Bangladesh Agrees to Settle Russian Nuclear Plant Deal in Chinese Yuan

The Lede: Bangladesh and Russia agree to settle the transaction of an ongoing nuclear power plant deal in Chinese yuan.

What We Know:

• Bangladesh has agreed to pay Russia about $300 million in yuan currency to settle the first payment for building a nuclear power plant in Rooppur near the capital city of Dhaka.
• Bangladesh is collaborating with Russia's state-owned atomic company Rosatom in constructing the first of two planned nuclear power plants as part of a $12.65 billion project. 90% of the project is financed through a Russian loan repayable within 28 years with a 10-year grace period.
• Using Chinese yuan for the deal allows Bangladesh to circumvent SWIFT sanctions that complicate the settlement of transactions with Russia in U.S. dollars.

The Background: In December 2022, the U.S. instructed Bangladesh not to dock a sanctioned Russian ship carrying essential parts for the planned nuclear plant in one of its ports. The ship was re-routed to dock in India and the parts were subsequently transported to Bangladesh via another ship, which completed the transfer of parts while still abiding by U.S. sanctions. In August 2022, Bangladesh imported over 500,000 tons of discounted wheat from Russia under the backdrop of rising food prices. It has also considered importing discounted oil from Russia via India to bypass U.S. sanctions.

Likely Outcomes:

• Many countries in South Asia, most notably India, have shown frustration with U.S. sanctions and the increasingly volatile global markets. Bangladesh will continue to assess the benefits of reorganizing its energy infrastructure and who it partners with to provide energy as the country faces a declining currency and foreign exchange reserves, as well as global energy and supply chain disruptions.
• With the possibility of settling trade in yuan, many countries will seek to settle international transactions with whatever currency is expedient. This may reduce the role of the dollar in certain parts of the global economy. The U.S. will likely retaliate against this growing trend in international trade. It may craft policies to discourage the settlement of transactions involving alternatives to the dollar. Such policies would either keep some of the more neutral countries in line with the U.S. and Western order or push them closer to warmer relations with the rivaling China-Russia bloc.

Quotables:

"Russia wanted us to make payment in rouble but that's not possible for us. So we have agreed to pay in Chinese yuan.” – Uttam Kumar Karmaker, senior official in the Bangladesh Economic Relations Division

Good Reads:

Bangladesh to pay Russia in yuan for nuclear plant (Reuters)

Bangladesh to Pay Russia $300 Million in Yuan for Power Plant (Bloomberg)

Bangladesh-Russia Nuclear Plant Deal Settled in Chinese Yuan (IR Insider)