De-dollarisation: Bangladesh ditches dollar, to pay Russia in Chinese yuan for nuclear plant

Dhaka: The US dollar is gradually losing its hegemony and this has become all the more real after Bangladesh has decided to settle payment for a nuclear plant to Russia in Chinese yuan. With sanctions on Russia by the US and European nations, Bangladesh was struggling to look out for ways to settle repayments worth $110 million for the Rooppur power plant which is under construction in the South Asian country. Dhaka is constructing the nuclear power plants in collaboration with Russia’s state-owned atomic company Rosatom in a $12.65 billion project. Of the total cost, 90 per cent is financed through a Russian loan repayable within 28 years, with a 10-year grace period. Why is Bangladesh paying Russia in yuan? Bangladesh’s additional secretary of the ministry’s Economic Relations Division (ERD), Uttam Kumar Karmaker, said that because of sanctions against Russian banks, Dhanka was unable to process payments in US dollars. “Russia asked us to settle the payments in their currency, rubles, but that was not feasible. So we both opted for yuan,” Karmaker was quoted as saying by Nikkei Asia. Also Read: Dollar’s dominance at risk, says US Treasury Secretary Janet Yellen    The decision to clear the stalled payments to Russia for the nuclear power plant in yuan was taken by a high-level delegation from Russia and Bangladesh’s Ministry of Finance. The development came amid increasing de-dollarization efforts by several countries including Russia, China, Brazil, India and calls by BRICS [Brazil, Russia, India, China and South Africa] nations for a common BRICS currency. How will Bangladesh settle payments with Russia in yuan? Bangladesh will clear pending payments with Russia via a Chinese bank. Dhaka is likely to clear the stalled payment from its own reserves of yuan. Russia will receive the payment through China’s Cross-Border Interbank Payment System (CIPS), a yuan-driven alternative to the dollar-dominated SWIFT system. SWIFT, which is believed to be a secure messaging platform for settling cross-border payments, is more popular than CIPS. With 11,000 members, SWIFT enables around $5 trillion in trade, while CIPS which has 1,280 members. The decision by the West to block some Russian banks’ SWIFT access, however, appears to have given an opportunity to China to promote its alternative. Don’t Miss: Dollar Dumped: How the first China-UAE gas deal in yuan is a big blow to US During their bi-lateral summit in March this year, Chinese President Xi Jinping and his Russian counterpart Vladimir Putin said, “We are in favour of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa and Latin America.” Bangladesh’s share of yuan as foreign currency reserve Since 2017, Bangladesh’s central bank has been building up the share of yuan in its foreign currency reserves. It happened soon after the Chinese currency was included in the International Monetary Fund’s Special Drawing Rights (SDR) currency basket. The yuan’s portion of Bangladesh’s forex reserves rose to 1.32 per cent in August year, from 1 per cent in 2017. At the same time, the dollar’s portion as forex reserves of Bangladesh declined to 75 per cent from 81 per cent. Must Read: Dollar Decoupled: Donald Trump warns US currency 'crashing, will no longer be the world standard' In September last year, a circular was issued by Bangladesh Bank allowing commercial banks in the country to maintain accounts in yuan with their corresponding branches abroad to settle overseas transactions. Read all the  Latest News ,  Trending News ,  Cricket News ,  Bollywood News , India News  and  Entertainment News  here. Follow us on  Facebook,  Twitter and  Instagram.