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Ukraine and Implications for Asia

31 Mar Ukraine and Implications for Asia

Ukraine and Implications for Asia

As the situation in Ukraine intensifies, the SIIA held a hybrid seminar, “Ukraine and Implications for Asia” on Thursday, 10 March 2022. Speaking at the seminar were Mr Bilahari Kausikan, Chairman of the Middle East Institute at the National University of Singapore, and Mr Manu Bhaskaran, Founding Director and CEO of Centennial Asia Advisors as well as Council Member of the SIIA. Both experts shared their insights on the geopolitical and economic consequences of the war.

 

Geopolitical Implications

Mr Kausikan shared that the Russo-Ukrainian war has four broad impacts. First, Europe will take their own defence more seriously moving forward and this can already be seen from the doubling of Germany’s defence budget. Second, the idea of “the West” will be reinvigorated, with countries in Europe recognising a greater need to cohere despite internal strains. Third, the strategic role that the United States plays in the balance of power will be given more credence in a world that acknowledges the importance of countering China and Russia’s growing might. Fourth, US-China discord may sharpen with the latter refusing to express disapproval of Russia’s actions.

 

While China is unlikely to take any action to hold Russia accountable given their strategic partnership, Mr Kausikan said that China will try its hardest to stabilise its relations with the West to avoid suffering collateral damage from sanctions directed at Russia. While Western and Chinese systems have bifurcated in some domains, China is still not ready to be self-reliant. It is so integrated in the global order and supply chains that it cannot afford to risk its access to Western markets by outrightly defending Russia.

 

But does Russia’s actions have consequences for the rest of Asia? Will China take a cue from Russia and go rogue in its attempts to dominate the region? Mr Kausikan believes this is unlikely as China must portray itself as respectful of international norms to be consistent with its stance that other countries should not meddle with China’s affairs in relation to Tibet, Xinjiang, and Taiwan. It is also unlikely that China will stage an unprovoked attack on Taiwan. China recognises that Taiwan is strategically and economically more important than Ukraine in global supply chains. The US will also take a more resolute stance where Taiwan is concerned given its significance to US’ allies in the Asia-Pacific such as Japan, South Korea, and Australia.

 

Finally, Mr Kausikan discussed the impact of Russia’ actions on smaller countries. He shared that if Russia’s aggressions and disregard for international norms go unaccounted for, smaller countries will face an existential crisis. Smaller countries must stand for international norms and condemn any attempts by bigger countries to subjugate them by naked force.

 

Economic Implications

The direct economic costs to the region will be moderate but there will trickle-down risks from a global slowdown. A European downturn can threaten the pace of economic recovery. During the seminar, Mr Bhaskaran highlighted the impacts of the rise in energy costs, commodity and food prices on both individuals and businesses. Individuals will be affected by a higher cost of living, resulting in a decrease in consumer expenditure and overall slowdown in the economy. Business will be affected by an increased cost of production and the world will see a temporary decrease in foreign direct investment.

 

However, Mr. Bhaskaran remained optimistic about the overall global economic landscape. An increase in defence spending, particularly in the information technology sector, can boost growth.

 

As more countries start to treat COVID-19 as endemic, the reopening of borders will help to cushion the impact of the war. High levels of vaccination and improved medical capabilities worldwide will boost the confidence of governments to reopen. There will be a release of pent-up demand which will help the tourism and hospitality sectors. Businesses dependent on cross-border supply chains and labour flows will bounce back. New and emerging sectors such as sustainability and digitalisation, which rose to prominence during the pandemic, will also help to revitalise the global economy.

 

However, Mr Bhaskaran also warned that a new development arising out of the Russo-Ukrainian war is China’s greater push for self-reliance. Witnessing the strength of the Western response towards Russia has driven China to more urgently sanction-proof their economy and increase domestic demand so that it will not be too reliant on international demand and made vulnerable by a Western-led financial system. This increase in protectionism may dampen trade and negatively impact the global economy.

 

Conclusion

The war has resulted in bloodshed and heavy casualties on both sides. Ukrainian resistance and the response from the international community has been firmer and more widespread than the Russian leadership had expected, and this has prolonged the conflict. While Asia has been relatively shielded in terms of political and economic costs, middle powers and smaller countries in the region must be mindful in taking informed stances and introducing appropriate policies for longer-term interests.