Rooppur power plant: Transactions stalled by sanctions on Russia

Western sanctions on a number of Russian banks have pitched financial transactions of Bangladesh’s Rooppur nuclear power plant project into uncertainty. The Russian bank through which Bangladesh’s Sonali Bank transacts the funds of this project, has asked Bangladesh to hold up transactions for the time being. The bank is facing sanctions of the global payment system SWIFT.

The bank, Bank for Development and Foreign Economic Affairs (VEB), sent Bangladesh Bank a message through the SWIFT system a few days ago, asking that transactions be halted. The bank also said that if Bangladesh delays in sending the payment for the Rooppur project, no extra fee will be charged for the delay.

Attempts were made to contact Sonali Bank managing director Ataur Rahman Pradhan about the matter, but he was unavailable for comment. However, an official of the relevant department in the bank, on condition of anonymity, told Prothom Alo that as soon as VEB got the message of SWIFT sanctions, they asked Bangladesh not to carry out transactions. Other than Rooppur, the fate of certain other Russian business deals in the country may become uncertain too as a result of the SWIFT sanctions.

In the meantime, the state-owned Agrani Bank and the private sector National Bank have also received similar messages from Russian banks. These banks have asked the Bangladeshi banks to hold up transactions with them for the time being. Till Thursday night it was not known whether the Russian banks sent such messages to any other banks in Bangladesh.

Meanwhile, foreign secretary Masud Bin Momen held a meeting on Thursday with diplomats, businesspersons, bankers and other stakeholders about the situation which has emerged. After the meeting, he told journalists that it had been suggested at the meeting that no transactions which required sending funds to Russia immediately, be carried out because the money may be held up by SWIFT.

Russia launched its attack on Ukraine on 24 February after which western countries together imposed various sanctions on the country. These include an exclusion of Russian banks from SWIFT transactions. This action will come into effect on 12 March.

In a letter issued on Wednesday to Bangladeshi banks on its network, SWIFT said that other than VEB, the Russian banks to face this sanction include Otkritie, Novikombank, Promsvyasbank, Bank Russia, Sovocombank and VTB Bank. VTB Bank is the second top bank of Russia, while Otkritie is the biggest bank in the country’s private sector. Persons related to the Bangladesh banking sector have said that due to the sanctions, these banks do not want to carry out any SWIFT transactions with Bangladesh any more.

Russia is providing Bangladesh with assistance in the construction of the Rooppur nuclear power plant, which is the country’s largest ever single project. Atomstroyexport is constructing the power plants as contractors under the Russian nuclear power corporation Rosatom.

The two units of the 1200 MW plant at Rooppur are being constructed at a cost of around Tk 1.14 trillion (Tk 1,14,000 crore). The Bangladesh government is providing around Tk 220.53 billion (Tk 22,053 crore) and Russia is providing Tk 910.40 billion (Tk 91,040 crore). Commercial power transmission of the plant is scheduled to commence from 17 February 2024. In context of the western sanctions on Russia, on Tuesday night Rosatom said in a press release that there does not appear to be any apprehension about a breach in the Rooppur nuclear power plant project or any change in the timeline.

The Russian bank VEB has been carrying out transactions (Relationship Management Application-RMA) with Bangladesh’s Sonali Bank. The bank would send Russian credit to Bangladesh and Sonali Bank would send payment for machinery and other equipment to Russia through VEB.

According to sources, a portion of the payment was due to be sent to Russia in March-April this year. However, due to the war, VEB has informed Bangladesh Bank that no money should be sent for the time being. An official of the Rooppur project, on condition of anonymity, told Prothom Alo on Thursday night that they too had received a message not to carry out transactions at the moment. Even if the financial transactions were held up for a few months, the work would not be delayed.

The private sector National Bank has dealings with Russia’s Otkritia Bank. Sources say that two clients of National Bank recently opened export letters of credit with the Russian bank, but cannot advance further due to the SWIFT sanctions.

The state-owned Agrani Bank has dealings with the Russian State Development Corporation VEB.RF. On 28 February the bank sent a letter to Agrani Bank to suspend transactions.

Speaking to Prothom Alo Thursday night, Agrani Bank managing director Mohammad Shams-Ul-Islam said, “We do not have significant transactions with VEB.RF. Even though there is no SWIFT sanction, we do not understand why this Russian bank has suspended transactions.”

In a message sent on Wednesday to its member banks, SWIFT stated that several banks and financial institutions connected to the seven sanctioned Russian banks have been added to the list of suspended transactions. These include EXIM Bank of Russia, Orient Express, Rosgosstrakh Bank and VTB Capital. Two Belarus Banks have also come under SWIFT sanctions.

A total of 11,000 banks and financial institutions of over 200 countries around the world are connected to SWIFT. During a meeting at Bangladesh Bank on Thursday, it was said that Bangladesh’s commercial banks may face a disruption in dealings with Russia.

Bank Asia’s managing director Arfan Ali, speaking to Prothom Alo about the SWIFT restrictions on Russian banks, said transactions with Russia can be carried out through banks of other countries once the SWIFT sanction comes into effect. However, that will cost more and the risks will be higher.

* This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir