Russia proposes Indian rupee settlements, a dedicated payment system and a bank branch in Dhaka to clear Rooppur loan hurdles and expand trade amid lingering US sanctions on its banks.

Russia has formally proposed settling bilateral trade with Bangladesh in Indian rupees, creating dedicated payment infrastructure and opening a Russian bank branch in Dhaka. The move aims to bypass transaction barriers created by US sanctions on Russian banks and unlock long-stuck loan repayments for the Rooppur Nuclear Power Plant.

Officials at the Economic Relations Division (ERD) confirmed the proposals will feature prominently at the next meeting of the Bangladesh-Russia Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation, expected in September or October. A preparatory meeting was scheduled to finalise Bangladesh’s agenda.

Sanctions Disrupt Conventional Channels

Western sanctions imposed after the Russia-Ukraine war severed many conventional banking links. Major Russian banks lost access to the SWIFT messaging system, making dollar transfers for trade and debt service extremely difficult. Bangladesh has been unable to remit loan installments for the Russian-financed Rooppur project through normal channels.

Russia earlier suggested repayment in Chinese yuan. Banks in both China and Bangladesh declined, citing fears of secondary US sanctions exposure. As an interim step, Bangladesh has been depositing installments into a Russian account at state-owned Sonali Bank. The funds remain trapped there; they cannot be transferred onward to Russian institutions.

Russia’s latest proposal draws on the existing India-Russia practice of settling a portion of bilateral trade in Indian rupees even without a formal currency-swap agreement. Bangladesh already settles some trade with India in rupees alongside dollars and other currencies. Moscow sees the rupee as a practical, less politically charged alternative that could restore cash flow without relying on the dollar-dominated system.

The idea is not entirely new. Russia floated a similar package during the previous Awami League government. Progress stalled after Bangladesh Bank sought guidance from the Ministry of Foreign Affairs. The current government is now reviewing the revived offer.

Rooppur Loan at the Centre of the Impasse

The Rooppur Nuclear Power Plant remains the largest and most visible element of the payment problem. The $12.65 billion project, located on the Padma River in Pabna district about 160 km northwest of Dhaka, is 90 per cent financed by a Russian intergovernmental loan. The two VVER-1200 reactors will deliver a combined 2,400 MW once both units are fully operational – meeting a significant share of Bangladesh’s electricity demand and reducing reliance on imported fossil fuels.

Construction began in 2017. Fuel loading at Unit 1 started on 28 April 2026 and was completed in the following weeks. Project officials and Rosatom have indicated that the unit is moving toward first criticality and initial power generation. Targets discussed in mid-2026 included supplying around 300 MW by late August and scaling toward full capacity of the first unit later, with the overall project aiming for completion in the 2027–28 window. Unit 2 is expected to follow on a staggered schedule.

Despite physical progress, financial friction has persisted. Bangladesh deposited hundreds of millions of dollars into escrow arrangements, including the Sonali Bank account. At various points the backlog of interest, commitment fees and principal has exceeded $800 million to $1 billion. Russia previously agreed to ease terms: waiving a $164 million late-payment fine on an earlier feasibility-study loan, extending the main $11.38 billion facility, and postponing the start of principal repayment to September 2028. Tax exemptions on repayments to Rosatom’s Atomstroyexport subsidiary were also granted as a special measure.

Even with these concessions, the absence of a workable transfer mechanism has left money sitting idle in Bangladesh while Russian counterparties wait. Bangladesh had suggested that Russia invest the accumulated funds inside the country; Moscow declined.

Broader Trade and Investment Ambitions

Beyond Rooppur, Russia is pushing for wider commercial ties. It has proposed establishing a Russia-Bangladesh Business Council, compiling a registry of reliable Bangladeshi textile suppliers for Russian importers, strengthening small- and medium-enterprise links, and assisting Bangladesh in developing special economic zones.

Trade figures illustrate the potential and the current shortfall. Before the Ukraine conflict, Bangladesh’s annual exports to Russia exceeded $500 million. In the July–May period of the current fiscal year they stood at only $245 million, according to Export Promotion Bureau data. Bangladesh continues to import Russian fertiliser, wheat and other commodities.

In a parallel meeting, a Russian delegation led by Chargé d’Affaires Vyacheslav Sentyurin offered to supply about 280,000 tonnes of urea fertiliser to the Bangladesh Chemical Industries Corporation under a government-to-government arrangement at $10 per tonne below prevailing international prices. Russia also expressed interest in exporting sunflower oil, yellow peas, chickpeas and lentils, framing the offers as support for Bangladesh’s food security.

Bangladesh’s Priorities and Next Steps

Dhaka’s agenda for the intergovernmental commission places technology transfer at the top. Officials intend to seek deeper cooperation in renewable energy, conventional power generation, e-commerce, the digital economy, agriculture, food security, agro-processing, technical and vocational education, skills development, and logistics connectivity.

The commission itself was established in 2017. Its most recent formal session was held virtually in March 2023. The upcoming physical or hybrid meeting will be the first substantial opportunity in several years to address the payment bottleneck alongside the broader economic relationship.

Whether the rupee proposal advances depends on technical feasibility, regulatory clearance from Bangladesh Bank and the Ministry of Foreign Affairs, and comfort levels among commercial banks about any residual sanctions risk. India-Russia rupee trade has demonstrated that such channels can function for significant volumes when both sides commit. Extending a similar model to Bangladesh would require correspondent relationships, clearing arrangements and possibly a Russian bank presence on the ground – exactly the package Moscow is now offering.

For Bangladesh the stakes are practical as well as strategic. Clearing the Rooppur payment backlog would remove a persistent irritant in bilateral ties and free up fiscal space. Successful diversification of settlement currencies would also reduce vulnerability to future sanctions or dollar shortages. For Russia the arrangement offers a way to monetise its large outstanding claims and deepen commercial engagement in South Asia at a time when Western financial isolation remains intense.

The ERD preparatory work now under way will determine how forcefully Bangladesh presses its own priorities – technology transfer, competitive fertiliser supplies, and reliable payment solutions – when the two sides sit down later this year. The rupee proposal has put a concrete option on the table. Turning it into a functioning mechanism will test the practical limits of alternative payment systems in a sanctions-constrained world.