Bangladesh Embassy in Moscow suggests barter trade amid SWIFT ban

A man in Springfield, Missouri of the United States exchanged a carton of eggs for two double rolls of toilet paper in March in 2020 during the first wave of Covid-19 that forced people to stay indoors, kept stores shut and broke supply chains. The barter trade of the middle age got a new life during that unprecedented period in the US.

That was a pandemic time call. Exactly after two years, it is March again and it is now wartime that challenged global supply chains in different ways and brought barter trade to the fore as an option not person-to-person, but state-to-state.

Such a proposal has just come from Bangladesh's embassy in Moscow.

In a report to the commerce ministry on 14 March, the embassy has suggested that the government export medicines and potatoes to Russia in exchange for importing food grains, such as wheat, fertilisers and edible oil through government-to-government bartering or currency swap by avoiding Russia's removal from SWIFT, an international payment system.

It also advised the government of continuing export-import activities privately in Chinese currency by using Bangladesh's corresponding accounts with Chinese banks if the sanctions on Russia continue, especially its exclusion from SWIFT, according to the report.

"Several banks in Bangladesh may have corresponding accounts in Chinese currency with Chinese banks, which may be used to facilitate export proceedings to Russia. China would be the more convenient choice having land connections with Russia," said Molla Saleheen Shiraj, commercial counsellor of Bangladesh in Moscow.

But it is only possible between exporters and importers who have been in business for a long term and have that confidence. It is very difficult for new and small exporters, he added.

Some of the potential ways suggested by Bangladesh's trade diplomat go in line with some other countries that are exploring channels for trade and financial transactions with Russia, which has been under a barrage of sanctions from the West since its attack on Ukraine. Moscow's allies in the BRICS group – Brazil, India and China – may consider a parallel financial system as the US and Europe have dropped big Russian banks from the main global payments system SWIFT, reports Reuters.

Chinese businesses and banks are increasingly settling transactions with Russia in yuan.

India is moving with its plan to get Russian banks and companies to open rupee accounts for trade settlement as part of a barter system.

"Barter transactions may be possible for food grains and edible oil from Russia and potatoes and medicines from Bangladesh," the Moscow-based commercial counsellor said in his letter to the commerce secretary, stating that 30% of India's $10 billion bilateral trade with Russia were settled in their national currencies – rupee and rouble – under state-to-state arrangements for defence and energy procurement.

"But other imports through private importers to Bangladesh will be hindered significantly," Molla Saleheen Shiraj pointed out. Bangladesh exports to Russia amounted to $665 million in the fiscal 2020-21, while imports totalled $482 million.

In the last seven (July-January) months of FY22, Bangladesh's exports to Russia amounted to $459 million, which was 43.28% higher than in the same period of FY21.

Bangladesh mainly imports wheat, fertilisers, edible oil, chemicals, and machineries from Russia. Wheat and fertilisers are often imported on a government-to-government basis and this procurement may be done in alternative ways – currency swap or barter amid the SWIFT ban, the Bangladesh embassy said.

Barter transactions may be possible for food grains and edible oil from Russia while potatoes and medicines from Bangladesh. But other imports through private importers to Bangladesh will be hindered significantly, it pointed out.

Bangladesh's main exportable items are RMG, shrimps, agri products, tobacco, jute and jute goods, leather and leather goods, footwear, light engineering, while its imports include wheat, machinery, metal and metal products, chemicals, minerals products, fertilisers, and edible oil.

The report said if the sanctions remain in force for a long period of time there are possibilities of hyper-inflation and economic turmoil, which will have a deep impact on bilateral trade with Bangladesh. Exports from Bangladesh are likely to fall drastically this time because of the SWIFT ban.

Only those RMG exporters who export to Russia through third countries, such as Turkey, Poland, Germany, Hong Kong, may get payments from export proceedings this time but they will be unlikely to continue exporting to the country, it added.

The same condition is applicable for other Bangladeshi major export items, such as jute, shrimp and tobacco.

A window of opportunities

The Bangladesh embassy said there could be some opportunities when Russia feels isolated from the West and likely to strengthen business ties with other regions, which it does not consider unfriendly. At the same time, Moscow will also want to open alternative sources for various products to the Russian market.

Bangladesh can seize the moment and proceed with its interest tactfully so that it can gain some additional mileage without annoying the western countries. The ultimate goal would be to have a signing free trade agreement with the Eurasian Economic Union led by Russia, it added.

"It seems that it takes time to sign an FTA under normal circumstances but now is the time for us to push it forward," the commercial counsellor added.

High potential for pharmaceuticals

Since generic drugs hold the largest market share, 64% in the Russian market, Bangladesh has a high potential to capture the market. It is also expected that regional markets outside Moscow and big cities are of high potential, considering cheaper prices Bangladesh may offer.

The embassy said medicines can be bartered against food grains, fertilisers from Russia under G2G basis, which will ensure faster market access.