Energy security: What energy strategy is needed to reduce geopolitical risks

The world is once again facing a fresh energy crisis reminiscent of the 1970s. But while that crisis was driven solely by disruptions in oil supply, today both oil and gas supplies are being affected simultaneously.

The energy crisis of the 1970s was primarily an oil crisis. Following the Yom Kippur War in 1973, when Egypt and Syria fought against Israel, the United States felt compelled to reduce its dependence on Middle Eastern oil. It began searching for alternative sources of oil. Not only the United States, but many other countries also started seeking alternatives to Middle Eastern oil.

As part of this effort, foreign companies began oil exploration in Bangladesh, but instead discovered gas fields. Throughout the 1980s and 1990s, Bangladesh’s dependence on natural gas steadily increased. At the same time, the use of gas also expanded in Britain and across Europe. The United States, too, gradually increased gas production as an alternative energy source.

Europe eventually became heavily dependent on Russian natural gas. At that point, it became difficult for the US to shift Europe’s gas market away from Russia. This is because exporting gas from the United States requires liquefaction (LNG) and transport across the Atlantic, which is far more expensive than pipeline gas.

LNG requires specialised technology and large infrastructure. Gas must first be liquefied, then transported by cargo ships, and upon reaching its destination, it must be regasified and distributed through pipelines. Despite these complexities and costs, the United States began to treat LNG as a strategic fuel, rather than focusing solely on price.

In countries that have their own gas, coal, or nuclear resources, it is difficult to create a market for LNG. However, in countries facing acute energy shortages and seeking alternatives to Middle Eastern supply, establishing LNG trade is comparatively easier.

At that time, strategic partnership with Japan provided a major opportunity for the United States in developing LNG technology. Japan needed energy, while the United States needed a reliable partner to advance LNG technology.

As a close ally, Japan began working on LNG technology development. It also played a significant role in building LNG infrastructure in Middle Eastern countries such as United Arab Emirates, Qatar, and Oman. Later, encouraging gas exports to other Asian countries also became important.

Meanwhile, as pressure to reduce environmental pollution and carbon emissions increased, many countries began moving away from coal. Concerns over nuclear accidents and waste management also grew. In this context, many countries followed the United States in viewing LNG as a “strategic fuel.” The LNG market expanded rapidly in the 2010s, and this trend reached Bangladesh as well.

From 2010, Bangladesh began formulating its power “master plan” with assistance from Japan. The 2010, 2016, and 2023 versions all emphasised increasing dependence on LNG and coal.

Following this path, Bangladesh, with support from the United States, gradually increased its reliance on LNG. At the same time, throughout the 2010s, the country built coal-based power plants with a total capacity of around 5,500 megawatts, relying on imported coal.

To maintain geopolitical balance, projects had to involve Japanese, Indian, and Chinese companies. At the same time, Russia was engaged through the construction of the Rooppur Nuclear Power Plant.

Like the 1970s, the world is once again facing a new energy crisis. But while earlier only oil supply was disrupted, now both oil and gas supplies are being affected simultaneously. The post-Covid economic shock, the Russia-Ukraine War, and tensions involving Iran, the United States, and Israel have collectively created a deep energy crisis.

In this situation, the US is in the most secure position. As LNG prices rise, the United States benefits, while import-dependent countries face severe crises. Developed countries that have the capacity to store oil and LNG suffer comparatively less. But import-dependent countries like Bangladesh, lacking financial and infrastructural capacity for storage, are being pushed toward economic strain as they are forced to buy energy at higher prices.

According to one estimate, Bangladesh will need to spend 40 per cent more on energy this year compared to 2025. The country has become LNG-dependent largely because it failed to prioritise new gas exploration over the past decades.

Bangladesh now has two LNG terminals. During the tenure of the interim government, construction of two more terminals was initially suspended, but later resumed. It appears that the then National Security Adviser’s visit to the United States played a role in this decision.

Last year, it suddenly emerged that Bangladesh had signed an LNG import agreement with the United States. Just three days before the election, a commercial agreement was signed. Among several conditions for reducing an additional 19 per cent reciprocal tariff on the garment sector to zero, a key condition is that Bangladesh must purchase $1 billion worth of LNG annually from the US for the next 15 years.

Notably, during the recent crisis, Bangladesh had to seek US approval to import energy from Russia. This indicates that due to import dependence, Bangladesh has already become “hostage” to geopolitics.

The ongoing conflict in the Middle East has once again demonstrated the range of risks Bangladesh faces due to increased LNG dependence. If this dependence continues, it will be difficult for the country to escape this trap. In the past, in seeking quick solutions during crises, Bangladesh has become overly dependent on foreign energy technologies. If it continues on this path, breaking free from such dependence will become even harder in the future.

Now, citing cost savings, some interest groups are again proposing coal extraction in Phulbari. However, such solutions have long been proven unacceptable. At a time when the government is preoccupied with sourcing oil and LNG on a daily basis, discussions of coal extraction are highly irrelevant. In particular, extracting coal in Phulbari would severely damage agricultural land and water resources, destroying livelihoods and causing significant environmental harm. Ultimately, the project would prove extremely costly for society as a whole.

Many fail to account for social and environmental costs when calculating project expenses. They do not include social losses alongside land value, nor do they consider future agricultural income. As a result, domestic coal appears cheaper. But once these costs are included, it becomes clear that extracting coal in Phulbari would threaten not only the environment but also national income, food security, and social stability.

Whenever a crisis arises in the energy sector, certain groups attempt to exploit the situation to advance the interests of foreign companies. The renewed push for coal extraction reflects such priorities. Yet, there are faster and less harmful alternative solutions available.

For Bangladesh, a long-term solution lies in state-led gas exploration in offshore areas. However, this will take time. As an immediate solution, large-scale solar power implementation is essential.

This includes utility-scale solar projects, rooftop solar, and solar-powered irrigation. Most of the panels used in these projects are imported from China. Land acquisition, verification, and price reassessments for many projects have already been completed. Now, what is needed is clear government incentives and policy support for rapid implementation.

Some question how quickly solar capacity can be expanded. The example of Vietnam shows that it is possible. Starting from zero in 2018, Vietnam built 16,500 megawatts of solar capacity by the end of 2020—about 25 per cent of its total capacity.

In 2020 alone, it added around 11,000 megawatts to the grid, 48 per cent of which came from rooftop solar. During that time, as part of my PhD research, I visited Vietnam and spoke with experts, researchers, and investors.

The key driver behind Vietnam’s success was government intervention and “feed-in tariff” incentives. A feed-in tariff is a policy that guarantees renewable energy producers a fixed price, typically higher than the market rate, for each unit of electricity supplied to the grid over a certain period.

My research found that if such incentives had been offered over a longer timeframe, the rapid achievement would not have been possible. The Vietnamese government announced that only those who could connect solar power to the grid by December 2020 would receive guaranteed pricing for 20 years. At that time, solar technology costs were falling daily, so investors might have preferred to wait. But the fixed deadline and assured long-term returns encouraged immediate investment. This policy not only achieved its target but exceeded it by attracting additional investment.

Since the crisis began, it has become evident that countries with higher shares of renewable energy are saving more money. Beyond European nations, China, India, Vietnam, and Pakistan have set examples. By expanding solar power, Pakistan alone has saved $12 billion.

To cope with war, uncertainty, and imperial aggression, reducing import dependence is essential. Achieving self-reliance through coal extraction—at the cost of livelihoods, environmental degradation, and social insecurity—is not a sustainable solution. Geopolitical risks also remain significant in coal and nuclear sectors controlled by foreign companies. In the case of coal, future carbon taxes could again lead to foreign exchange losses.

On the other hand, the $6 billion spent annually on LNG subsidies could have been invested in state-led gas exploration, significantly boosting domestic production capacity by now. Additionally, providing incentives for renewable energy would not only save costs but also strengthen Bangladesh’s bargaining position in geopolitics.

Therefore, to reduce geopolitical risks, Bangladesh must develop a strategy centered on renewable energy and domestic gas exploration and production.

* Moshahida Sultana is an energy researcher and a faculty member in the Department of Accounting at the University of Dhaka

* The views expressed are the author’s own