Asia winners and losers in Russia-Ukraine war: commodities, weapons

From food prices to tourism and weapons supply, 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 Economic Intelligence Unit report.

Food prices are particularly sensitive to the war as both countries are significant commodity producers, according to the research firm. Some Asian countries rely on commodities such as fertilizer from Russia, and a global shortage is already driving up prices of agriculture and grains.

Given the region’s relatively high levels of dependence on energy and agricultural commodity imports – even if countries don’t source directly from Russia or Ukraine, the spike in prices will be concerning, warned the EIU.

“Niche dependencies include reliance on Russia and Ukraine as a source of fertilizer and grain in South-east and South Asia, which could cause disruption in the agricultural sector,” said the firm.

The world’s major powers have hit Russia with wide-ranging sanctions over Russia’s unprovoked war on Ukraine. The US has imposed sanctions on energy, while the UK plans to do so by the end of the year. The European Union is also considering whether to do the same.

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

“North-east Asia — home to the world’s leading chipmakers — also has some exposure to any disruption in the supply of rare gases used in semiconductor production,” EIU said in its report.

Other areas that may be impacted include Russian tourists preferring to stay away, as well as some Asia-Pacific countries that may be cut off from Russian weapons.

Global prices for oil, gas and grains have already spiked since the war started in late February.

Russia and Ukraine contribute a significant percentage of the world’s supply for some of those commodities.

Wheat futures wall some gains from the initial spike, but are still up 65% compared to a year ago. Corn futures are up over 40% in the same period.

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 pointed out.

“International sanctions on Russian defense firms will impede the future access of Asian countries to these arms,” ​​the research firm said.

However, that 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 2000-2020, ranked by share of total imports

• Mongolia (about 100%), Vietnam (more than 80%), China (nearly 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%)

Meanwhile, the ruble initially dived nearly 30% against the dollar as the war began. Since then, the currency has bounced back but was last trading about 10% lower than the start of the year, hurting the wallets of ordinary Russians.