Effects of the Russian Invasion on ASEAN Economies

The heightened tension between the two countries at war has made other countries worry about their future economies.

With Russia facing economic penalties for its invasion of Ukraine, we should expect some repercussions on ASEAN economies in the coming weeks and months. Admittedly, there is a high degree of uncertainty regarding matters like this, but there are some possibilities.

Energy Prices

Let's start with energy costs. Russia is a prominent energy exporter, but ASEAN has little direct exposure.

• Singapore imported $38.8 billion in refined petroleum oil in 2019, but only 5.7% came from Russia.
• In 2019, Thailand purchased $16.6 billion worth of crude, but only 3.3% from Russia.
• Vietnam, which acquired 15% from Russia, may be more vulnerable.

Food Prices

Expect higher food prices, which were already rising due to global inflationary pressures before the invasion. These countries have more direct exposure.

Semi-finished Steel Manufacturing

Russia and Ukraine are major suppliers of semi-finished iron and steel, which is used in the production of automobiles, machinery, and electronics.

Perhaps domestic production can fill up the shortfall, or producers like Japan can dramatically increase output. But disrupting supply chains like this will likely harm manufacturing.

Pressure to End Russian Business Partnerships

Shell stated last week that it would terminate a $3 billion deal with Gazprom. But ASEAN firms may not be as keen to accept write-downs. Together with Gazprom and other South Korean and Turkish partners, Petronas owns a 15% share in Iraq's Badra oil field. However, it has already stated that it will not withdraw from the partnership this time.

One of Vietnam's leading energy companies is Vietsovpetro, a joint effort between Russia's Zarubezhneft and Vietnam's state-owned Vietpetro. In addition, the state-owned oil and gas company in Indonesia, Pertamina, is collaborating with Rosneft to build a large domestic refinery. Upon completion, the $13.8 billion projects will significantly increase domestic refinery capacity.

In summary, most regions are not directly dependent on Russian energy. Still, supply shocks on significant industry and agricultural imports are likely, as the war raises prices globally. Others are trapped in joint ventures with Russian companies that they cannot break free. Not that expectations were exceptionally high, to begin with, but this may help explain ASEAN's cautious response to Russia's invasion.