POBNEWS24, Dhaka, Feb 10, 2024 : Analysts believe that Russia’s inclusion of Bangladesh in its list of more than 30 ‘friends and neutral’ countries is not so significant from the point of view of economy, but it has diplomatic importance.
Recently, the Russian Embassy in Dhaka made a post on their verified Facebook page and X (formerly Twitter) account about the inclusion of Bangladesh in the list.
It is said that Moscow will allow countries on the list, including Bangladesh, to trade in the Russian currency market and derivatives market. That is, the banks and financial institutions of those listed countries will be able to transact in the Russian currency Ruble.
What are the opportunities for transactions in Ruble?
According to Bangladesh Bank, the ruble reserves in Bangladesh are very limited. As the ruble is not popular as a convertible or exchangeable currency, this currency is still not widely used in foreign transactions. Banks that deal in foreign currency also do not keep rubles.
As a result, direct transactions in rubles do not take place. Convert to any third currency and then transact. In this case, China’s yuan is used as a third currency, but its scope is quite limited. In such a situation, there is no economic or practical significance of Bangladesh’s inclusion in Russia’s list of friends, said economist and member of the board of trustees of private research organization CPD Mr Devapriya Bhattacharya.
According to him, Bangladesh’s import and export trade with Russia is very limited. After covid especially since Russian attack on Ukraine it has decreased even more.
Debapriya Bhattacharya is of the opinion that their enrollment will not be of much benefit in solving the current problem in Bangladesh’s trade with Russia, above all in improving the trade relations between the two countries.
He said, “We have to have enough rubles for payment and they have to have enough money to make new trades. But there are not enough reserves for trade.”
Also, the reserve of the yuan as a third currency in commercial transactions is insufficient.
There are questions about how much debt can be paid with the yuan in hand and how much of the yuan that comes in can be used in the international market. Therefore, trading in the third currency between Dhaka and Moscow is not a quick solution, said Mr. Bhattacharya thinks. Recently, during the visit of Russian Foreign Minister Sergey Lavrov, there were various discussions about the transactions in the two countries’ own currencies.
All options have been explored to see if transactions can be made through Russian banks and ships that are not covered by the embargo.
On the eve of Lavrov’s visit, Bangladesh’s then Foreign Minister AK Abdul Momen told reporters that the two countries have been discussing commercial transactions in the country’s single currency for quite some time.
He said, there can be a superficial discussion about transactions in their currency (Rubles). Because Bangladesh does not have ruble.
However, the issue of giving this trade facility is more political than economic, said Samia Zaman, a teacher in the international relations department of Dhaka University.
According to her, it is not important whether Bangladesh will gain a lot from this opportunity or whether the scope of trade will increase. Rather, the message that Russia has opened the opportunity to trade in its own currency to Bangladesh, which is under pressure from the West, is important here.
Russian President Putin has taken some steps to pull the ruble down.
Trade opportunities are limited
Bangladesh import-export transactions are mainly done in US dollars. Besides, some transactions are done in Euro, Pound, Australian Dollar, Chinese Yuan and Canadian Dollar.
Apart from this, trade in taka-rupee has started with India under special arrangement.
In that case, the amount of bilateral commercial transactions between Bangladesh and Russia is quite low.
In most cases, the transactions between the two countries were in dollars or euros. The bond was also opened in US Dollars and Euros. Apart from this, the financial transactions between the two countries for the Ruppur nuclear power project are also not in ruble.
Bangladeshi media reports that Bangladesh and Russia have agreed to repay the loan of this project in Chinese currency Yuan. Economists said that currently there is no opportunity to directly export Bangladeshi products to the Russian market. The main reason for this is that there is no transaction with Russia in the banking channel of Bangladesh.
Besides, the trade in the Russian market is not increasing as expected due to customs complications in the export of Bangladeshi products. Export of Bangladeshi products to Russian market has to be done through third country and old era Telegraphic Transaction (TT) system.
Analysts do not expect Russia’s inclusion in the friend list to bring any change overnight.
Russian banks were banned from SWIFT (Society for Worldwide Interbank Financial Telecommunication), an international trading system operated from Belgium, after the attack on Ukraine. Russia also considered settlement of transactions in this manner insecure. At that time Bangladesh-Russia trade and investment was at risk.
Because of this, the payment of import-export money, especially the Russian-funded projects including Ruppur nuclear power plant, had become difficult.
In such a situation, the country offered Bangladesh to settle the transaction using the ‘currency swap’ method as an alternative to SWIFT. But due to lack of sufficient reserve of ruble, the discussion did not progress.
When two countries trade in their respective currencies avoiding the dollar, it is known as a ‘currency swap’.
If this system is introduced, the central bank of one country will open an account in the opposite currency with the central bank of another country. Bangladesh Bank will have Russian currency account.
And the Central Bank of Russia will have an account of money. But in this case the two countries need to have enough reserves of that currency.
Russia’s goal is to dominate
Russia is believed to have opened up ruble-denominated transactions with friendly countries, mainly as part of boosting its economy. Because, due to the military operation in Ukraine in February 2022, Western countries imposed several sanctions on Russia.
After the start of the war, 1,200 multinational companies stopped doing business with Russia or announced severance of relations. In this, while the import gradually increased, the export income decreased in comparison. Which makes the country’s economy somewhat cornered.
Overall, the ruble lost 25 percent of its value against the dollar. According to a report by Reuters, the Russian currency, the ruble, is at its weakest level in 17 months against the US dollar. To deal with this economic pressure, the country’s central bank raised interest rates up to 13 percent to strengthen the currency. In such a turbulent state of the economy, Russia opened the door to trade facilities and published the list.
Samia Zaman, a teacher in the Department of International Relations of Dhaka University, believes that Russia is trying to break the supremacy of the US dollar in international trade through this list and create the supremacy of their currency.
According to her, Russia made this strategic announcement to expand its dominance in the changing geopolitics. He said, “Since the attack on Ukraine, they have been looking for alternative markets to trade in rubles. Now they have opened trade in ruble for these 30 countries. This will increase the value of their currency, prestige.
” According to the news of the Russian state news agency RIA Novosti, in July of this year, the country’s President Vladimir Putin signed a law in this regard. According to the information published in the Russian press, the countries declared as friends and neutral will be able to participate in their ruble-based currency and commodity market on the basis of that legal framework.
According to the Russian federal law, this law will increase the ability of direct trade with allied countries and the demand for the ruble, which will contribute to the Russian economy.
Influence and caution in diplomacy
However, as Western countries have put Bangladesh under pressure around the election, this friendly attitude of Russia sends a positive message, says Samia Zaman, a teacher in the International Relations Department of Dhaka University.
Economist Debapriya Bhattacharya feels that Russia’s enlistment may give some courage to the government amid Western pressure. Analysts believe that Russia’s relationship with Bangladesh may become stronger.
However, Mr Bhattacharya warned that there is no guarantee that the result will be positive in the end.
He said, if Bangladesh rushes towards Russia in this geopolitics, Bangladesh’s trade with the West, foreign investment, foreign aid, remittances, etc. may be negatively affected.
Advising the government to be careful in this regard, he said, “Our politics should not make the economic problem more complicated.”
