Home ›› 16 May 2023 ›› Editorial
It is known to us that the Rooppur Nuclear Power Project is being implemented under Russian loan amounting to US $ 1,138 crore (90 per cent of total cost $ 1,265 crore). Repayment of this loan is scheduled to begin in 2027. However, Bangladesh has started paying the interest on the loan agreement signed with Russia in 2013 for a power plant with a capacity of 2,400 MW from 2018.
Russian loan of Rooppur project was scheduled to be repaid in dollars but Ukraine-Russia war has made the situation complicated. Due to imposition of sanctions on some Russian institutions by some countries including the United States a deadlock was created regarding repayment of Rooppur’s debt in dollars. At one point, Russia forced Bangladesh to start repaying the debt in its own currency Ruble. But Bangladesh disagreed to follow this system untested. On 13th April, with the help of China, Bangladesh and Russia agreed to start repaying the first installment of the loan, equivalent to around $ 320 million in Chinese currency Yuan.
On 12th April the US Treasury Department imposed new sanctions on a120 companies including several subsidiaries of Russia’s state-owned energy company Rosatom. Announcing sanction Under Secretary of the Treasury for Terrorism and Financial Intelligence said, “Today’s decision reaffirms our strong commitment at the G7 that any third party supporting Russia’s war will pay a heavy price.” Referring to this ban the US Embassy in Dhaka objected to repayment of Rooppur power plant loan through a third country’. However, Rosatom claimed in a statement that ban on any single concern within Rosatom will not affect the Rooppur Project.
What is the meaning of this embargo? Primarily, the target is to undermine Russia’s power in international economic transactions and to prevent Russian individuals and entities from helping Putin on the battlefield. But why should Bangladesh comply with the ban on American citizens or American-owned institutions? Former diplomat Munshi Faiz Ahmed thinks that there is no such thing that Bangladesh has to comply with US sanctions. He said, “Bangladesh is not obliged to accept sanctions of America. But as Bangladesh is a small country, a less powerful country, they obey these things.” India is trading with Russia without following US sanctions, Middle Eastern countries have done it, nothing has happened to them. According to Mr. Ahmed, Bangladesh can experiment by not complying with US sanctions and observe what consequences arise. “The United States is not getting benefit from these sanctions. So, it can be observed how far they go. At best they can impose sanctions on Bangladesh which may shrink our export market to America. In that case, Bangladesh’s commercial relations with America will suffer. But I don’t think they will go there” – he said. (BBC Bangla 21-4-2023)
The US and Europe have imposed various sanctions on Russia since its involvement in the war in Ukraine in 2022. The main purpose of these sanctions was to narrow the path of economic transactions in Russia. Due to US sanction Russia’s trade with Bangladesh has also been repeatedly hampered. America took several steps like isolating some Russian banks from SWIFT, banning Russian banks from providing loan support to Rooppur and banning ships carrying project equipment. The Ursa Major ship case may be recalled here. As a result of this, Russia and Bangladesh decided to repay the debt in Chinese currency Yuan as an alternative arrangement though it is now under uncertainty. However, many economists believe that Bangladesh will suffer in the end if the debt is repaid in Yuan (BBC Bangla, 21st April, 2023).
According to economist Mustafizur Rahman,of CPD, if Russia agrees to take repayment in Yuan, Bangladesh will have to buy that Yuan with dollars because Bangladesh does not have sufficient amount of Yuan. In that case there will be some financial loss of Bangladesh. If Bangladesh and Russia do not trade in dollars between themselves, the United States will want to put them under pressure in many ways. Apart from SWIFT, Bangladesh may repay Russian loan through an alternative way of dealing in dollars but using any other currency would lead to many more restrictions.
Another point is relevant here. Clause 5(2) of the loan agreement states that at least six months before the beginning of each year Bangladesh and Russia will decide how much money will be spent on Rooppur in the coming year. If the stipulated amount is not spent, additional 0.5% will be payable as commitment fee. According to ERD statistics, the Rooppur project was supposed to cost $ 8.41 billion from 2017 to 2022 but 65% has been spent. As the entire amount has not been spent, Bangladesh has paid about Tk 78 crore to Russia as commitment fee till 2021 as per agreement.
According to report of Channel 24 dt. 23-5-2023 Rooppur loan agreement is going to be amended to avoid US sanctions. Explaining the ban Washington said that despite ban the United States wants to cooperate with Bangladesh on current and future transactions of Rooppur project through discussion but how? Sanction and cooperation are contradictory. Regarding cooperation through sanction the U\S Embassy in Dhaka has explained that the US has no headache about how Bangladesh repays Rooppur’s debt if the US sanctions policy is not violated. The United States expects Bangladesh to choose its trading partners wisely to meet its energy needs. Reiterating their position on the Ukraine issue, embassy sources said that they have to be cautious so that Russia cannot take any advantage using financial system of the United States
It is further reported that on the backdrop of US sanction Bangladesh and Russia have started discussions on alternative safe methods. If necessary, the two countries have agreed to amend the loan agreement to overcome the multi-dimensional complexity in loan repayment. On 15th March the two countries agreed on this point in a Bangladesh-Russia inter-governmental commission meeting. In the meeting, Bangladesh proposed to form a separate joint coordination committee under IGCA. That committee that will look after the construction of Rooppur project. It will also solve the problem with the use of loan money within the stipulated time. It is expected that the government will take decision considering all sides cautiously.
The writer is a former Commissioner of Taxes. He can be contacted at [email protected]
