Category: ASEAN

Sergey Lavrov is on a two-day visit to Russia’s closest ASEAN ally, Vietnam, before heading to the G20 foreign ministers’ meeting The Russian foreign minister is in Hanoi on a quick visit to Moscow’s main Southeast Asian partner before attending a G20 meeting in Bali, during which Lavrov’s Canadian counterpart has warned she would not shake his hand. Canada’s Foreign Affairs Minister Mélanie Joly told Canadian media she would instead “confront him with facts and expose Russia’s narrative for what it is: lies and disinformation” about the war in Ukraine. Canada, alongside a number of Western countries, has imposed sanctions on Moscow for its invasion of Ukraine, now in its fifth month. U.S. Secretary of State Antony Blinken is also expected to snub Lavrov in Bali, with the State Department saying “it cannot be business as usual with the Russian Federation.” Vietnam on the other hand has repeatedly refused to condemn the Russian war and also objected to a U.S.-led effort to suspend Russia from the U.N. Human Rights Council. Lavrov is the first Russian cabinet minister to visit Hanoi since President Vladimir Putin announced a “special military operation” against Ukraine in February. His visit is taking place as Hanoi and Moscow celebrate the 10th anniversary of the so-called “comprehensive strategic partnership” that Vietnam has forged with only three nations in the world. Besides Russia, the two other comprehensive strategic partners are China and India. ‘The most important partner’ The Russian foreign minister and his Vietnamese host Bui Thanh Son held a meeting on Wednesday morning, during which Foreign Affairs Minister Son was quoted by Russian state media as saying that he’d like to “reassure you that Russia will always be our most important partner and the main priority in Vietnam’s policy.” Son said he “deeply believed that with the high level of political trust and a long-term interest,” the Vietnam-Russia relationship would continue to develop. Moscow is Hanoi’s traditional ally and its biggest arms supplier. Most Vietnamese weaponry used by the navy and air force was bought from Russia, leading to a future dependence on Russian maintenance and spare parts, despite efforts to diversify arms supplies. Russian anti-submarine ship Marshal Shaposhnikov seen in a file photo. CREDIT: ITAR TASS A Russian presence in the South China Sea, where Beijing claims “historical rights” over almost 80 per cent, could also be seen as a counterweight for competing China-U.S. rivalry as well as keeping China’s aggression at bay, say analysts. On June 25-28, three warships of the Russian Navy’s Pacific Fleet, led by the Udaloy-class anti-submarine destroyer Marshal Shaposhnikov, visited Cam Ranh in central Vietnam  where Russia operated a major naval base until 2002. Lavrov was quoted as telling his Vietnamese counterpart on Wednesday that “in the context of current world affairs, once again we should unite and strive to maintain international laws, the principle of national sovereignty and non-interference in other countries’ internal affairs.” The full agenda of the Russian minister’s visit has not been disclosed but some analysts, such as Artyom Lukin, Deputy Director for Research at the School of Regional and International Studies at Russia’s Far Eastern Federal University, said boosting economic cooperation at a time when Moscow has been isolated and sanctioned would be one of the main topics. “The Kremlin should already be more or less satisfied with Hanoi’s position on the Ukraine crisis since Vietnam’s stance all along has been strictly neutral,” Lukin said. “Rather than securing Vietnam’s political neutrality, which is already there, Moscow needs to ensure that Vietnam continues, and expands, economic links with Russia.” Between a rock and a hard place “What is important for Russia now is how to restructure economic ties, trade, cooperation in industry and technologies with the non-Western world,” said Fyodor Lukyanov, Chairman of the Presidium of the Russian Council for Foreign and Defense Policy. “It is highly important for Russia to intensify all possible ties to find ways to avoid and bypass the economic warfare applied by the West,” said the Moscow-based analyst. Artyom Lukin from the Far Eastern Federal University in Vladivostok pointed out that “amid Western sanctions, Asia and the Middle East are replacing Europe as Russia’s main geo-economic partners.” “Vietnam is the only ASEAN country to have a Free Trade Agreement with Moscow and Vietnam’s economic significance for Russia will now grow substantially, both as a market in itself and as a gateway for Russia’s business interactions with Asia,” he added. Despite COVID-19, bilateral trade between Vietnam and Russia reached U.S.$5.54 billion in 2021, a 14-percent increase from the previous year, according to official statistics. Yet the Ukrainian crisis that severely disrupted the global supply chain of food, fertilizer and energy has put Hanoi in an uneasy position. Vietnam has established some important strategic links with foreign powers including the U.S. and Japan, both strongly opposed to the Russian war in Ukraine and both are considered supportive of Hanoi’s interests in the South China Sea. Being seen as too close to Moscow would give Hanoi a disadvantage unless it could act as a go-between to mediate Russia’s interactions with the West, said a Vietnamese expert who didn’t want to be named as they are not authorized to speak to foreign media. Vietnam also has to be watchful for Russia-China joint maritime activities that may hurt its interests in the South China Sea. On Monday Chinese and Russian warships were spotted just outside Japanese territorial waters around the disputed, Japan-administered Senkaku Islands in the East China Sea. Tokyo lodged a protest with Beijing about the incident that happened amid China’s growing maritime assertiveness and increasingly robust China-Russia military ties, Kyodo News reported. Chinese media responded that the Russian Navy’s recent military activities in the West Pacific are a warning to Japan amid Japanese sanctions on Russia over the Ukraine crisis.

Despite the efforts of Indonesian President Joko “Jokowi” Widodo, the war in Ukraine continues. Whether governments in Southeast Asia are willing to admit it or not, the war matters, as it threatens the liberal international order, creates a dangerous precedent for other aggressor states, and harms the fragile post-pandemic economic recovery by causing inflationary pressures in energy and food. Southeast Asian states, apart from Singapore, have eschewed sanctions and continue to trade with Russia. But as the war drags on, that will have consequences in terms of secondary sanctions and other penalties imposed by the west. Russian supply chains run through Southeast Asia, and the United States and other western governments are have made the targeting of Russian sanctions evasion operations a top priority. One area where Southeast Asian actors may be tempted into sanctions evasion – or where, conversely, they could help pressure Russia economically – is in the export of semiconductors. A Protracted War Initially, Ukrainian forces successfully repelled the Russian invasion near the capital Kyiv and other cities in the north. Now, the Russians have advanced in the east and south, where the flat terrain favors the offense and provides little security for the defense. Tens of thousands of soldiers and over 4,500 civilians have been killed in 120 days of fighting. The United States estimates that the Ukrainians are losing 100 to 200 men a day. Cities, such as Mariupol, have been leveled by artillery fire and depopulated. Mass graves are being discovered, and the evidence of Russian war crimes is mounting. While Ukrainians are maintaining the will to fight, the costs are rising. Indonesian President Joko ‘Jokowi’ Widodo visits an apartment complex destroyed by Russian airstrikes in Irpin, Ukraine, June 29, 2022. Credit: Handout/Press Bureau of the Indonesian Presidential Secretariat Trying to Weather the Economic Storm The initial shock of sanctions on the Russian economy has been stemmed. The ruble has not only recovered after its initial drop, but, buoyed by $150 million a day in oil and gas exports, it’s stronger than before the war began. Indeed, according to a recent report in The New York Times, in the first 100 days after the invasion, Russia netted $98 billion. Nonetheless, on June 26, Russia defaulted on $100 million in sovereign debt. While the economy reeled from the immediate or planned departure of about 1,000 western firms, over half of the 300 Asian firms have remained and continue to do business.  Where Russia is going to start to feel the economic pinch is in its manufacturing sector, as it is highly dependent on the import of inputs such as European machine tools and Asian semiconductors. Though Russia has five foundries, they produce very low quality products and Moscow is highly dependent on imports. In 2020, Russia imported nearly $1.5 billion in semiconductors. The largest producers of high-end circuitry, Japan, South Korea, Singapore, and most importantly Taiwan, remain firmly committed to the sanctions regime. But firms in China and Southeast Asia may try to fill those critical supply chains for Moscow. In 2020, China accounted for one-third of Russian semiconductor imports. Since the Russian invasion, China has complied with international sanctions, for fear of secondary sanctions and the loss of market access. But diplomatically, China remains firmly in Russia’s camp, and continues to espouse the Russian justification for and narrative of the war. President Xi Jinping stated that there are “no limits” on the bilateral relationship and no “forbidden” areas of cooperation, suggesting frustration with western sanctions. On June 29, the U.S. Treasury department added five Chinese electronics manufacturers to an export blacklist, which will deny them the ability to sell in the U.S. market, for their sales to Russian military industries. This should have a chilling effect on other Chinese suppliers. Southeast Asia’s Role in Moscow’s Supply Chain In 2020, Malaysia exported some $280 million worth of semiconductors to Russia, making it the second largest source after China, according to the Financial Times. The Philippines and Thailand exported over $60 million each; Singapore exported roughly $10 million. In all, Southeast Asia accounted for nearly a third of Russian semiconductors. Malaysia has already been called out for announcing their intentions to sell semiconductors to Russia as part of their policy of “strategic neutrality.” On April 23, the South China Morning Post reported that the Malaysian ambassador to Moscow told state-owned media that Malaysia would “consider any request” and continue their exports to Russia. Malaysian manufacturers were warned that they could face secondary sanctions and loss of market access, threatening future investment in a nearly $9 billion export market. Similar warnings were made to manufacturers in the Philippines and Thailand. Although Vietnam remains close to Russia, its semiconductor manufacturing is directly controlled by foreign investors. Intel, which is amongst the most prestigious foreign investors in the country, made an additional $475 million investment in 2021; bringing their total investment to $1.5 billion. As companies continue to decouple from China, Vietnam is eager to increase high-tech manufacturing and is cognizant of the costs of trying to evade sanctions on Russia. Russian President Vladimir Putin meets with Indonesian President Joko ‘Jokowi’ Widodo at the Kremlin in Moscow, June 30, 2022. Credit: Sputnik via Reuters Evading Sanctions But Russia is desperate to revive its manufacturing and, as the war drags on, it will try to get countries to evade sanctions and/or use straw purchasers. Countries including Indonesia that are hard-hit from soaring energy prices have already looked to Russia for below market energy supplies. Jokowi’s trip to Moscow and his defiant willingness to include President Putin at the G-20 summit in Indonesia in November, are clearly intended to curry favor with Moscow for narrow economic gain. Indonesia’s leadership seems unable to grasp the fact that soaring food and energy prices that are hitting the public so hard have been caused by Russia’s illegal war of aggression. And sadly they are not alone in Southeast Asia, where the governments continue to view the war in Ukraine as a remote European crisis that doesn’t impact them or have other geo-strategic implications for the region. Southeast Asian countries can profess their neutrality,…