World prices of some grains have risen since the start of the Russo-Ukrainian war, with both countries contributing a large proportion of the world supply of some such commodities as wheat.
Vincent Mundy | Bloomberg | Getty Images
From food prices to tourism and arms supplies, Asia-Pacific countries could be hit hard by the Russo-Ukrainian war, even if they are not directly exposed to the conflict, according to a new report by the Economist Intelligence Unit.
Food prices are particularly sensitive to the war since both countries are commodity producers, according to the research firm. Some Asian countries rely on commodities such as fertilizers from Russia, and Global shortages have already driven up agricultural and grain prices.
Given the region’s relatively high levels of dependence on energy and agricultural imports – even if the countries are not a direct source from Russia or Ukraine, the price hike would be worrisome, the Economist Intelligence Unit warned.
“Specialized dependencies include reliance on Russia and Ukraine as a source of fertilizer and grain in Southeast and South Asia, which could cause disruption in the agricultural sector,” the company said.
The world’s major powers have imposed wide-ranging sanctions on Russia because of Russia’s unjustified war on Ukraine. The United States had imposed energy sanctions, while The UK 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 to some countries from higher commodity prices and a global search for alternative supplies.
economic intelligence unit
Sanctions have also been imposed on the country Oligarchs, banks, state institutionsand sovereign bonds.
“Northeast Asia – home to the world’s largest chip makers – is also experiencing some interruptions in the supply of rare gases used in semiconductor production,” EU said in its report.
Other areas that may be affected include Russian tourists’ preference to stay away, as well as some Asia-Pacific countries that may be cut off from Russian weapons.
Winners and Losers from Commodity Rally
Global oil, gas and grain prices have already risen since the outbreak of war in late February.
Russia and Ukraine contribute a large proportion of the world supply of some of these commodities.
Wheat futures contracts It trimmed some gains from the initial rally, but it’s still 65% higher than a year ago. corn futures contracts It increased by more than 40% in the same period.
Some countries will be vulnerable to higher prices, but others may benefit.
“There will be export benefits for some countries from higher commodity prices and a global search for alternative supplies,” the Economist Intelligence Unit said.
Besides food and energy, nickel supplies have also been hit because Russia is the world’s third largest supplier of nickel.
Countries that will benefit from higher commodity prices:
- Coal exporters: Australia, Indonesia and Mongolia
- Crude oil exporting countries: Malaysia, Brunei
- LNG: 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 for 2020):
- Fertilizers: Indonesia (more than 15%), Vietnam (more than 10%), Thailand (more than 10%), Malaysia (about 10%), India (more than 6%), Bangladesh (about 5%), Myanmar ( about 3%), Sri Lanka (about 2%)
- Grains from Russia: Pakistan (about 40%), Sri Lanka (more than 30%), Bangladesh (more than 20%), Vietnam (about 10%), Thailand (about 5%), Philippines (about 5%), Indonesia ( Less than 5%), Myanmar (less than 5%), Malaysia (less than 5%)
- Grains from Ukraine: Pakistan (about 40%), Indonesia (more than 20%), Bangladesh (about 20%), Thailand (more than 10%), Myanmar (more than 10%), Sri Lanka (about 10%), Vietnam (less than 5%), Philippines (about 5%), Malaysia (about 5%)
Russian weapons
Russia is the second largest arms supplier in the world. The Economist Intelligence Unit has indicated that it has been a major exporter of arms to China, India and Vietnam for the past two decades.
“International sanctions against Russian defense companies will impede future access to these weapons by Asian countries,” the research firm said.
This will also create new opportunities for manufacturers from other countries, as well as domestic producers, the report said.
Countries most dependent on Russian arms imports from 2000 to 2020, ranked by share of total imports
- Mongolia (about 100%), Vietnam (about 80%), China (about 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
The Economist Intelligence Unit noted that while airlines in Asia are still open to Russian airlines, tourists from the country may not visit them.
“Tourism is the main potential supply in the service trade, and as Asian airlines continue to open up to Russian airlines, unlike those in Europe, this trade can continue (and may expand),” the research firm said.
“However, it is possible that the desire of Russians to travel will be affected by the economic turmoil, the devaluation of the ruble and the withdrawal of international payment services from Russia,” she added.
Several Russian banks have also been excluded from SWIFT, a global system that links more than 11,000 member banks in nearly 200 countries and regions globally.
at the same time, The ruble initially fell by nearly 30% against the dollar When the war started. Since then, the currency has rebounded again, but for the last time it was trading about 10% less than at the beginning of the year, which hurt the wallets of ordinary Russians.
However, dependence on Russian tourists remains low in Asia.
Thailand was the biggest beneficiary in the region in 2019, receiving 1.4 million Russian visitors, according to the EIU. However, that represented just less than 4% of all arrivals that year. Vietnam took second place, while Indonesia, Sri Lanka and the Maldives combined the top five Asian destinations for Russian tourists.
“Without the conflict, Russian tourism could have increased in importance, given the ongoing restrictions on departing Chinese travelers,” the Economist Intelligence Unit said.
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