Russia to Receive Rooppur Loan Payments via Sonali Bank

Under the terms of the agreement, a foreign currency account will be opened in the name of the Russian government at Sonali Bank’s local branch in Dhaka. This account will be managed by the Russian Ministry of Finance, which will oversee the receipt of both principal and interest payments moving forward. The account will be activated after receiving final approval from Russia's central government.

The ERD, representing the Bangladeshi government, will be responsible for ensuring that the required payments are made on time, following a high-level meeting at the ERD on Wednesday. The meeting, chaired by ERD Secretary Shahriar Kader Siddiky, included representatives from the ERD, the Ministry of Science and Technology, and other key stakeholders, along with an eight-member Russian delegation led by Anton Kozhinov, the finance director of Atomstroyexport Joint Stock Company (ASE JSC), which represents the Russian government. Other members of the delegation included Denis Mamonov, director of the Department of Public Debt and Sovereign Financial Agent at Russia's Ministry of Finance, and Malyavin Ilya, executive director at the Government Agent Office at VEB.RF.

The Rooppur project, with a total cost of $12.65 billion, is 90% financed by Russia. Until the outbreak of the Russia-Ukraine war, Bangladesh had been making regular interest payments through Russia's VEB.RF bank. However, following the war and subsequent US sanctions on Russian banks, regular transactions were halted, leading to nearly $800 million in overdue interest, commitment fees, and penalties. Principal repayments are scheduled to start in 2027.

The new Sonali Bank account will be used for future payments, but it will not be used to settle the existing overdue amounts. A resolution on clearing the outstanding dues remains pending. According to a senior ERD official, all dues owed to Russia have been deposited into an escrow account at Bangladesh Bank. However, Russia has expressed a preference for direct control over these funds, and efforts to resolve this issue have been ongoing for nearly two years.

While Russia had initially proposed opening a branch of its bank in Bangladesh to handle the loan payments, discussions between the central banks of the two countries failed to reach an agreement on the matter. As a result, the decision was made to open a foreign currency account in the name of the Russian government at Sonali Bank.

This account arrangement is particularly advantageous for Russia, as it can lend out the deposited funds to other financial institutions in Bangladesh, engage in currency swaps, or earn interest on the balance. However, the funds currently held in the Bangladesh Bank escrow account will not be transferred to Sonali Bank. The account will be opened once the Russian central government formally approves the decision, with Bangladesh already agreeing to move forward with the process.

Loan Disbursements and Outstanding Dues

The loan agreement for the Rooppur project was signed in 2016, and disbursements began the following year. As of mid-August 2024, Russia had released $7.33 billion in 25 installments, with the total estimated cost of the project standing at $12.65 billion, 90% of which is funded by Russia. The remaining 10% is provided by Bangladesh. In addition, Bangladesh borrowed $491 million from Russia for the project’s feasibility study, with repayment of the last two installments of this loan still pending.

Bangladesh had been making interest payments every six months under the agreement, but the outbreak of the Russia-Ukraine war disrupted this process. Despite depositing the necessary funds in an escrow account, Russia has incurred penalty interest charges due to delayed payments, and the outstanding dues now amount to around $800 million.

In August 2024, Russia's VEB.RF bank requested payment of $630 million in overdue dues by mid-September, but due to technical complications and sanctions, Bangladesh was unable to process the payment.

Extension of Loan Disbursement and Repayment Deadlines

With the Rooppur project still under construction, Bangladesh requested an extension of the loan disbursement and repayment deadlines by two years in June 2024. The disbursement period was initially set to end in December 2024, with the first installment of the principal due in March 2027. However, as of October 2024, only 67.81% of the project was completed, according to the Implementation Monitoring and Evaluation Division (IMED).

Bangladesh has formally requested Russia extend the loan disbursement deadline until 2026 and postpone the principal repayment until 2029. Although the Russian government has yet to respond, officials are optimistic that a decision will be reached soon, as both parties acknowledge that the project cannot proceed without an extension. If granted, the delay in loan disbursements will also delay the start of the principal repayments.