Russia-Ukraine crisis: Asian economies face ‘disastrous’ rise in fuel and commodity prices, with Japan and South Korea likely to bear brunt

Regional economies reliant on Russian crude oil, gas and metals could be hit by surging prices and even shortages if Moscow retaliates against Western sanctions

Japan and South Korea are most vulnerable; Japan particularly so after Prime Minister Fumio Kishida’s announcement that Tokyo will implement sanctions of its own

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A tank drives along a street after Russian President Vladimir Putin ordered the deployment of Russian troops to two breakaway regions in eastern Ukraine following the recognition of their independence. Photo: Reuters

Published: 7:08pm, 23 Feb 2022Updated: 1:32pm, 9 Mar 2022

The Russia-Ukraine crisis could prove “disastrous” for Asian economies, with surging prices of fuel and commodities likely to add to coronavirus-induced economic woes, economists have warned.

Although Western countries stopped short of enacting sanctions on direct supplies of goods from Russia as they levied “modest first-tranche” restrictions on Russian elites and financial systems, the crisis has sent jitters through markets and triggered price surges in key Russian exports such as oil, gas and metal raw materials that are expected to exacerbate rising inflation and production crunches in Asia.

Still recovering from pandemic-driven supply chain disruptions that have sent the cost of supplies rocketing over the past two years, major Asian economies that import from Russia – such as Japan and South Korea – would face not only further price increases but potentially shortages too if Russia were to counter the sanctions by cutting supplies.

“The immediate consequence of a Russian invasion of Ukraine would be economic volatility that would upset the growth outlook for Asia,” the Economist Intelligence Unit’s regional director Tom Rafferty said.

“Market concerns tied to Ukraine have been a factor in keeping global energy prices high, and an outbreak of hostilities could cause a price surge that would stimulate additional inflation and harm consumer spending.

“While Asian countries would not be directly involved in any conflict, the geopolitical and economic implications for the region would still be significant.”