Home ›› 02 Apr 2023 ›› Front
Russia has expressed keen interest in improving the existing bilateral trade relations with Bangladesh, proposing direct export of food products, fuel and fertilisers through the G to G system.
The country also interested in increasing investment in various sectors, according to the sources at the concerned ministry.
Bangladesh has previously sought Russia’s cooperation in the direct export of ready-made garments and other products because its market has a vast demand for various Bangladeshi products. But due to several complications, exporters do not have a direct channel to send goods to Russia.
Bangladesh exported $639 million worth of products and services to Russia in the 2021-22 fiscal year while importing goods worth $594.39 million. In the previous fiscal of 2020-21, the export and import were $665.31 million and $466.70 million respectively.
Ministry of Commerce, Ministry of Foreign Affairs and officials of the Economic Relations Division stated, “Bilateral meetings have been held recently where Russia has expressed interest to develop trade relations with Bangladesh. The ministries will review proposals individually and the decision will follow. Although Russia may face some challenges due to the sanctions.”
Russia proposes trade through G to G
Bangladesh has been importing food products from various countries for a long time including Argentina, Ukraine, Australia, India, and Nepal. Now, Russia has made a governmental offer to export food products to this country. Bangladesh’s Ministry of Foreign Affairs notified the Ministry of Commerce on March 14.
A recent proposal from the Ministry of Agriculture of the Russian Federation has stated, “Russian Federation is interested to supply food commodity items to Bangladesh on G to G basis. The Russian state-owned joint stock company Foreign Economic Corporation, subordinate of the Ministry of Agriculture of the Russian Federation, is highly interested in expanding relations with Bangladesh.
They are mainly to supply various food products such as yellow peas, chickpeas, red lentils, green lentils, sunflower oil etc to Bangladesh on a G2G basis. They would like to take the opportunity to supply these items at the best competitive and comprehensive price.
Bangladesh’s government should be interested in importing these commodities. It may be taken as an opportunity to sell to low-income people through Trading Corporation of Bangladesh (TCB) at affordable prices”.
Moscow to export LNG
Russia proposes to supply Bangladesh with liquefied natural gas (LNG) to meet its long-term energy needs.
The proposal was made virtually on March 13 during the fourth convention of the Russia-Bangladesh inter-governmental commission regarding trade, economic, scientific and technical cooperation. The commission was established in 2017 to oversee economic cooperation.
Bangladesh has been importing LNG from Qatar and Oman but for the first time, Russia has proposed to export LNG at the governmental level of the country.
Currently, Bangladesh has a demand of 3,500 million cubic feet of gas per day, but there is a considerable shortage of supply. Of this, 2,200 million cubic feet of gas comes from domestic sources, while another 600 million cubic feet of gas comes from LNG imports.
Russia has offered to export gas pipelines and other equipment to Bangladesh as well as invest in the modernisation of Ghorashal Unit-1 and Unit-2.
Bangladesh’s older power plants which were built during the Pakistan era are no longer at production capacity. Only 110 MW of power can be generated by these power plants. Russia has offered to directly sell materials needed to modernise Bangladesh’s energy projects instead of tendering them.
Bangladesh is working to establish 100 economic zones by 2030. Besides, Russian investment has been sought in the Export Processing Zones (EPZ) and Hi-tech parks. Also, Bangladesh has sought investments in joint ventures such as fertiliser factories, LNG projects, fuel refineries, leather processing factories, pharmaceuticals and tourism.
However, the major obstacle to trade with Russia is the currency exchange. Due to sanctions, Russian banks are unable to transact in dollars using the SWIFT system. However, Russia made the offer to conduct trade using the Ruble.
Russian banks have been banned from using SWIFT, an international trading system operated from Belgium, after the attack on Ukraine. Russia then offered Bangladesh to settle the transaction through the ‘Currency Swap’ method as an alternative to SWIFT. When two countries transact in their respective currencies, avoiding the dollar or any other major international currency, it is known as a ‘currency swap’. However, the central bank has not yet taken it into account.
The biggest problem in the export of products from Bangladesh to Russia is the high customs duty. Along with taxation complications, Bangladesh does not even have modern banking communication with the country. Trade has to be done through third parties and the telegraphic transaction (TT) system which is out of date. Bangladesh exports goods to Russia mainly through Germany, Poland and other EU countries.
