24 global banks ready to confirm LCs for grain imports from Russia

A cloud of uncertainty over payments for Bangladesh's sourcing of food grains and fertilisers from Russia, Ukraine and Belarus has now been dispelled as 24 global banks have agreed to give letter of credit (LC) confirmation for imports from those countries, said Commerce Minister Tipu Munshi on Thursday.

However, the minister could not specifically name the banks.

Seeking anonymity, a commerce ministry official said Russia suggested Bangladesh to approach these 24 global banks that have still kept on dollar transactions with Moscow.

Russian banks, which have remained out of the purview of Western sanctions, have also given their consent to accept dollar payments, Tipu Munshi noted, hoping that imports will get back to normal and prices of food products will come down.

"We want to inform everyone that there is no problem in importing food from Russia and Ukraine. So, we have no reason to worry," the minister told the media after a Cabinet Division meeting on how to settle payments for grain imports from Russia, Ukraine and Belarus.

Food Minister Sadhan Chandra Majumder said an easy payment system has been ensured. So, rice and wheat will continue to come in, leading to a quick fall in their prices in the local market.

Officials at agriculture and food ministries say there is now no obstacle to the ongoing process of importing five lakh tonnes of wheat and 1.2 lakh tonnes of Muriate of Potash from Russia.

Last Tuesday Agriculture Minister Muhammad Abdur Razzaque told The Business Standard that global banks were not giving confirmation to LCs opened by Bangladeshi banks for transactions with Russia. 

"In this situation, we have to think about what will be the payment method for fertiliser and wheat imports," he said.

The commerce minister said they did not discuss the payment process for the imports of fuel oil from Russia. On Wednesday, Russian Ambassador to Bangladesh Alexander Mantytskiy told journalists that Russia had been in talks with Bangladesh to decide on a payment currency other than the dollar for its fuel supplies to the latter.

Officials at state-owned banks and the Bangladesh Bank said the United States cut off seven out of nearly 300 Russian banks from the international financial messaging system SWIFT. Bangladesh mainly opens LCs with 15 banks that are out of the sanctions.

After opening an LC with those banks, a bank of Bangladesh needs to secure confirmation from global banks based in the European Union, they noted.

An official of the Bangladesh Bank told TBS that Bangladesh imports goods from Russia by opening LCs with Moscow's Ak Bars Bank and Bank Zenit, which are not sanctioned by the US. 

Middle East-based Mashreq Bank, having correspondent banking with the two banks, gives confirmation to LCs opening for fertiliser and wheat imports by Bangladeshi banks and has continued it, he noted.

Earlier, on 16 August, the Bangladesh Bank, in a letter to the Financial Institutions Division of the finance ministry, also said normal financial transactions between Bangladesh and Russian banks that are not under the US sanctions are going on.

But Bangladesh has not been able to import fertilisers and food grains from Russia and Belarus since February following Western sanctions on Moscow over its invasion of Ukraine.

On the other hand, Ukraine's Black Sea port city of Odessa had been blocked by Russian forces, and the imports of food grains from Kiev had also stopped. As a result, there was a shortage of wheat in Bangladesh. 

The government was also worried about ensuring supply of fertilisers.

In this situation, last July, the United States said they had no restrictions on import of fertilisers, food and agricultural products from Russia. Besides, exports from Ukrainian Black Sea ports reopened following an agreement, brokered by the United Nations along with Turkey.

So, while Bangladesh had already finalised imports of fertilisers and wheat through a negotiation with Russia, the government was concerned about whether dollar payment would be possible.

Mohammad Shams-Ul Islam, former managing director and CEO of Agrani Bank Ltd, told TBS that there has been no problem in LC confirmation in Bangladesh's bilateral trade transactions with the Russian banks that are still connected to SWIFT. 

There will also be no problem in payment of import of wheat and fertiliser in dollars on a government-to-government basis, he said.

Russia issued a list of "unfriendly" countries in the wake of severe economic sanctions over the Ukraine conflict. Vladimir Putin has demanded payment in roubles for Russian gas, oil and food grains sold to those "unfriendly" countries, he noted.

As Bangladesh is out of this list and there is no US ban on the imports of Russian food grains and fertilisers, global banks will confirm import LCs in dollars. African countries are also importing food grains from Russia in dollars, he said.

State-owned Sonali Bank opens LCs in favour of the Rooppur nuclear power plant in Bangladesh. 

An official of the bank's branch dealing in foreign exchange transactions told TBS that they open LCs with a bank owned by the Russian government. There are no US restrictions on that bank and LC confirmation is not required. 

Even after the start of the war, there was no problem in transactions with the bank, he said.