Bangladesh is struggling to sustain exports, labour migration and major development cooperation with Russia as US-led financial sanctions imposed after the Russia-Ukraine war continue to disrupt payment settlements.
The sanctions have sharply reduced Bangladesh’s exports to Russia, prevented around 10,000 Bangladeshi migrant workers from sending remittances through formal banking channels and stalled repayments of the Russian loan for the Rooppur Nuclear Power Plant.
Officials said Dhaka even approached Washington seeking a waiver for Russia-related financial transactions, but without success.
Against this backdrop, Bangladesh and Russia are discussing alternative payment mechanisms, including opening a branch of Russia’s state-owned Sber Bank in Dhaka to facilitate settlements in national currencies, following a model already operating between Russia and India.
“Bangladesh is having to pay the price of a Western sanctions regime that doesn’t take the economic needs of the developing world into consideration,”
Michael Kugelman, resident senior fellow for South Asia at the Atlantic Council
Finding a payment solution was one of the key issues discussed during Foreign Minister Khalilur Rahman’s visit to Moscow in early June, officials said.
Asked about the impact of geopolitical tensions on international trade, Fahmida Khatun, executive director of the Centre for Policy Dialogue, told The Daily Star, “Geopolitics is directly affecting international trade nowadays as multilateral organisations and rules have become largely ineffective.
“It is mostly developing countries that are bearing the consequences through higher fuel prices, disruptions in commodity imports and financial restrictions.”
EXPORTS TAKE A HIT
Bangladesh’s exports to Russia have plunged from $638 million in 2021-22 fiscal year to $257 million in 2025-26, while imports have risen from $474 million to $1.59 billion over the same period, according to Export Promotion Bureau data.
“Bangladesh imports mostly wheat and fertiliser from Russia. Even there we face payment problems. We also cannot import military equipment, while our garment exporters are struggling to receive payments,” a foreign ministry official said.
Businesses say the biggest obstacle is no longer demand for Bangladeshi products but the inability to receive export proceeds.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said at least eight garment exporters have been unable to recover payments for shipments made since early 2024.
“More than $4.6 million remains unpaid,” he told The Daily Star, adding that garment exports to Russia have virtually come to a standstill.
After sanctions were imposed in 2022, Russian buyers initially paid exporters in Chinese yuan through Chinese banks. About two years ago, however, those banks stopped processing the transactions following US warnings and returned the funds to Russia.
Exporters later used a Thai bank to settle some payments in US dollars, but more than $4 million still remains outstanding, Hatem said.
The industry also lost a $10 million export order after a Polish retailer cancelled a plan under which Bangladeshi garments would be shipped to Poland before being transported overland to Russia.
A commerce ministry official said Bangladesh is trying to boost exports and create jobs at a time when the economy has already been strained by global conflicts, higher energy prices and recent political changes.
“Russia remains a market with huge potential, but payment settlement has become the biggest obstacle,” he said.
REMITTANCES BLOCKED
Officials estimate that around 10,000 Bangladeshi migrant workers in Russia are unable to send their earnings home through formal banking channels because of the sanctions.
During Khalilur’s Moscow visit, the two countries also discussed a proposal to recruit up to 1 lakh Bangladeshi workers over the next year. Officials said such an initiative would require a bilateral agreement, but the payment issue must be settled first.
“Unless migrant workers can send remittances through official channels, the foreign currency does not enter Bangladesh Bank’s reserves,” said a Bangladeshi diplomat in Moscow.
ROOPPUR REPAYMENTS STALLED
The sanctions have also complicated Bangladesh’s repayment of the Russian loan for the $12.65 billion Rooppur Nuclear Power Plant, of which Russia financed $11.38 billion.
The original agreement required repayments in US dollars, but that became impossible after major Russian banks were removed from the SWIFT international payment system following the Ukraine war.
Diplomatic sources said Russia has repeatedly sought repayments, including proposals to accept rouble-denominated payments. Bangladesh also explored routing payments through Chinese banks, but those efforts were unsuccessful.
Before 2022, Bangladesh had paid about $1 billion in interest and advance repayments. Since then, nearly another $1 billion has accumulated in an escrow account at Bangladesh Bank because it cannot legally be transferred to Russia.
Russia has also proposed settling the loan in Indian rupees, but the proposal remains at a preliminary stage, Bangladesh Bank spokesperson Arief Hossain Khan said.
“This is primarily a diplomatic issue, not a financial one. Bangladesh is regularly depositing the due repayments into the escrow account.”
Payments to Russian personnel working on the Rooppur project have not been affected since their salaries and allowances are paid through a local bank account, he said.
SEARCHING FOR ALTERNATIVES
Since 2022, the two countries have explored several payment mechanisms, but none has proved fully effective. Officials now see the proposed opening of a Sber Bank branch in Bangladesh as a possible long-term solution.
During his Moscow visit, Khalilur met Sber Bank First Deputy Chairman Alexander Vedyakhin to discuss mechanisms for facilitating trade, investment and financial settlements.
Sber Bank already operates in India. According to Russia’s TASS news agency, its Indian branch now handles most India-Russia transactions in national currencies, has expanded rupee lending to Russian exporters and significantly reduced payment processing times.
Bangladeshi officials believe a similar arrangement could help restore bilateral trade and financial transactions.
Asked how vulnerable Bangladesh is to the current geopolitical uncertainties, Michael Kugelman, resident senior fellow for South Asia at the Atlantic Council, said Bangladesh is particularly vulnerable because Russia remains an important partner in the energy sector at a time when global market shocks have heightened the country’s energy security concerns.
“This makes Dhaka’s commercial ties with Moscow all the more high-stakes.”
He also said Bangladesh faces the same dilemma as many Global South countries that have maintained neutrality over the Ukraine war.
“They are having to pay the price of a Western sanctions regime that doesn’t take the economic needs of the developing world into consideration,” he told The Daily Star from Washington.
Kugelman suggested Bangladesh could use its currently stable relationship with Washington to seek either a sanctions waiver or greater flexibility so that legitimate commercial transactions with Russia do not trigger punitive measures.
