In a bid to diversify its oil export market amid western sanctions over its invasion of Ukraine, Russia now wants to sell its crude oil to Bangladesh.
The world's third largest oil producer has already submitted a proposal to Bangladesh, State Minister of Power, Energy and Mineral Resources Nasrul Hamid told journalists on Monday at Bidyut Bhaban in Dhaka.
"We have received a proposal from Russia expressing their interest to sell its crude oil to us. The Bangladesh Petroleum Corporation (BPC) is now exploring how it can import the oil and pay the bills," he said.
The transaction, if it takes place, will also come with some complications, according to sources in the BPC.
They told The Business Standard that apart from which currency to use for the purchase, there are some other issues relating to the import of Russian crude oil.
"Bangladesh does not have the capacity to refine additional crude oil as the annual capacity of the country's lone refinery – Eastern Refinery – is around 15 lakh tonnes and Bangladesh has two contracts with Saudi Aramco and the United Arab Emirates to supply the same quantity of crude oil in 2022," a source said, requesting anonymity.
"If Bangladesh goes for Russian crude oil at a cheaper rate, then the relationship with long-term suppliers – Saudi Arabia and the United Arab Emirates – will be impacted," the source said.
As an oil producer, Russia comes right after the United States and Saudi Arabia. In January 2022, Russia's total oil production was 11.3 million barrels per day, of which 10 million barrels were crude oil.
The Russian offer comes at a time when the country is experiencing the lowest price for its oil following western sanctions after Russia invaded Ukraine.
While some European and Asian nations have backed away from Russian oil, China and India have grabbed the opportunity and begun stockpiling the crude oil now available at a cheaper rate.
The Indian government defended its move to buy Russian oil, saying what it buys from Russia in a month is less than what Europe buys from Russia in an afternoon.
Purchases made by India soared in April as it bought 627,000 barrels a day from Russia, compared to 274,000 barrels a day in March.
According to S&P Global, an international data news company, the April daily figure was 20 times India's daily average for Russian imports last year.
India's total oil consumption in 2021 stood at 4.76 million barrels a day.
China, on the other hand, was already Russia's biggest Asian customer. The manufacturing hub of the world needs the oil to fuel its growing automobile and petrochemical industries.
Referring to estimates by Vortexa Analytics, a Reuters report said China's seaborne Russian oil imports will jump to a near-record 1.1 million barrels per day (bpd) in May, up from 750,000 bpd in the first quarter and 800,000 bpd in 2021.
Meanwhile, many European countries have continued buying oil from Russia, with plans to wean off with time.
Brent crude futures rose 82 cents to $113.61 a barrel, while US West Texas Intermediate (WTI) crude climbed to $110.97 a barrel, adding to last week's small gains for both contracts.
However, Russian ESPO and Sokol crude oil were sold at $76.66 per barrel and $100.70 barrel on Monday.
At present, Bangladesh imports around 91% to 92% of its total 6.3 million tonnes' consumption while the rest is sourced from local gas fields in the form of condensate, a bio-product of gas.
Oil price may rise in Bangladesh
State Minister Nasrul Hamid on Monday said there were no plans to change fuel prices at the moment, but adjustments may come in the future.
"At this moment, we don't want to adjust oil prices. We just want to keep it static," he said.
"Oil and gas prices are in a volatile situation right now in the world market. The rate at which the product is sold in the morning changes by afternoon. If there is a Tk20 increase, then comes a Tk2 decrease," he added.
"However, as a political government we expect a bearable price adjustment," he said.
Regarding fuel reserves in the country, Hamid said the current amount met the nation's requirement.
"However, there is a complication in getting ships to deliver oil from abroad as the freight cost of ships has increased by three to four times," he added.
On a possible dollar crisis affecting the opening of letters of credit (LCs) for the import of oil, Hamid said there had been a complexity but it was being solved as banks had begun opening the LCs.
Sources at the Energy and Mineral Resource Division said at present the BPC has a storage of one month - equivalent to six lakh tonnes of fuel - at major land and riverine depots across the country.
The BPC increased prices (Tk15/litre) of diesel and kerosene after the price for petroleum in the international market rose to $95 per barrel in November last year.
Last Saturday, the Indian union government announced a reduction of tax on diesel and petrol, a move which will lead to a decrease in the price of both products by 7 rupees and 9 rupees respectively.