Repayment of Russian loan hits snags

The fallout from economic downturn, coupled with runaway corruption was bound to affect the balance of payments of the country. Today, policymakers are indeed in a fix about how to manage the repayment of principal-plus-interest on loans taken from international sources for various projects. None is more glaring than the one for the country's first nuclear power project viz. Rooppur Nuclear Power Plant (RNPP). The recent turmoil that transformed the political-cum-economic outlook, has put Dhaka on a collision course with Moscow, especially over what to do about the $11 billion plus Russian loan that has made RNPP possible. This remains a G2G (government-to-government) deal and also the largest foreign financed infrastructure project of the country under any administration. There is no contention about the fact that repayment will have to be made.

It is interesting to note that very recently, a study has been published by an expatriate Bangladeshi expert where a comparative analysis has been made about the cost of RNPP and similar projects in India and Belarus. While the nuclear reactors are of the same generation and design, it is not as simple as to make a statement on graft alleged to have taken place. It has to be proven by taking into account all the variables that distinguish RNPP from the Indian and Belarus projects. That said, it is in Bangladesh's interest to complete this project and get it operational at the earliest. The country is in the midst of a major energy crunch. It is also a fact that the LNG (liquefied natural gas) experiment, the cross-border trade in electricity, the power produced and sold by independent power producers all have big questions hanging over them in relation to graft. Hence, it would be a pity to mothball RNPP on the suspicion that there was a multi-billion dollar payoff by one party to another.

Russia has been pressing Bangladesh to make repayment of $650 million on the loan extended to Dhaka. Given today's economic situation, Dhaka has asked for an extension on repayment of capital, a request that has not been welcomed by Moscow. Why not? Why this direct rebuttal? It is not as though Bangladesh is bankrupt and is refusing to repay. It certainly is interesting that Russia is demanding that the payment on loan interest be made through Chinese banks (in Yuan), but the fact is that this is easier said than done. Russia is at liberty to ignore the Western-backed sanctions scheme against it, but can Bangladesh say the same?

The change of the political guard in Dhaka has also shifted its focus on the definition of domestic development. The preceding five-year plan has been put on hold and the economy is no longer infrastructure development-driven. Rather, the focus is on soft loans and grants for human resources development and other interest areas. Regarding the Russian loan (including interest) payment, Bangladesh wants a renegotiation on the terms of payment and this is not unheard of globally. Restructuring of international loans happens all the time.

Insistence on the "terms of payment" ignores the problems associated with the banning of Russia from the SWIFT banking system. Yes, there are alternative means of payment that includes the Chinese-led initiative CIPS, but that has its own problems. Bangladesh isn't a full member of the BRICS and so these problems are not going away anytime soon. There is hardly any point in getting emotional on such cold-hearted matters.

Moscow has to understand the economic reality Bangladesh faces on multiple fronts. The RNPP remains the single most important power infrastructure of the country. Bangladesh requires reliable power that is affordable. Regardless of how Moscow sees the situation, there has to be a renegotiation on the terms of payment and possibly this will involve deferred payment unless an acceptable, alternative legal means to transfer the repayments can be found under international law. There is no other alternative for Bangladesh. It cannot evoke the ire of the West to please the East. On its part, Russia should think about preserving the cordial relations it has with Bangladesh.

Everything must be brought to the negotiating table. All contentious issues have to be hammered out through discussion - not acrimony. It does not help either nation to be at loggerheads over RNPP. The RNPP is a long-term proposition to provide reliable and "cheap" power. These must be worked out by both parties and come to an agreement over the loan (and interest) repayments and also the price of power generated because of the simple fact that massive financial outlays have been made and years spent to build this project. This is simply too big to fail. Russia should get off its high horse and come to the discussion table because Bangladesh believes in "friendship to all, malice to none".

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