influence.
Chinese President Xi Jinping is urging Persian Gulf nations, including Saudi Arabia, to adopt the yuan as the currency for oil trade, a critical commodity that has been predominantly priced in dollars for many years. However, only a small proportion of trade transactions currently utilise yuan.
Using yuan to pay for the nuclear plant could lead to a resumption of regular trade between Bangladesh and Russia, which has been hampered since Russia’s invasion of Ukraine, reported the newspaper. The absence of a payment mechanism has been one of the primary causes of the decline in trade relations, according to experts and officials.
Previous attempts to resolve the payment issue between Bangladesh and Russia, such as a currency swap or the Russian-supported System for Transfer of Financial Messages (SPFS), were stymied by U.S. sanctions last year.
The prospect of a Chinese solution to the payment problem emerged when China proposed a currency swap to Bangladesh last year. In response, Bangladesh authorised a group of its banks to finalise transactions with China using yuan.
The newspaper said that Mezbaul Haque, the spokesperson of the central bank of Bangladesh, declined to confirm or deny the decision to pay Russia in yuan. ‘The yuan is one of our official currencies,’ he said. ‘We have some of it in our foreign exchange reserves too. It is an option.’
Ahsan Mansur, executive director of the Policy Research Institute in Bangladesh, said the nuclear plant could not be delayed. Bangladesh needed to be ‘pragmatic’ and proceed with the project even if it meant circumventing the dollar, he said. ‘The interests of Third World countries like Bangladesh are not the same as that of China and the U.S.,’ Mansur said. ‘We have to maintain relations with both.’
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