Dhaka, May 2025 — In a significant diplomatic move, Bangladesh has cancelled a planned purchase of naval vessels under a defense loan agreement with India. The decision comes in direct response to India’s recent withdrawal of trade privileges previously extended to Bangladesh.
According to government sources, the cancellation involves the procurement of warships and patrol vessels that were to be financed under the $500 million defense credit line extended by India in 2017. The deal was part of a broader initiative to enhance Bangladesh’s military capabilities with support from Indian defense manufacturers.
Officials in Dhaka stated that the decision reflects Bangladesh’s discontent over India’s abrupt suspension of trade benefits, which had provided Bangladesh with preferential access to Indian markets for key export goods. “When strategic cooperation is disrupted on one front, it inevitably affects mutual commitments on others,” a senior official from Bangladesh’s Ministry of Defence said on condition of anonymity.
The canceled deal signals growing tensions between the two South Asian neighbors, who have historically shared strong economic and defense ties but have recently experienced strained relations over regional security, border management, and economic competition.
While India has not yet officially responded to the cancellation, analysts say the move may trigger a reevaluation of bilateral defense and economic engagements between the two countries. Experts also warn that this development could create space for other regional powers—particularly China and Turkey—to increase their influence in Bangladesh’s defense sector.
Diplomatic observers view the cancellation as a strategic message from Dhaka, underscoring its willingness to assert sovereignty in foreign policy matters and respond decisively to actions perceived as unfavorable.