Bangladesh will lose one of the most promising garment export destinations if various Russian lenders are barred from the SWIFT messaging system in response to the country’s invasion of Ukraine, entrepreneurs have warned.

Western nations announced a series of tough sanctions on Saturday to punish Russia for its invasion of Ukraine, including blocking certain banks from the SWIFT international payment system.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global financial artery that enables the smooth and rapid transfer of money across borders.

If the ban becomes effective, local exporters will have difficulty receiving payments from Russian importers.

Russia is a growing export destination for clothing items from Bangladesh.

In the July-January period of the current fiscal year, the country sent apparel worth $415.47 million, registering a 36.47 percent year-on-year growth, Bureau data shows. Export Promotion Program (EPB).

Bangladesh shipped $593.66 million worth of garments to Russia in the last fiscal year, including $373.25 million of knitted items and $220.41 million of woven items.

But any sanctions imposed on Russian lenders for using the SWIFT messaging system could affect Bangladesh’s exports to the market.

Rajiv Chowdhury, managing director of Young4ever Textiles Ltd, recently started exporting knitted hoodies to Russia as he sees the country as a promising foreign market. He sent the first batch to a Russian buyer based in Turkey.

He exported clothes worth $4 lakh in two shipments and received $2 lakh in payment for the first shipment.

“I have been assured that my Russian buyer will make the payment from Turkey as he has an office in the country. So this time I may not have any problem receiving payment from my Russian buyer,” Chowdhury said.

But the entrepreneur plans not to ship goods to Russia until the uncertainty over SWIFT is resolved, as it could face difficulties in obtaining export revenue.

“We have already ordered our members to halt shipments of clothing items to Russia as the war unfolds there and for the potential ban on the use of SWIFT,” said Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“We are worried about the Russian and Ukrainian markets. Uncertainty was created in payment and shipping after the outbreak of the war.”

The BGMEA has asked its members not to accept new work orders from Russia to avoid any hassle in payments.

“Russian buyers should settle payments as soon as possible so that they don’t run into any uncertainty in the time of Covid-19,” Hassan said.

Mohammad Hatem, executive chairman of the Bangladesh Knitwear Manufacturers and Exporters Association, said they were concerned about the payment issue due to the uncertainty surrounding the use of SWIFT in Russia.

“We have not been receiving orders from Russian buyers since the Western nation agreed to ban certain Russian banks from using the SWIFT system. This will create a major barrier for us in Russian markets.”

The Russian market has been growing for Bangladesh since FY 2009-2010, when the government started paying an additional 4% cash incentive on exports to new or emerging markets to offset the effects of the global financial crisis from 2007-2008.

Before the introduction of the incentive, the export of clothing items to non-traditional markets amounted to a few million dollars. It hit $5.08 billion in the last fiscal year.

Bangladesh considers all countries as non-traditional markets except UK, EU, Canada and USA.

Between July and January, export earnings from non-traditional markets amounted to $3.66 billion, a year-on-year increase of 24.46 percent, according to the EPB.

Regarding the EU market, Bangladesh’s biggest export destination, Hassan from BGMEA says European markets pose no challenge as business is business as usual so far.

More than $22 billion worth of clothing items are shipped from Bangladesh to European countries, accounting for 64% of annual clothing exports.