Originally posted in The Daily Star on March 16, 2023
Russia has proposed a direct payment system bypassing the global standard SWIFT to settle the dues for Rooppur nuclear power plant as the Soviet nation looks to navigate the sanctions from the West following the Ukraine war.
SWIFT is the messaging system used by financial institutions globally to convey instructions to carry out tens of millions of transactions each day. Most Russian banks are banned from SWIFT, effectively cutting the nation off from the global payment network.
This has left Russia in a blind spot over its payment from Bangladesh for the $13 billion Rooppur nuclear power plant.
The issue was discussed at length at the fourth meeting of the Russia-Bangladesh commission, which concluded yesterday.
The existing Russian-Bangladeshi interbank infrastructure is not sufficiently robust to service all mutual foreign trade settlements without the involvement of intermediary banks from third countries, said the Bank of Russia in a letter to Bangladesh Bank Governor Abdur Rouf Talukder ahead of the three-day virtual meeting.
The current situation sets special requirements for the financial infrastructure in use: it should be resilient and independent from third parties, and it should be able to fully ensure uninterrupted and reliable settlements under trade and economic activities, the letter read.
“In view of this, we would be grateful if you could support and facilitate the establishment of direct correspondent relations between our countries’ banks.”
Should BB agree to this, the Bank of Russia sought a list of interested Bangladeshi banks.
The letter also mentioned a currency swap agreement and setting up a currency clearing scheme to settle payments between the two countries.
Under the proposed arrangement by the BB, Bangladesh would deposit money in a Chinese bank account of the Bank of Russia. But Russia has been insisting on direct payment in roubles.
It appears Russia is softening its stance on this: Bank of Russia wanted to know the procedure for determining the conversion rate under the proposed currency clearing scheme and the anticipated timeframe by which it can be made operational.
It also sought the BB’s opinion on connecting to the Bank of Russia Financial Messaging System (SPFS) for transferring financial information as well as the anticipated timeframe and method of connection.
The Bank of Russia also sought the central bank’s opinion on the possibility of using Russian roubles to settle the foreign trade balance. It wanted to know the BB’s experience as a member of the Asian Clearing Union.
At the three-day meeting, a host of issues ranging from clearing mechanism for exports and imports to payment for the Rooppur nuclear power plant, from the import of liquefied natural gas to wheat from Russia were discussed among others.
“They gave us some proposals and we gave them some,” Uttam Kumar Karmaker, additional secretary of the Economic Relations Division, told The Daily Star yesterday.
A mission will come from Russia next to further the talks and arrive at a decision.
“The issues are too important to be resolved over a virtual meeting. We did not arrive at any decision at the meeting,” he added.
The security of SPFS is being assessed as SWIFT is said to be watertight, said another ERD official on the condition of anonymity as he is not authorised to speak with media.
“We have some requirements. Russia has sent us a letter over Rooppur payment and we are assessing the various modes as Russia has a lot of sanctions on it,” said Md. Mezbaul Haque, BB spokesman.