As Russia’s forces close in on Ukraine’s capital Kyiv and the attack intensifies, both the Russian government and its richest citizens are beginning to feel the heat of Western sanctions. These sanctions will soon clamp trade between Russia, Ukraine, and the Asia-Pacific region.

Share Market Live

NSE

However, since the trade volume is relatively low, the impact on APAC will be muted. The long-term energy price inflation and effects of the supply chain disruption will also have a modest impact, according to Moody’s Analytics report.

Also read: Russia-Ukraine war LIVE: Indian student killed in Kharkiv shelling; battle for Kyiv intensifies

Major imports from Russia into APAC include oil and natural gas. Some countries import wheat and specialty gases such as neon and helium as well. Trade flows from Ukraine are smaller but the imports from Ukraine into the APAC matter more. The value of imports has risen in recent years, and Indonesia and India have the highest exposure to imports from Ukraine followed closely by China, the report ‘Limited Trade Between Ukraine and APAC’ said.

Iron ore, semifinished iron, and iron bars are the largest commodities imported by APAC countries from Ukraine. But relative to the size of each importing country’s GDP and economy, the import flows are modest.

Also read: Russia-Ukraine crisis: May consider releasing oil from strategic petroleum reserves, says MoPNG

Direct trade between Ukraine and the APAC is limited, but the impact on inflation and disruption in the supply chain will be felt modestly in the region. Inflation comes with high energy and food prices. Although Ukraine is not an energy exporter, it will impact energy prices indirectly via blockages of shipments from Russia, and by the risk, premium now priced into global crude oil and other energy products.

Imports from Russia to APAC are slightly higher and more volatile as they primarily consist of of energy products.

Also read: How crude oil price surge amid Russia-Ukraine crisis will impact India

According to the Moody’s Analytics’ ‘APAC’s Direct Trade With Russia’ report, the greatest volatility of the value of imports from Russia has been felt in Singapore, where refined petroleum, with its volatile price, accounts for about 75 percent of imports from Russia. But Singapore’s imports from Russia have never amounted to more than 2 percent of all its imports. Therefore, no APAC economy is highly dependent on imports from Russia.

Exports to Russia are only important to China and it is also the largest importer of goods from Russia within the APAC. Nearly 70 percent of Russian imports comprise energy-related products.

Also read: SBI takes 'cautionary' view in processing transactions of Russian entities

Yet no APAC economy is highly dependent on imports from Russia, which represent less than 1 percent of nominal GDP for the major APAC countries.

So, despite more sanctions and the increasing difficulty to trade with Russia, the impact on APAC would remain small. The indirect impact of longer-lasting global energy price inflation will weigh heavy on the region’s economy and much of this will be felt through higher input costs for food production.

Another area where the Russia-Ukraine conflict may have a serious effect is the ongoing shortage of semiconductor chips. Both Russia and Ukraine are major players in the global supply chain of neon and helium gases, that play a critical role in the production of chips.

Also read: Explained: How Russia-Ukraine crisis will impact agri-business in India

(Edited by : Shoma Bhattacharjee)

First Published:Mar 1, 2022 6:00 PM IST