The escalation of the Russia-Ukraine conflict has caused global concern given its continued humanitarian impact. Its consequences are long-lasting and far-reaching, as nations – as well as organisations – impose sanctions globally, which have implications on international trade. Though Southeast Asia is physically removed from the crisis, the region is not exempted from the conflict’s effects and, despite alleged overall muteness (at least, as compared to other global players), they are indeed responding on myriad fronts. This month’s edition of ‘From the Hill’ examines these responses and identifies emerging trends that may impact the region.
Feature Topic
How the Russian Invasion of Ukraine Might Impact ASEAN Economies
Given fuel, food, and financial market volatilities, Southeast Asia's nations are bracing themselves for an uncertain future. Simultaneously, they are attempting to balance the burden and necessity of international positioning and protecting domestic concerns.
As such, the variations in humanitarian and political stances are vast, ranging from Singapore and Timor Leste’s support of Ukrainian sovereignty to the UN representative of Myanmar’s ousted government in exile’s strong condemnation of Russia. Other regional responses appear equally driven by balancing domestic considerations and affirming or reminding neighbours within the region of their strategic and intentional positioning.
There also appears to be a defensive balance of avoiding international repercussions, should a firm position be expressed. For instance, Thailand has chosen to employ political neutrality but assist with humanitarian efforts by distributing Ukrainian aid via neighbouring Poland, while Malaysia has condemned Moscow’s aggression (yet refrained from imposing sanctions). Presently, the tactical ‘pick and choose’ approach by some nations could be advantageous as they can still supply aid. However, such moves could also be perceived as reinforcing quite typical, non-committal stances on emergency conflict situations taking place in faraway continents.
However, the world is now connected beyond just physical linkages; Southeast Asian nations indeed might soon need to tailor their respective stances given the conflict’s most immediate impact on commodities. Sanctions have caused fuel prices to surge and nations are placed in the tenuous position of having to either stoke the flames of inflation or fork out subsidies which could potentially hamper economic growth. There are also knock-on implications for related industries such as oil drilling that rely on Russian equipment. On one hand, these developments could have positive effects on other industries such as coal, palm oil, and nickel – causing nations such as Malaysia and Indonesia to have an external windfall gain as major producers, while the implications have been more adverse for more oil-dependent ones such as Thailand.
There is also an emerging food shortage crisis. This not only includes disruption to meat supply chains involving some of Southeast Asia’s biggest companies, but also – and to a larger degree – corn and wheat (of which both Russia and Ukraine are major exporters), causing a 14-year high in wheat prices and prompting a search for alternative wheat sources globally. Together, with calls to adjust to more regionally and locally friendly rice-based diets to ensure food security beyond the crisis, there could very well arise geopolitical shifts in power and influence within the region, especially vis-à-vis those with fewer resources to capitalise on. Reliance on countries beyond the region might emerge as a new regional dynamic given the economic trends arising from these shortages.
Within the financial sector, while a focus on Southeast Asian equities has allayed inflation fears, there are still signs the region must brace for the economic impact that may spur longer-term recovery. Many nations are still grappling with the impacts of the COVID-19 pandemic, and as the region opens its borders in a bid to reignite tourism and related industries, the effects of the conflict might prove another uncontrollable setback impeding recovery.
Alternatively, for Southeast Asian nations with the relevant resources, the continued conflict might mean a shift into greater positions of regional influence, which might also promote their international interests. Others might continue to align themselves with the relevant powers in the conflict to affirm their global as well as regional interests and motivations, whilst yet others might continue to seek methods of differentiating approaches, to maintain neutrality and nuance.
Could we see a roll-back to the decades during Southeast Asia’s formative era during the Cold War? Then, many countries in the region were being courted (and pressured) to move away from non-aligned positions and take a stronger position towards either the Western or Eastern blocs. The difference now is that there is a modern global stakeholder that has yet to assert itself amid the ongoing tensions, one that is being appealed to exercise its already enormous influence in international affairs to stem the crisis in Ukraine before it exacerbates.
Note: The conflict in Ukraine is an ongoing situation. The information referenced is correct as of 17 March 2022.
Read Redhill’s response to the crisis in Ukraine here
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