Vincent Mundy | Bloomberg | Getty Images From food prices to tourism and arms supplies, Asia-Pacific countries could be hit hard by the Russia-Ukraine war, even if they are not directly exposed to the conflict, according to a new report by the Economic Intelligence Unit. Food prices are particularly sensitive to war, and both countries are major producers of goods, according to the research company. Some Asian countries rely on commodities such as fertilizers from Russia, and the global shortage has already pushed up agricultural and grain prices. Given the region’s relatively high levels of dependence on energy and agricultural imports – even if countries do not source directly from Russia or Ukraine, rising prices will be worrying, the EIU has warned. “Specialized dependencies include dependence on Russia and Ukraine as a source of fertilizers and cereals in Southeast and South Asia, which could upset the agricultural sector,” the company said. The great powers of the world have hit Russia with wide-ranging sanctions for Russia’s unprovoked war against Ukraine. The US has imposed sanctions on the energy, while the United Kingdom plans to do so by the end of the year. The European Union is also considering whether to do the same. There will be export benefits for some countries from higher commodity prices and the global search for alternative supply. Financial Information Unit Sanctions have also been imposed on the country’s oligarchs, banks, state-owned enterprises and government bonds. “Northeast Asia – home to the world’s top chipmakers – also has some exposure to any interruptions in the supply of rare gases used in semiconductor production,” the EIU said in a report. Other areas that may be affected include Russian tourists who prefer to stay away, as well as some Asia-Pacific countries that may be cut off from Russian weapons.
Winners and losers from the commodity peaks
World prices for oil, gas and grain have skyrocketed since the war began in late February. Russia and Ukraine contribute a significant share of the global supply of some of these goods. Wheat futures offset some gains from the initial rise, but are still up 65% from a year ago. Maize futures contracts increase by more than 40% over the same period. Some countries will be vulnerable to rising prices, but others may benefit. “There will be export benefits for some countries from higher commodity prices and a global search for alternative supply,” the EIU said. In addition to food and energy, nickel supply has also been hit as Russia is the third largest supplier of nickel in the world. Countries that will benefit from higher commodity prices:
Coal exporters: Australia, Indonesia, Mongolia Crude oil exporters: Malaysia, Brunei Liquefied natural gas: Australia, Malaysia, Papua New Guinea Nickel suppliers: Indonesia, New Caledonia Wheat suppliers: Australia, India
Countries most vulnerable to price increases (imports from Russia / Ukraine as a percentage of world imports in 2020):
Fertilizers: Indonesia (over 15%), Vietnam (over 10%), Thailand (over 10%), Malaysia (around 10%), India (over 6%), Bangladesh (almost 5%), Myanmar ( about 3%), Sri Lanka (about 2%) Cereals from Russia: Pakistan (about 40%), Sri Lanka (over 30%), Bangladesh (over 20%), Vietnam (almost 10%), Thailand (about 5%), Philippines (about 5%), Indonesia (less than 5%), Myanmar (less than 5%), Malaysia (less than 5%) Cereals from Ukraine: Pakistan (almost 40%), Indonesia (over 20%), Bangladesh (almost 20%), Thailand (over 10%), Myanmar (over 10%), Sri Lanka (almost 10%) , Vietnam (less than 5%), Philippines (about 5%), Malaysia (about 5%)
Russian weapons
Russia is the second largest supplier of weapons in the world. It has been a major source of arms for China, India and Vietnam for the past two decades, the EIU said. “International sanctions on Russian defense companies will prevent Asian countries from gaining access to these weapons in the future,” the research firm said. However, this will also create new opportunities for manufacturers from other countries, as well as domestic producers, the report says. Countries most dependent on Russian arms imports in 2000-2020, share of total imports
Mongolia (about 100%), Vietnam (over 80%), China (almost 80%), India (over 60%), Laos (over 40%), Myanmar (around 40%), Malaysia (over 20%) %)%), Indonesia (over 10%), Bangladesh (over 10%), Nepal (over 10%), Pakistan (under 10%)
Loss of Russian tourists
While Asian airlines are still open to Russian airlines, tourists from the country may not visit, the EIU said. “Tourism is the main potential exposure to trade in services, and with Asian airlines still open to Russian airlines, as opposed to those in Europe, such trade could continue (and possibly expand),” she said. company. “However, the Russians’ willingness to travel is likely to be affected by the economic turmoil, the devaluation of the ruble and the withdrawal of international payment services from Russia,” he added. Many Russian banks have also been cut off from SWIFT, a global system that connects more than 11,000 member banks in some 200 countries and territories worldwide. Meanwhile, the ruble initially fell nearly 30% against the dollar as the war began. Since then, the currency has recovered, but recently traded about 10% lower since the beginning of the year, hurting the wallets of ordinary Russians. However, dependence on Russian tourists is still low in Asia. Thailand was the largest beneficiary in the region in 2019, receiving 1.4 million Russian visitors, according to the EIU. However, this accounted for only less than 4% of total arrivals that year. Vietnam was second, while Indonesia, Sri Lanka and the Maldives account for the top five Asian destinations for Russian tourists. “Without the conflict, however, Russian tourism could have grown in importance, given the continuing restrictions on outbound Chinese travelers,” the EIU said.
