Asia – winners and losers in the Russian-Ukrainian war: goods, weapons

World prices for some cereals have risen since the start of the Russo-Ukrainian war, with both countries contributing a significant percentage of world supplies of some of these commodities, such as wheat.

Vincent Mandy Bloomberg | Getty Images

From food prices to tourism and arms supplies, the countries of the Asia-Pacific region could be hit hard by the Russian-Ukrainian war, even if they are not directly affected by the conflict, a new Economic Intelligence Report said.

Food prices are particularly sensitive before the war, as both countries are significant producers of goods, according to the research firm. Some Asian countries are counting on goods such as fertilizers from Russia, and the global deficit is already raising prices for agriculture and grain.

Given the region’s relatively high level of dependence on energy and agricultural imports – even if countries do not supply directly from Russia or Ukraine, price spikes will be unsettling, the EIU warns.

“Niche dependencies include dependence on Russia and Ukraine as sources of fertilizers and grain in Southeast and South Asia, which could disrupt the agricultural sector,” the firm said.

Major world powers have imposed extensive sanctions on Russia over Russia’s unprovoked war against Ukraine. The US has imposed energy sanctions, and the UK plans to do so by the end of the year. The European Union is also considering whether to do the same.

Rising commodity prices and the global search for alternative supplies for some countries will benefit exports.

Department of Economic Intelligence

Sanctions have also been imposed on the country’s oligarchs, banks, state-owned enterprises and sovereign bonds.

“Northeast Asia, home to the world’s leading chipmakers, is also facing any disruptions in the supply of rare gases used in semiconductor production,” the EIU report said.

Other areas that could be affected include Russian tourists who prefer to stay away, as well as some countries in the Asia-Pacific region that may be cut off from Russian weapons.

Winners and losers from commodity jumps

World prices for oil, gas and grain have already risen since the start of the war in late February.

Russia and Ukraine account for a significant percentage of world supplies of some of these goods.

Wheat futures cut some gains from the initial jump, but still rose 65% from a year ago. Over the same period, corn futures rose more than 40%.

Some countries will be vulnerable to rising prices, but others may benefit.

“For some countries, there will be benefits for exports through rising commodity prices and the global search for alternative supplies,” the EIU said.

In addition to food and energy, nickel supplies have also been affected, as Russia is the world’s third-largest supplier of nickel.

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 rising prices (imports from Russia / Ukraine as a percentage of world imports in 2020):

  • Fertilizers: Indonesia (more than 15%), Vietnam (more than 10%), Thailand (more than 10%), Malaysia (about 10%), India (more than 6%), Bangladesh (almost 5%), Myanmar (about 3%), Sri Lanka (about 2%)
  • Cereals from Russia: Pakistan (about 40%), Sri Lanka (more than 30%), Bangladesh (more than 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 (more than 20%), Bangladesh (about 20%), Thailand (more than 10%), Myanmar (more than 10%), Sri Lanka (almost 10%) %), Vietnam (less than 5%), Philippines (about 5%), Malaysia (about 5%)

Russian weapons

Russia is the world’s second largest arms supplier. For the past two decades, it has been a major source of weapons for China, India and Vietnam, the EIU said.

“International sanctions against Russian defense companies will hinder Asian countries’ future access to these weapons,” the research firm said.

However, it will also create new opportunities for producers from other countries as well as domestic producers, the report said.

Countries most dependent on Russian arms imports in 2000-2020, ranked by share of total imports

  • Mongolia (about 100%), Vietnam (more than 80%), China (almost 80%), India (more than 60%), Laos (more than 40%), Myanmar (about 40%), Malaysia (more than 20%), Indonesia (more than 10%), Bangladesh (more than 10%), Nepal (more than 10%), Pakistan (less than 10%)

Loss of Russian tourists

While Asian air routes are still open to Russian airlines, tourists from the country may not visit, the EIU said.

“Tourism is a major potential risk in trade in services, and because Asian air routes are still open to Russian airlines, unlike European ones, such trade may continue (and potentially expand),” the research firm said.

“However, the willingness of Russians to travel is likely to be affected by economic disruptions, the depreciation of the ruble and the withdrawal of international payment services from Russia,” – added in it.

Several Russian banks have also been excluded from SWIFT, a global system that connects more than 11,000 member banks in about 200 countries and territories around the world.

Meanwhile, the ruble initially fell to the dollar by almost 30% since the start of the war. Since then, the currency has recovered, but last traded about 10% lower than at the beginning of the year, damaging the wallets of ordinary Russians.

However, dependence on Russian tourists in Asia remains low.

According to the EIU, Thailand became the largest beneficiary in the region in 2019, receiving 1.4 million Russian visitors. However, this accounted for only less than 4% of total arrivals that year. Vietnam is in second place, while Indonesia, Sri Lanka and the Maldives close the top five Asian destinations for Russian tourists.

“But without the conflict, the importance of Russian tourism could increase in importance, given the constant restrictions on Chinese travelers,” the EIU said.

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