Bangladesh and Russia have opted for the Chinese yuan to settle payments related to the construction of the Rooppur nuclear power plant, due to sanctions against Russian banks that have made it impossible to process payments in U.S. dollars.
The ruble was not a viable option for payment of the Rooppur nuclear power plant
According to Uttam Kumar Karmaker, deputy secretary of the economic relations division of the Ministry of Finance, the two sides had no choice but to use the yuan as a means of payment, as settlement in rubles was not feasible. Payments will be routed through a Chinese bank via the Chinese Interbank Cross-Border Payment System (CIPS), which is an alternative to the U.S. dollar and euro dominated SWIFT cross-border banking system.
The $12.65 billion Rooppur nuclear power plant project is 90% financed by a Russian loan, with an interest rate of Libor plus 1.75% capped at 4%, repayable over 28 years and with a 10-year grace period. The plant, located 160 kilometers from Dhaka, the capital of Bangladesh, will have two Russian VVER-1200 reactors. Project manager Shaukat Akbar said in October 2022 that he hoped to begin production of the first unit on a pilot basis by the end of 2023 and “be fully ready to supply in 2024.”
The US sanctions situation has created delivery delays for the Rooppur nuclear power plant project
However, U.S. sanctions on Russia over its war with Ukraine have caused problems for the project, with 69 Russian ships banned from Bangladesh ports to comply with U.S. sanctions. This has resulted in delivery delays, with alternative routes or vessels being put in place. The situation has prompted Maria Zakharova of the Russian Foreign Ministry to call on Bangladesh to assert its national interests more decisively.
In addition, the Business Standard of Bangladesh reported that repayment of parts of the loan for the construction of the Rooppur nuclear power plant had begun, but that a $318 million repayment was currently pending due to sanctions ending the use of the SWIFT system. The newspaper also reports that other trade between Bangladesh and Russia will also be settled in Chinese currency.
In summary, the Rooppur nuclear power plant project was affected by the U.S. sanctions against Russia, which prevented the processing of payments in U.S. dollars. As a result, Bangladesh and Russia have switched to the Chinese yuan to settle payments. This has resulted in delivery delays for the project, but both parties remain committed to its completion.
