Commentary: Fossil fuels are winning the battle for easy money

Cash-strapped countries have been turning to the International Islamic Trade Finance Corp to fund their petroleum imports, according to David Fickling's report for Bloomberg Opinion. Despite Brent crude prices exceeding US$100 per barrel for most of the past month, and diesel prices surpassing twice that amount, the world's poorest fossil fuel importers have avoided crisis conditions. This is largely due to the growing trend of multilateral assistance in helping oil and gas users pay for expensive fuel.

In Bangladesh, a US$3.3 billion emergency energy package has been agreed upon by the government, with a substantial portion - US$3.1 billion - earmarked for oil and gas imports that fiscal year. This funding relies heavily on the International Islamic Trade Finance Corp (ITFC), one of the world's fastest-growing multilateral banks.

The ITFC, established in 2008, primarily disburses funds for semi-commercial lending to help cash-strapped countries pay for petroleum imports, a trend that has propelled the ITFC into the ranks of major multilateral lenders in recent years. Between 2020 and 2024, it disbursed a total of US$29 billion, positioning it alongside conventional institutions like the African Development Bank and European Bank for Reconstruction and Development.

While this assistance addresses immediate needs and helps prevent severe consequences similar to currency crises, it does raise concerns. The ITFC's lending primarily benefits OPEC members, as the poorest nations struggle to grow due to a lack of capital. Borrowing money to finance fuel imports merely postpones the underlying problem, and the ITFC's lending often prioritizes fossil fuel consumption over long-term sustainable energy solutions.

This approach can keep developing countries reliant on fossil fuels even as better alternatives become available, perpetuating the cycle of dependence on oil exporters.