US-Bangladesh trade deal may obstruct Bangladesh’s renewable energy growth

On 9 February, Bangladesh and the United States jointly announced that they had signed a reciprocal trade agreement to strengthen the bilateral economic relationship.

As a result of the deal, the US agreed to reduce its reciprocal tariff rate on goods originating from Bangladesh to 19% from 20%. In return, Bangladesh agreed to provide significant preferential market access for US industrial and agricultural goods.

While the agreement has apparently brought some relief to the export-based readymade garment industry, it has also become a matter of debate in Bangladesh, as several clauses have raised concerns over national security and geopolitics, in addition to tariff concessions.

Under the non-tariff provisions, Bangladesh is required to purchase $15 billion worth of American liquefied natural gas (LNG) over 15 years. The agreement also places restrictions on Bangladesh entering into any free trade agreements with non-market-based countries.

Economists and energy experts view the agreement as a potential threat to Bangladesh's energy security, as it may require the country to seek approval regarding whom it can procure fuel from.

Therefore, the conditions and restrictions under the agreement are likely to make Bangladesh more dependent on costly LNG, which could ultimately hinder the growth of renewable energy and limit access to cheaper energy alternatives. 

The LNG dependency trap

Seven years ago, in 2018, Bangladesh met its total gas consumption through domestic production, although there was a significant gap between daily demand and supply, as persists today.

To bridge this gap, the South Asian country entered the global market to import liquefied natural gas (LNG) in the first quarter of 2018.

The country built two floating storage and regasification units (FSRUs) in the Bay of Bengal to facilitate the import of LNG from Qatar and Oman under separate agreements. In subsequent years, Bangladesh also entered the volatile spot market to bolster gas supply to the national grid.

Over time, the country has become dependent on expensive imported LNG, with one-third of its total annual gas consumption now relying on this source. It currently imports around 5.5 million tonnes of LNG annually to meet demand across various sectors.

Since entering the LNG market in 2018, Bangladesh has imported 36.43 million tonnes of LNG worth around $20 billion, according to the state-run Rupantarita Prakritik Gas Company Ltd (RPGCL).

This dependency is likely to deepen over the next 15 years under the trade agreement with the US.

"Compliance with this condition will leave Bangladesh locked into volatile and expensive LNG dependency," said Moshahida Sultana, an associate professor in the Accounting Department at the University of Dhaka.

Growing US dominance on Bangladesh's gas sector  

At present, Bangladesh has two regasification units — the Maheshkhali LNG Terminal and the Summit LNG Terminal. Both terminals were constructed by the US energy firm Excelerate Energy, although one FSRU is owned by Summit Power International, a Bangladeshi conglomerate.

These two facilities account for around 35% of the country's total daily gas supply.

In addition to LNG terminal infrastructure, Excelerate Energy secured a 15-year contract to supply between 0.85 million and 1 million tonnes of LNG annually. Signed in November 2023 under the Awami League-led government, the US-based company began supplying LNG to Bangladesh, with its first delivery in early February 2026.

Beyond LNG infrastructure and supply agreements, the US also has a strong presence in Bangladesh's domestic gas production. The American energy giant Chevron controls around 58% of the country's total daily gas production of 1,700 million cubic feet.

With the new LNG import conditions under the trade agreement, the United States is likely to gain near-total dominance over Bangladesh's gas sector.

Renewable energy growth may be obstructed

Bangladesh's two operational FSRUs — Summit LNG and Excelerate Energy's Excellence — have a combined re-gasification capacity of around 7.5 million tonnes per annum, according to Petrobangla data. 

But the country's existing LNG supply deals and spot purchase exceed the regasification capacity. It has annual 8 million tonnes long term import contracts with Qatar, Oman and US's Excelerate Energy. With the newly signed trade deal, the volume might cross 10 million tonnes annually. 

So, the US-Bangladesh trade deal is going to obstruct the expected transition to renewable energy as the South Asian country will run after building infrastructure including regasification and storage units,  and a required pipeline to facilitate and process the agreed amount of LNG. 

"Thus, the investment for LNG storage and regasification facilities and import bills could push back the targeted renewable goal. The money that could have been spent on renewable energy would  go to LNG," Moshahida noted. 

"Renewables would not expand much if investment is interrupted," she added. 

Secondly, though solar power seems to be the most prospective source for Bangladesh to enhance renewable energy, the trade deal would come here as a barrier as it restricts the country from entering into any free trade with a non-market-based country. Here, it is mentionable that the US considers China and Russia as non-market countries. 

"Investment for LNG storage and regasification facilities and import bills could push back the targeted renewables goal. The money that could have been spent on renewable energy would go to LNG. Renewables would not expand much if investment is interrupted."

Moshahida Sultana, Associate Professor, Department of Accounting, University of Dhaka

Currently, Bangladesh's total renewable energy generation capacity is 1,743 MW, of which 1,450MW comes from solar energy, according to the Sustainable and Renewable Energy Development Authority (SREDA). Much of this solar energy capacity has been built with Chinese made technology and equipment. 

As per the conditions under the trade agreement, Bangladesh may face US restrictions for importing China-made batteries, inverters, solar panels. If this happens, that could be a big setback for the expansion of solar electricity. 

Limiting cheaper alternative sources

Bangladesh has been facing a huge pressure of subsidy for gradual dependency on LNG. In the last fiscal year (FY2024-25), the country had to provide Tk6,000 crore for LNG import. 

The size of this subsidy could be doubled due to oil and gas price volatility in the global market following the closure of the Strait of Hormuz which shifts one-third of the global energy supply. 

But this subsidy and import cost pressure on Bangladesh is likely to increase more and more in the coming years due to the time bound import condition set under the trade agreement. 

If the country tries to receive a minimum volume of LNG under all long term contracts, it will not have the scope to explore alternative cheaper options. 

Debapriya Bhattacharya, economist and distinguished fellow at Center for Policy Dialogue, said that the terms and conditions set in the US-Bangladesh Trade Agreement are limiting the cheaper energy sources for Bangladesh at a time of global price volatility.

Before signing of the recent bilateral deal, Bangladesh had the freedom of purchasing fuel, goods and materials from any country including China And Russia. 

But deal's clauses related to sanctions alignment and 'non-market country' are constraining Bangladesh from accessing cheaper fuel alternatives. For example, Bangladesh could import Russian fuel oil as an alternative to Middle East countries' fuel which has been disrupted by the closure of Strait of Hormuz. 

As per the new trade agreement with the US, Bangladesh requires a formal waiver from the United States to procure Russian fuel and the South Asian nation has asked for that.