Sanctions threaten Russia-backed nuclear power plant project in Bangladesh

By SM Najmus Sakib

DHAKA, Bangladesh (AA) – A Moscow-backed nuclear power plant project in Bangladesh is facing uncertainty after Western countries stepped up sanctions against Russia for its war on Ukraine.

The SWIFT (Society for Worldwide Interbank Financial Telecommunication) ban on some Russian banks, which went into effect on March 12, has already suspended financial transactions to Bangladesh's first nuclear power project, Ruppur Nuclear Power Plant, which was signed with Moscow in 2015 with a $12.65-billion credit agreement.

The Rooppur project, which is slated to be operational in 2023 and is being built on a 62,000-acre piece of land in the central district of Pabna, consists of two units, each with a capacity of 1,200 megawatts.

Bangladesh's central bank has already issued a caution in commercial transactions with seven Russian banks that have been barred from using SWIFT.

SWIFT and some sanctioned Russian banks have also written to the central bank and other commercial lenders, requesting that transactions be halted.

The Russian Bank for Development and Foreign Economic Affairs (VEB), which is primarily dedicated to money transactions for the nuclear power project, wrote to the central Bangladesh Bank (BB) to cease transactions owing to the ban.

Economists and policy experts believed that the escalating sanctions will also jeopardize trades, exports, and other commercial transactions with Russia.

- SWIFT impact on project

Speaking to Anadolu Agency, Ahsan M Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), a nonprofit economic advocacy organization, stated that the Rooppur project is now absolutely uncertain.

“Necessary goods and equipment delivery for the power project couldn’t move to Bangladesh as shipment from Russia got suspended due to the war situation,” he explained.

“Bangladesh would also be unable to pay invoices for ordered equipment for the power project to Russian banks since import and export letters of credit with sanctioned banks would be stalled due to the SWIFT ban,” he added.

So, a big question has arisen: if the project financing from Russia is suspended or abandoned, who will take responsibility for the major project?

Mansur expressed concern that if the running project is delayed, there will be technical consequences.

However, he suggested using diplomatic channels to allow shipment for the project.

Zahid Hussain, a former lead economist of the World Bank's Dhaka office, told Anadolu Agency that if Russia's economy suffers over time as a result of the war, funding for bilateral projects between Russia and other countries, including Bangladesh, would be curtailed.

- Business, exports hurt

Bangladesh has nearly $700 million annual trade with Russia, which is not negligible, Hussain observed.

“The financial transaction ban comes at a time when Bangladesh’s business ties with Russia are strengthening, and exports to Russia, especially garment goods, have more than doubled in the last five years," he added.

“Goods loaded ships in Bangladesh ports couldn’t leave for Russia due to the war situation. Local manufacturers, who couldn’t deliver their ready goods from the warehouse, fear huge business loss,” he mentioned.

He believes that an economic war has been unleashed on all.

"The evolving situation will worsen if the US and its allies impose secondary sanctions that restrict any third country from having financial and business connections with Russia," he feared.

"Trading would have challenges in receiving payment from Russia for goods that had already been shipped."

However, because Moscow and Beijing have a good relationship, a transaction in Chinese currency could be a solution to collect the pending payment from Russia, he suggested.

- Government says ‘no worries’

Md Serajul Islam, executive director and spokesperson for Bangladesh Bank, told Anadolu Agency that "commercial transactions with Russia are around $600 million, with $450 million coming through Singapore. Only $150 is coming directly from Russian banks."

“So, we cannot go for money transactions through the seven Russian banks that come under the SWIFT ban,” he explained.

“Usually, local exporters or businesses have their global exposures both in Russia and other countries, so we asked local exporters and commercial banks to be cautious when dealing with sanctioned banks.”

However, the government will take the next course of action considering the evolving global situation, he added.

“Because the Rooppur power plant project is a government-to-government (G2G) project, the government will decide on the issue,” he said.

The country’s Foreign Secretary, Masud Bin Momen, told reporters in Dhaka this week that they are not worried much over any work disruption at the project site as western sanctions have not hampered Russia's State Atomic Energy Corporation, or ROSATOM, which is leading the nuclear power project.

In a media statement, ROSATOM also claimed that the project will be completed as committed and there would be no work disruptions on the project site.