Bangladesh will pay Russia $318 million worth of yuan for a loan payment on a nuclear power plant. Western sanctions on Moscow prevented Bangladesh from paying in US dollars. The decision to use the yuan is the latest example of de-dollarization. Loading Something is loading.
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Bangladesh has agreed to pay Russia about $318 million worth of Chinese yuan for a loan payment on a nuclear power plant.
Western sanctions imposed on Moscow last year for its war on Ukraine prevented Bangladesh from paying in US dollars, which is the predominant currency for cross-border transactions.
Russia, whose state-owned Rosatom is building the nuclear plant, had initially insisted on payment in rubles and refused yuan due to concern over potential conversion losses, according to Bloomberg.
But a representative for Rosatom confirmed to the Washington Post that the loan payment will be made in yuan.
The payment is partial reimbursement for a $12 billion loan the South Asian country previously received from Moscow, and will help fund a nuclear power plant near the capital city of Dhaka.
It’ll be facilitated using China’s Cross-border Interbank Payment System, which Beijing launched in 2015 to help elevate the yuan and erode the dollar’s dominance. Russia was banned last year from the rival SWIFT payment system.
Bangladesh’s yuan payment is the latest example of de-dollarization. Others countries have also looked to non-dollar options as sanctions against Russia, such as the freezing of its foreign-currency reserves, have exposed fresh risks in holding dollar assets.
Meanwhile, China is pursuing trade deals that emphasize non-dollar transactions and has agreed to use the yuan in cross-border trades with countries such as Brazil and Kazakhstan.
But the greenback is likely to remain a global currency even as de-dollarization has begun, economist Peter C. Earle said earlier this month.
Writing in the American Institute for Economic Research, he said use of the dollar in “economic warfare” as well as “error-fraught monetary policy regimes” are driving countries away from the greenback.
Still, he’s highly skeptical of China’s efforts to elevate the yuan on the world stage and replace the dollar, saying, “Even beyond the decades that such a change would probably take, the likelihood of the yuan becoming the global reserve currency ranges between profoundly unlikely to essentially impossible.”