World prices for some grains have skyrocketed since the start of the war between Russia and Ukraine, with the two countries contributing a large percentage of the world’s supply of some of these staples, such as wheat.
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From food prices to tourism to arms supplies, Asia-Pacific countries could be hit hard by the Russian-Ukrainian war, even if they are not directly exposed to the conflict, according to a new report from the ‘U.S. Research Unit. EconomicIntelligence.
Food prices are particularly sensitive to war because both countries are major producers of raw materials, according to the research firm. Some Asian countries depend on raw materials such as fertilizers from Russia, and global shortages are already driving up the prices of agricultural products and grains.
Given the region’s relatively high levels of dependence on imports of agricultural and energy products, even if countries do not source directly from Russia or Ukraine, rising prices will be a concern, the EIU warned.
“Niche dependencies include reliance on Russia and Ukraine as a source of fertilizer and grain in Southeast and South Asia, which could disrupt the agricultural sector,” he said. said the company.
Major world powers have hit Russia with sweeping sanctions over Russia’s unprovoked war against Ukraine. The United States has imposed energy sanctions, while the United Kingdom plans to do so before the end of the year. The European Union is also considering doing the same.
Sanctions have also been imposed on the country’s oligarchs, banks, state-owned companies and sovereign bonds.
“Northeast Asia, home to the world’s leading chipmakers, is also exposed to any disruption in the supply of noble gases used in semiconductor production,” the EIU said in its report.
Other areas likely to be affected include Russian tourists who prefer to stay away, as well as some Asia-Pacific countries that could be cut off from Russian weapons.
Winners and Losers of Commodity Spikes
Global oil, gas and grain prices have already soared since the war began in late February.
Russia and Ukraine provide a significant percentage of the world’s supply of some of these commodities.
Wheat futures have pared some gains from the initial peak, but are still up 65% from a year ago. Corn futures are up more than 40% over the same period.
Some countries will be vulnerable to price increases, but others could benefit.
“There will be export benefits for some countries through rising commodity prices and a global search for alternative sourcing,” the EIU said.
In addition to food and energy, nickel supply has also been affected, with Russia being 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 price increases (imports from Russia/Ukraine as a percentage of world imports in 2020):
- Fertilizer: Indonesia (more than 15%), Vietnam (more than 10%), Thailand (more than 10%), Malaysia (about 10%), India (more than 6%), Bangladesh (nearly 5%), Myanmar (about 3%) , Sri Lanka (about 2%)
- Cereals 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%)
- Ukrainian cereals: Pakistan (nearly 40%), Indonesia (more than 20%), Bangladesh (nearly 20%), Thailand (more than 10%), Myanmar (more than 10%), Sri Lanka (nearly 10% ), Vietnam (less than 5%), Philippines (about 5%), Malaysia (about 5%)
Russia is the world’s second largest arms supplier. It has been a major source of weaponry for China, India and Vietnam over the past two decades, the EIU noted.
“International sanctions against Russian defense companies will prevent future access by Asian countries to these weapons,” the research firm said.
However, it will also create new opportunities for manufacturers in other countries, as well as domestic producers, according to the report.
Countries most dependent on Russian arms imports between 2000 and 2020, ranked by share of total imports
- Mongolia (around 100%), Vietnam (over 80%), China (around 80%), India (over 60%), Laos (over 40%), Myanmar (around 40%), Malaysia (over 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 are not allowed to visit them, the EIU noted.
“Tourism is the main potential exposure within services trade, and with Asian air routes still open to Russian airlines, unlike European airlines, this trade could continue (and potentially grow),” the official said. research firm.
“However, Russians’ willingness to travel is likely to be affected by economic disruption, the depreciation of the ruble and the withdrawal of international payment services from Russia,” he added.
Several Russian banks have also been barred from SWIFT, a global system that connects more than 11,000 member banks in some 200 countries and territories around the world.
Meanwhile, the ruble initially fell almost 30% against the dollar when the war started. The currency has since recovered, but the last time it was traded it was 10% lower than it was at the start of the year, hurting the wallets of ordinary Russians.
However, reliance on Russian tourists remains low in Asia.
Thailand was the region’s biggest beneficiary in 2019, receiving 1.4 million Russian visitors, according to the EIU. Yet this represented just under 4% of its total arrivals that year. Vietnam ranks second, while Indonesia, Sri Lanka and the Maldives complete the top five Asian destinations for Russian tourists.
“However, without the conflict, Russian tourism might have gained in importance, given the current restrictions on Chinese travelers abroad,” the EIU said.