Russia is exploring a new approach to conduct bilateral trade with Bangladesh using Indian rupees to sidestep US sanctions that have limited financial interactions between the two nations. The proposal is part of a broader effort to find alternative methods for exchanging goods and services without relying on traditional banking systems affected by Western restrictions on Russian financial institutions. Officials from both countries have begun discussions on implementing this plan, which could reshape the way trade is conducted between Moscow and Dhaka.
As part of the proposal, Russian authorities have also suggested establishing a dedicated payment system and opening a branch of a Russian bank in Bangladesh to facilitate transactions more smoothly. These steps are aimed at addressing the growing challenges in financial dealings that have emerged following US sanctions imposed after the invasion of Ukraine. The new approach is expected to make it easier for both sides to process payments while adhering to the current restrictions.
Stalled nuclear project payments
A major sticking point remains the Rooppur Nuclear Power Plant project, which has created a financial logjam. Bangladesh is unable to transfer loan repayments to Russian banks due to the ongoing sanctions, which have made international fund transfers difficult. To resolve this issue, Russia had previously proposed using Chinese yuan for repayment, but that effort was also unsuccessful. Chinese and Bangladeshi banks reportedly declined to participate due to concerns about potential exposure to US sanctions. As a result, the proposal did not yield a viable solution.
Currently, Bangladesh is depositing loan instalments into a Russian account held at Sonali Bank as a temporary fix. This issue continues to hinder financial cooperation between the two countries. Despite repeated discussions, no resolution has been reached. Russian officials had also suggested investing the accumulated repayment funds within Bangladesh to resolve the situation, but Dhaka did not accept the idea, leaving the matter unresolved.
Trade dynamics shift
Trade between Bangladesh and Russia has changed significantly since the war in Ukraine began. However, data from the Export Promotion Bureau shows that exports have dropped to $245 million during the July-May period of the current fiscal year. Despite the decline, Bangladesh still imports essential commodities such as fertilizer and wheat from Russia.
Looking ahead, Bangladeshi officials are prioritizing stronger cooperation in the renewable energy and power generation sectors during the next meeting of the Bangladesh-Russia Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation. Before the official discussions, the Economic Relations Division (ERD) will hold a preparatory session to finalize Bangladesh's agenda and ensure that key issues are addressed.
In addition to financial challenges, Russia has proposed several initiatives to expand bilateral trade and strengthen economic ties. These include the establishment of a Russia-Bangladesh Business Council to enhance business relations between companies in both countries. The proposal to expand cooperation between small and medium-sized enterprises is also under discussion, as well as supporting Bangladesh in developing special economic zones to attract investment and boost industrial growth.
Russia's proposal to use Indian rupees for trade with Bangladesh is not without precedent. India and Russia already conduct some of their bilateral trade in Indian rupees, even though the two countries do not have a currency swap agreement. Bangladesh, which already conducts trade with India in Indian rupees as well as the US dollar and other currencies, could benefit from a similar arrangement with Russia. Officials believe this existing practice could be a model for expanding trade between the two nations using an alternative currency system.
Despite a strong historical relationship, particularly Russia's support during Bangladesh's Liberation War, current levels of Bangladeshi exports to Russia remain relatively low. However, the potential for growth in this area is significant. In addition to seeking stronger cooperation in energy and digital sectors, Bangladesh is also focused on securing Russian technology transfer as a priority. With new initiatives on the table and a more open framework for trade, both countries could explore new opportunities for economic collaboration in the months to come.