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Impacts of the Russia-Ukraine War on ASEAN

Authors: Ryan James Tan Wei Ren & Venkatesh Bagrodia

Research Head: Aces Low Ying Xuan





Introduction

On the 24th of February, Russia stunned the world by launching a “special military operation” (as described by President Putin) into Ukraine, airports and military headquarters were attacked and tanks and troops rolled in from Russia. This was a result of rising tensions between the 2 countries and NATO, with Russia claiming this invasion as necessary for its national security. NATO had been expanding eastwards over the past years, with countries such as Estonia, Latvia, and Lithuania joining the Western alliance. Therefore, NATO has been moving its military infrastructure closer and closer to Russia. With Ukraine now exploring the possibility of joining the alliance, President Putin felt that the country’s security would come under more pressure. Despite the geographical distance, ASEAN countries have also suffered from the economic repercussions of the conflict. In addition, it brings an air of uncertainty over China’s motives, as they are close allies with Russia.


ASEAN’s muted response


Most ASEAN countries have provided a muted response to the conflict so far. Other than calling for peace and voting for a UN General Assembly resolution that reprimanded Russia for its invasion, most countries have maintained a neutral stance. One reason for this is their importance to ASEAN for trade, as Russia is ASEAN’s 9th largest trading partner and trade between the 2 regions reached $18 billion in 2019. They are responsible for a large amount of energy, food and military imports. For example, Vietnam imports 80% of its military equipment (Hutt, 2022) and 10% of its coal from Russia (Reuters, 2022). Therefore, Russia’s importance to ASEAN for trade plays an important role in ASEAN’s muted response so far.


Another reason for ASEAN’s muted response is due to its history of non-interference when it comes to other countries’ affairs to ensure regime stability while maintaining cooperative ties with the rest of the world. Delfin Lorenzana, the defence secretary of the Philippines, cited this reason for their neutrality, as he claimed that whatever happens in Europe is not their business (Hutt, 2022).


On the other hand, Singapore has taken a different approach and started to impose economic sanctions on Russia. The Monetary Authority of Singapore (MAS) has banned financial institutions from entering any transaction for the export of goods that could aid Russia in its invasion, such as weapons, electronics, and telecommunications. MAS has also ordered its financial institutions to freeze the assets and funds of Russian banks, such as VTB Bank and Bank Rossiya. This is seen as a rare move from Singapore, with the most recent unilateral sanctions occurring more than 40 years ago when Vietnam invaded Cambodia (Li, 2022). Yet, this response was not unexpected, as the Singapore Government has criticised Russia before, during their 2014 invasion of Crimea. Singapore, being one of the smallest countries in the world, has felt the need to advocate for the respect of territorial boundaries and sovereignty (Li, 2022).


Will this embolden China to act?


Experts have claimed that ASEAN governments do not want to frustrate China. In the build-up to the conflict, China and Russia were the only countries to vote against holding a United Nations Security Council meeting to address Russia’s presence on the border of Ukraine (Davis Jr, 2022). China and Russia are close allies and they have been unclear with their stance on the issue. They have called for peace, but are yet to criticise Russia for their actions. Several ASEAN countries, namely Vietnam and the Philippines have been involved in the South China Sea dispute with China. The South China Sea dispute has been a hotly contested area among these 3 countries over the past few years due to the area’s abundant natural resources, such as natural gas and oil. There are understandable fears that frustrating China could lead to an escalation of the dispute, as China has stepped up its military presence in the area and has deployed anti-ship and surface-to-air missiles, along with anti-aircraft guns.


Furthermore, if Russia succeeds in conquering Ukraine, there are concerns that it will encourage China to escalate their ambitions to reclaim Taiwan (Osnos, 2022). China’s conflict with Taiwan has stemmed from President Xi’s desire for the “re-unification” of the 2 countries and has not ruled out the possible use of force to achieve it. The split between the 2 countries came about in World War 2, when there was fighting between the nationalist China forces and the Chinese Communist Party. The nationalist party, known as the Kuomintang, lost and fled to Taiwan and has risen to be one of the biggest political parties there. This has led to Taiwan stepping up surveillance and defences in case of any signs of an invasion. In the larger scheme of things, there is fear that China will see Russia’s venture as a way of normalising aggression to achieve their goals. Taiwan’s President Tsai has called this “cognitive warfare”, which is a mix of disinformation and political meddling, to make countries vulnerable to attacks (Osnos, 2022). However, it is worth noting that the Russia-Ukraine and China-Taiwan conflicts are inherently different. China is not Russia and Taiwan is not Ukraine. China, unlike Russia, does not have a history of massive interventions, invasions or occupations of other countries since it invaded Vietnam in 1979 (Scobell & Stevenson-Yang, 2022) and only has one military base on foreign soil as well, unlike Russia, who has more than 20. Meanwhile, Taiwan has the support of the world’s most capable military, the US Army, who will almost certainly come to their support in the event of an invasion from China, while it was publicly stated that the US would not intervene to help Ukraine. Therefore, even though ASEAN countries should be cautious of provoking China, they should understand these 2 conflicts differ in their contexts.


Economic Impacts


The war has several economic impacts on the region. Russia is one of the greatest suppliers of energy, especially oil. With the war the countries against Russia stand at a cross off of whether they should continue buying energy from them. We know that NATO still purchases oil from Russia even though they have put a few sanctions on Russia. Due to the disruption, the price of oil has gone as high as US$140 a barrel, the highest in the last decade. Prices of other commodities have also risen due to the war, especially the goods that were mainly imported from Russia and Ukraine. Their trade relations with Russia have also been disrupted due to the Russia-Ukraine Conflict. This will have a long lasting effect on their GDPs which would be difficult for them to recover from. Also, due to the war the stock markets across the world are greatly affected. Investors have lost billions of dollars in the first few days of the war. This is majorly a behavioural economic effect as people become worried due the war and its devastating impacts. I believe that due to the bank rising rates the effect has been amplified. The Russian stock market has already been halved in the first week of the war. The CPI basket price is also estimated to rise, causing a higher rate of inflation estimated before the war and reducing the purchasing power of the people( Carnell , 2022)


Conclusion


To conclude, the war has affected the Asean Economy greatly. It has affected the entire world’s financial market. In Spite of the damaging effects and according to the current situation it can be concluded that the war can have a comparatively shorter term impact on the economies of the Asean countries rather a very long term impact since they are not in very direct relation to the war (Carnell, 2022). Therefore the economies can recover relatively faster after the impacts of the war.


References

Carnell, R. (2022, March 3). The Asian economies most exposed to the Russia-Ukraine conflict. ING Think. Retrieved May 17, 2022, from https://think.ing.com/articles/the-asian-economies-most-exposed-to-the-russia-ukraine-conflict


Davis Jr, E. (2022, March 8). China’s Xi Jinping calls for ‘maximum restraint’ in Ukraine. Retrieved May 16, 2022, from https://www.usnews.com/news/world-report/articles/2022-03-08/chinas-xi-jinping-calls-for-maximum-restraint-in-ukraine


Hutt, D. (2022, March 7). Ukraine conflict: What's behind Southeast Asia's muted response?: DW: 07.03.2022. DW.COM. Retrieved May 16, 2022, from https://www.dw.com/en/ukraine-conflict-whats-behind-southeast-asias-muted-response/a-61039013


Li, X. (2022, March 9). Why Singapore has chosen to impose sanctions on Russia. – The Diplomat. Retrieved May 16, 2022, from https://thediplomat.com/2022/03/why-singapore-has-chosen-to-impose-sanctions-on-russia/


Osnos, E. (2022, February 24). What is china learning from Russia's invasion of Ukraine? The New Yorker. Retrieved May 16, 2022, from https://www.newyorker.com/news/daily-comment/what-is-china-learning-from-russias-invasion-of-ukraine


Scobell, A., & Stevenson-Young, L. (2022, March 4). China is not Russia. Taiwan is not Ukraine. United States Institute of Peace. Retrieved May 16, 2022, from https://www.usip.org/publications/2022/03/china-not-russia-taiwan-not-ukraine





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