During her visit to the Qatar Economic Forum, Bangladeshi Prime Minister Sheikh Hasina expressed the country’s willingness to purchase Russian oil if it is available at a reasonable price.
Prime Minister Hasina emphasised that Bangladesh would consider buying oil from Russia considering its price. Furthermore, she affirmed Bangladesh’s commitment to maintaining a neutral stance in conflicts between other nations.
What the PM said about buying oil?
Prime Minister Sheikh Hasina stated that Bangladesh will continue to purchase Russian oil if it is available at an affordable price, despite concerns about potential backlash from Western countries. Bangladesh is currently facing challenges in maintaining its foreign currency reserves and stabilizing its economy, as global commodity prices, including oil, have experienced significant increases over the past year.
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In response to questions about the on-going procurement of Russian oil, Prime Minister Hasina expressed willingness to buy it, stating, “If the commodity is offered at an affordable price, of course, we will buy it. Why not?” She emphasised that Bangladesh adheres to a policy of maintaining friendly relations with all nations and does not engage in activities that isolate Russia due to its military operation in Ukraine. She affirmed that Bangladesh will not adopt a partisan role in global affairs.
Prime Minister Hasina further explained that Bangladesh’s focus is on developing the country and meeting the needs of its people to improve their quality of life. While Dhaka primarily purchases oil from Middle Eastern countries like Saudi Arabia and the United Arab Emirates through long-term agreements, the rising energy costs and fuel-price hikes in Bangladesh have made Russian oil an attractive option. Neighbouring countries like India have already taken advantage of substantial discounts when purchasing Russian oil.
Bangladesh is not the only country in Asia to buy oil from Russia
According to the state-controlled lender Bank of Baroda, India’s imports of Russian oil have experienced a substantial increase from a low starting point in 2022 and continued to rise throughout the year. Currently, Russian oil constitutes nearly 20% of India’s annual crude imports, a notable surge from just 2% in 2021. India’s seaborne crude purchases from Russia have surpassed those of China.
However, it is worth noting that China receives nearly 800,000 barrels per day through a pipeline from Russia, in addition to its seaborne imports, although the pipeline capacity is believed to be at or near its maximum. India began procuring Urals crude, which was available at a discounted price, following the invasion of Ukraine in February last year.
In recent months, Indian oil refiners have also demonstrated an increasing interest in Russia’s ESPO blend, originating from East Siberia and destined for the Pacific Ocean. While China’s seaborne imports of Russian oil experienced fluctuations throughout 2022, they rebounded later in the year and early this year.
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Several other nations have capitalized on the opportunity to purchase discounted Russian crude. Turkiye and Bulgaria, which has received an exemption from the EU ban on Russian oil imports by sea, have significantly increased their purchases. Additionally, Pakistan has struck a deal with Russia to acquire discounted oil. However, the volumes imported by these countries do not match the quantities imported by India and China.
A cost-effective option
After Russia’s invasion of Ukraine, several foreign governments and companies opted to boycott its energy exports, resulting in a reduction in buyers. During a specific period in the previous year, there was a notable price disparity between Russian Urals crude and Brent crude, the internationally recognized standard for oil pricing, with the former trading at a significant discount of more than $30 per barrel compared to the latter.
The sanctions imposed on Russia include a price cap plan introduced by G7 and EU leaders in December 2022. The objective of this plan is to limit Russia’s oil export revenue and keep it below $60 per barrel. The EU has also halted imports of Russian oil by sea and banned the import of refined oil products from Russia.
Although Russia’s oil exports in April increased in volume compared to the previous year, its revenues decreased by an estimated 27%, as the International Energy Agency reported. The United States expressed its dissatisfaction with India’s purchase of Russian oil after the invasion of Ukraine. However, it acknowledged that India has the right to source crude from Russia.
There have been concerns regarding the resale of refined fuels derived from Russian oil to the US and EU. The EU has observed a significant rise in imports of diesel and jet fuel from India.
The Indian government has defended its ongoing crude purchases from Russia, citing the necessity to procure oil from the most cost-effective source. Indian refineries have faced difficulties in securing financing for their oil purchases from Russia due to the imposition of sanctions on Russian banks, which have disrupted payment transactions. As a result, Indian refiners have been compelled to rely on the use of US dollars for their procurement of Russian oil. However, they have also been actively exploring alternative payment methods to mitigate the impact of these challenges.
China’s state-owned oil enterprises increasingly use the Chinese renminbi, rather than the dollar, to finance oil purchases.
Russian Oil to help Bangladesh in tackling energy crisis
In the face of its on-going energy crisis, Bangladesh is actively exploring options to mitigate the situation by considering the purchase of oil from Russia. Energy experts propose various approaches that could potentially help Bangladesh secure a stable energy supply and address its pressing needs.
One viable strategy is negotiating a long-term agreement with Russia. This would establish a predictable oil supply for Bangladesh, enabling the country to plan its energy requirements and allocate resources accordingly. Bangladesh can reduce uncertainties and minimize the impact of price fluctuations on its energy budget by ensuring a steady supply at a predetermined price.
Alternatively, Bangladesh could explore purchasing oil on the spot market, capitalising on price fluctuations to secure oil from Russia at discounted rates. This approach would allow Bangladesh to take advantage of favorable market conditions and potentially reduce its energy costs.
To mitigate risks associated with direct dealings, Bangladesh may also consider using intermediaries for oil purchases from Russia. By employing intermediaries, Bangladesh could reduce the likelihood of sanctions imposed by the United States and European countries, mitigating potential economic repercussions and ensuring uninterrupted energy supplies.