The Bangladesh Bank (BB) has alerted the commercial banks to risks of transactions with Russian lenders in the face of unprecedentedly massive Western sanctions targeting Russia’s economy in response to its invasion of Ukraine.
Central bank spokesman Serajul Islam confirmed the development to bdnews24.com on Friday as Russia continued its campaign to demilitarise Ukraine and keep the eastern European country away from NATO citing security risks.
Foreign Secretary Masud Bin Momen said the authorities were assessing the effects of the sanctions on Russia. Bangladesh does not meddle in international affairs because it is seeking help from all major powers to achieve its development goals quickly. It abstained from voting in the UN on reprimanding Russia for its actions in Ukraine.
In response to the war, the United States, the European Union, the United Kingdom and their allies have imposed sanctions on Russian President Vladimir Putin, people of the elite close to him, many of the country’s banks and financial institutions, effectively isolating the Russian economy.
Among the Western targets are five major banks, including state-backed Sberbank and VTB. Sberbank, Russia's largest lender, will no longer be able to transfer money with the assistance of US banks.
The West has limited Russia’s ability to do business in dollars, euros, pounds and yen, and cut off the country's second-largest bank VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB from the international transaction system SWIFT.
Sberbank and Gazprombank have not been included in the list of banks cut off from SWIFT because they are the main channels for payments for Russian oil and gas, which EU countries are still buying. The two banks are subject to other measures.
VEB is playing a major role in financing Rooppur power plant, the first nuclear plant of Bangladesh backed by Russia. The steps against the lender have sparked fears in Bangladesh about the fate of the ambitious project.
Foreign Secretary Masud said the government was figuring out how much Bangladesh will be affected by the sanctions on Russia.
“Not everything is clear in the initial days of the sanctions. We’re discussing the full range of impact. We held a meeting with the stakeholders yesterday. I think we need some more meetings,” he said on Friday.
The discussions are based on export and import of goods and services, and payments in Russia-backed projects. “We’ll set the course of action later.”
Masud does not think the sanctions will affect Rooppur nuclear power plant yet. “There will be complications if more Russian banks or large companies face sanctions.”
Faced with the unprecedented level of sanctions on Russia, global banks are taking a dim view of business with all Russian entities and dropping clients if there is even a slight doubt on their ties to that country.
While global banks have extensive experience with sanctions and have invested billions of dollars in compliance programmes in recent years, the curbs on Russia are unmatched in their scale, speed and complexity and may yet grow.
To avoid falling foul of the rules and having assets and capital ensnared by new curbs, banks are adopting extreme caution in all of their dealings with Russian entities, actions that will likely exacerbate global trade disruptions.
Top Chinese banks are rushing to ensure they can maintain business ties with Russian clients without running afoul of a barrage of Western sanctions.
Executives at some leading Chinese banks are exploring alternative payment systems as well as the possibility of passing some of their business to small domestically focused peers to avoid getting caught in secondary sanctions.
A potential "workaround" is for smaller local Chinese banks to work on transactions that larger peers with overseas business interest have to steer clear of.
Bangladesh Bank spokesman Serajul also said they will review any Russian proposal if it offers alternative ways of transaction. Bangladesh has to do transactions with some of the Russian entities facing sanctions.
“Or if they ask us to do transaction with other banks, we’ll look into it,” Serajul said.
