Iran war exposes cost of Asia’s fossil fuel reliance

• Forces Bangladesh into costly spot market due to loss of LNG contracts
• Solar expansion cuts Pakistan’s fuel import bill by billions over four years
• Analysts urge faster global shift to clean power for reducing price shocks

DHAKA: As a second major energy shock in four years roils global markets, the contrasting experiences of Pakistan and Bangladesh are underscoring the severe costs for emerging market countries that rely on fuel imports and making a powerful case for a shift toward cleaner power sources.

After South Asian countries were rocked by widespread electricity outages and inflation in 2022 due to soaring liquefied natural gas prices following Russia’s invasion of Ukraine, their paths diverged.

A consumer-led solar revolution swept Pakistan, while Bangladesh signed long-term LNG deals to fuel its power plants.

The fallout from the war with Iran that began with US and Israeli airstrikes on Feb 28 has highlighted the stark consequences of these divergent strategies.

Iran blocked the Strait of Hormuz in response, cutting off contracted long-term LNG supplies and prompting Bangladesh to buy 11 cargoes from the volatile spot market for delivery from March to May.

Bangladesh paid an average of $21.35 per million British thermal units (mmBtu) for the emergency cargoes, double the pre-war prices. The purchases cost the country about $880 million, an amount equal to nearly 15 per cent of its average total monthly imports in the first eight months of the fiscal year ending in June.

In contrast, Pakistan has not made any spot LNG purchases since the new crisis began, having successfully reduced its dependence on imported fossil fuels to 25pc from 32pc before the Ukraine war.

While officials acknowledge that power outages because of gas shortages could occur outside daylight hours when solar power is not available, they are expected to be minimal. “Bangladesh can draw lessons from Pakistan’s success to insulate itself from fuel price volatility,” said Shafiqul Alam, an analyst at the US-based energy think tank Institute for Energy Economics and Financial Analysis.

With rising air-conditioning use set to push power demand even higher, Bangladesh will buy three more LNG cargoes for delivery in May. Dhaka has already sought $2 billion in external financing for fuel imports and has been forced to trim public spending.

As its renewable capacity has largely remained stagnant since the Ukraine war, Bangladesh now gets 60pc of its annual power from imported gas, coal and expensive coal-fired power from neighbouring India, compared with 42pc in 2021.

Bangladesh’s predicament is not unique. Across Asia’s energy-import-dependent economies, inflation rose to decadal highs after the Ukraine war, with emerging economies like Thailand and the Philippines hit especially hard.

In Southeast Asia, fossil fuel subsidies to shield consumers from rising prices shot up to a record $105bn in 2022, 60pc above the previous peak, according to an International Energy Agency report on the region released in Oct 2024. But unlike in Bangladesh, renewable additions are surging across the world. That resulted in global fossil-fuel-fired power output falling last month despite war-linked fuel supply disruptions and a rise in overall power demand, according to the Centre for Research on Energy and Clean Air.

Pakistan’s solar boom helped it slash $12bn in oil and gas imports during the four years to February 2026, according to data from CREA and the Pakistan-based consultancy Renewables First. Analysts say a faster global shift to clean power would cut exposure to such price shocks, as three in four people globally live in net fossil-fuel-importing nations.

Published in Dawn, April 17th, 2026