According to a new report by the Economic Intelligence Unit, from food prices to tourism/arms supplies, Asia-Pacific countries could be severely affected by the Russia-Ukraine war, even if they are not directly involved in the conflict. Food prices are particularly vulnerable to war. Both countries are producers of essential goods. Some Asian countries rely on interests such as fertilizer from Russia. The global deficit is already driving up agricultural and grain prices.
Given the region’s relatively high dependence on energy and agricultural imports, price increases will be alarming even if countries do not supply directly from Russia or Ukraine.
Niche dependencies include dependence on Russia and Ukraine as a source of fertilizer and grain, leading to delays in the agricultural sector. The world’s most significant powers have struck Russia with broad sanctions over Russia’s unprovoked war with Ukraine. The US has imposed sanctions on energy. The United Kingdom plans to do this by the end of the year. The EU is also considering whether to do the same. Also imposed sanctions on the country’s oligarchs, banks, state-owned enterprises, and sovereign bonds.
According to the report, Northeast Asia – the home of the world’s leading chipmakers, suffers from some delays in the supply of rare gases used in the manufacture of semiconductors. Other areas that may be affected include Russian tourists who prefer to stay away from Russia and some countries in the Asia-Pacific.
Challenges of the Ukraine War
World prices for oil, gas, and grain have risen since the war. Russia-Ukraine contributes a significant percentage of world supply to some of these goods. Wheat futures made some gains from the original peak; However, they increased by 65% compared to the previous year. Corn futures are up more than 40% over the same period. Some countries will be vulnerable to rising prices; However, others may benefit.
In addition to food and energy, the nickel supply was also affected. Russia is the third-hugest supplier of nickel. Countries that will benefit from higher commodity prices are Coal Exporter – Indonesia, Australia, Mongolia; moreover, crude oil exporters to Brunei and Malaysia. Also liquefied natural gas: Malaysia, Australia, Papua New Guinea. Wheat Suppliers: Australia, India. Fertilizer: Malaysia, Indonesia, Vietnam, Myanmar, Thailand, India, Sri Lanka, Bangladesh. Cereals from Russia: Bangladesh, Pakistan, Sri Lanka, Vietnam, Thailand, Indonesia, Philippines, Malaysia, and Myanmar. Cereals from Ukraine: Pakistan, Bangladesh, Indonesia, Thailand, Myanmar, Vietnam, Sri Lanka, Philippines, and Malaysia.
Russia – What to Expect
Russia is the second-hugest supplier of weapons in the world. For the past two decades, it has been a significant source of arms for India, China, and Vietnam. International sanctions against Russian defense firms will prevent future access to these weapons by Asian countries. However, it will also create new opportunities for producers in other countries and local producers.
Tourism is a significant potential exposure to trade in services. Asian Airways is still open to Russian Airlines, unlike European Airlines; Such trades can continue and potentially expand. However, the desire of Russians to travel is likely to be affected by an economic slowdown, the devaluation of the rouble, and the withdrawal of international payment services from Russia. Several Russian banks have also dropped out of SWIFT, the global system that connects more than 11,000 member banks in up to 200 countries.
At the same time, the ruble initially fell by almost 30% against the dollar immediately after the start of the war. Since then, the currency has returned. However, recent trade was about 10% lower than at the beginning of the year. This damaged the wallets of ordinary Russians. However, dependence on Russian tourists in Asia is still lacking.
Thailand was the hugest beneficiary in the region in 2019; getting 1.4 million Russian visitors. Still, it accounted for less than 4% of the total arrivals. Vietnam was in second place, while Indonesia, Sri Lanka, and the Maldives collected the top five Asian destinations for Russian tourists.
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