The ongoing Russia-Ukraine conflict: Impact on Southeast Asia

From the Observer Research Foundation (Mar 11, 2023): The ongoing Russia-Ukraine conflict: Impact on Southeast Asia (By PREMESHA SAHA)

The disruptions in the supply of key commodities have affected the geographically-distant economies of Southeast Asia

The Ukraine conflict questions the very notions of a rules-based international order, respect for territorial sovereignty of other countries, and the core principles which underline the concept of a Free and Open Indo-Pacific region. The ongoing conflict for a year now has had an impact even on regions like Southeast Asia, which are ‘geographically distant’.

The increase in energy and food prices which have impacted the daily lives of people has raised concerns among the masses in the region
Economic impact

This region has mostly faced economic repercussions primarily due to the sanctions that have been imposed by countries like the United States (US), Europe, Japan, Australia, and others. Though both Moscow and Ukraine do not have a strong economic presence in the region as is reflected in the trade figures, with Russia contributing around 0.64 percent of global trade with the region and Ukraine only 0.11 percent, some analysts have cautioned that “a protracted conflict that hurts the European Union will have spillover effects in Southeast Asia as well, hitting everything from trade to tourism.” Malaysia’s Maybank issued a statement highlighting, “A broader Europe downturn will have larger knock-on effects on ASEAN’s exports, foreign direct investment, and growth. The European Union accounts for a substantial 9 percent of ASEAN exports, and more than 11 percent for Vietnam and the Philippines. It added that foreign direct investment from the EU makes up 11 percent of ASEAN’s total.”

The most visible impact can be seen in inflation due to the fast increase in the costs of oil and gas right after the outbreak of the war. Besides this, Russia and Ukraine are the key exporters of agricultural products, food grains, and critical minerals required for semiconductors. Some analysts have pointed out, “considering Russia’s and Ukraine’s roles as major wheat exporters and Ukraine’s position as a major player in corn, Indonesia and the Philippines would be vulnerable to wheat supply shocks and Vietnam exposed to corn disruptions.” For instance, in recent years, Vietnam has imported nearly US$1.5 billion worth of fertiliser, iron and steel, coal, and agricultural products from Russia and Ukraine. Therefore, some banks in Southeast Asia, like DBS Singapore have warned about “direct risks from specific commodity dependencies.” Likewise, in Thailand, there has been a constant increase in producer and consumer price inflation for the rise in commodity prices. Vietnam has faced instances of oil shortage and incidents of petrol hoarding have also been reported which is further escalating the price.

Impact on Russia’s arms sales to Southeast Asia

Moscow had been one of the leading arms exporters in the region, particularly to Vietnam. But a shift and the desire to diversify their arms imports from India, the United States (US), Israel, among others, is clearly visible. This is not solely for the ongoing war but also for reasons like the United States’ Countering America’s Adversaries Through Sanctions Act (CAATSA), which threatens penalties against countries that buy weapons from Moscow. But according to some scholars, there have been growing concerns about “the poor performance of Russian weaponry in the Russia-Ukraine conflict, over the quality and effectiveness of Russian weapons” even in countries like Vietnam. Many countries in Southeast Asia have already cancelled deals for purchasing of Russian arms. Indonesia, for instance, cancelled a planned purchase of SU-35 fighter jets worth US$1.14 billion and the Philippines withdrew from a US$250 million contract to acquire MI-171 military helicopters. Vietnam, meanwhile, has paused new arms purchases, partly due to a domestic anti-corruption crackdown, but also because Hanoi is increasingly concerned about Moscow’s ability to fulfil orders amid international sanctions. Still, scholars like, Richard A. Bitzinger, Visiting Senior Fellow with the Military Transformations Programme at the Institute of Defence and Strategic Studies (IDSS), S. Rajaratnam School of International Studies (RSIS) are of the opinion, “Southeast Asian nations may find it hard to resist the appeal of Russian arms deals, which often come without political strings and with innovative payment schemes.”

The ASEAN’s response to the conflict

In the wake of the conflict, barring Singapore, most of the Southeast Asian countries did have a very strong reaction to the crisis. Even the ASEAN issued a statement on 26 February 2022, which did not condemn Russia or even mention Russia, but just read that “all relevant parties to exercise maximum restraint”. However, with the conflict still dragging for a year now, some events do show that the ASEAN member countries are also moving away from a purely diplomatic stand and taking stronger positions. The first instance was seen during the 40th and 41st ASEAN Summit held in Phnom Penh from 10 to 13 November, 2022, with Ukraine’s accession to the Treaty of Amity and Cooperation in Southeast Asia (TAC). Scholars like Hoang Thi Ha Senior Fellow and Co-coordinator of the Regional Strategic and Political Studies Programme at the ISEAS–Yusof Ishak Institute in Singapore and William Choong, Senior Fellow at the ISEAS–Yusof Ishak Institute are of the opinion that, “the signing ceremony at the November 2022 ASEAN summit carried strong symbolism since the TAC—to which Russia is also a party—enshrines the cardinal principles of respect for territorial integrity, national sovereignty and non-use of force.” Similarly, Indonesia, during its G20 presidency in 2022 at the G20 Bali Summit invited Ukraine’s President Volodymyr Zelensky to deliver his virtual address and put together a strong statement by quoting the UNGA resolution that “deplores in the strongest terms the aggression by the Russian Federation against Ukraine and demands its complete and unconditional withdrawal from the territory of Ukraine”. This was a big step considering both China and Russia are a part of the G20. These incidents are reflective of a shift in the thinking of the Southeast countries, but the official position of the ASEAN remains the same.
Growing concerns about regional security

The Russia-Ukraine war has brought to the fore the reality that an attack and invasion of a country’s sovereign territory is a very real possibility. There are growing concerns about the chances of a regional conflict—over competing claims in the South China Sea or involving a spillover from a Chinese invasion of Taiwan. The statement by Singapore’s Prime Minister, Lee Hsien Loong, “If we regress to a world where ‘might is right’, small states would find it impossible to survive” and also the Japanese Prime Minister, Fumio Kishida, “The usurping of the status quo in Ukraine could breed new dynamics to the usurping of the status quo in East Asia, be it over the South China Sea, Taiwan and the Senkaku/Diaoyu Islands” is reflective of this.

There are growing concerns about the chances of a regional conflict—over competing claims in the South China Sea or involving a spillover from a Chinese invasion of Taiwan.

The Russia-Ukraine conflict is no longer being viewed as a ‘remote conflict’, which will not have much of an impact on geographically distant Southeast Asia. The increase in energy and food prices which have impacted the daily lives of people has raised concerns among the masses in the region. The desire to diversify the imports of arms from countries such as India, US, Israel, cancelling of planned deals for arms purchases and strong stands as well as measures in organisations like the ASEAN and G20 does show that there is a growing realisation that the soft stand taken in the initial stages of the conflict need to change.

https://www.orfonline.org/expert-speak/the-ongoing-russia-ukraine-conflict-impact-on-southeast-asia/