In Thailand, businesses feel economic shock of Ukraine war

Countries across Asia are bracing for rising inflation and supply chain disruptions amid sanctions against Russia.

Man sitting street in Bangkok
Thailand's businesses are feeling the knock-on effects of the war in the Ukraine and sanctions against Russia [File: Soe Zeya Tun/Reuters]

Bangkok, Thailand – For Bangkok-based exporter Peyton Enloe, getting Thai fresh fruit and vegetables onto Russian supermarket shelves has become an almost impossible task.

Russian consumers are cutting back on luxuries as the value of the rouble plummets to record lows. Not only that, the Aeroflot planes Enloe relies on to transport his produce are running out of space as flights fill up with Russian tourists cutting their holidays short.

“We’ve basically lost market access to Russia,” Enloe, managing director of Purithai Produce, which ships fresh and frozen produce to Europe, America and Russia, told Al Jazeera.

“My Russian customers told me people don’t have money to even buy the basics, let alone ‘exotic’ produce like mangos, durians, rambutans.”

Russia’s economy is being hammered by Western-led sanctions introduced in response to Russian President Vladimir Putin’s invasion of Ukraine.

But the outlook for Asia has also taken a sharply negative turn as the economic pain spreads across the globe.

The region’s fragile post-pandemic recoveries have been thrown into doubt as oil prices approach $140 a barrel, threatening a new round of rising inflation and supply chain crunches – challenging governments that have already had to spend big during the pandemic to find more resources to shield their populations from rising costs. Analysts expect oil prices to rise further still after President Joe Biden on Tuesday announced a ban on imports of Russian oil, gas, and coal.

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019.
Rising oil prices have cast a cloud over Asia’s post-pandemic economic recovery [File: Angus Mordant/Reuters]

Putin’s military campaign in Ukraine has disrupted the flow of goods between continents, with big shipping firms like Maersk and CMA CGM announcing they will no longer serve Russian ports. Asia’s biggest economies also depend on imported oil and gas – of which Russia is the world’s third and second-largest supplier, respectively – making them susceptible to rising energy prices.

“Asia will not be impacted as much as Russia or Europe,” Tommy Wu of Oxford Economics in Hong Kong told Al Jazeera. “But higher global energy prices and slower global trade will weigh on Asia’s recovery, notably for countries that rely heavily on oil imports such as Japan, South Korea and India.”

For China, which has declined to condemn or sanction Russia, any prolonged drag on global growth caused by the war is bad news, even if Beijing ramps up economic cooperation with an increasingly friendless Moscow.

“As Russia becomes increasingly isolated, it will lean more heavily on China as a trading partner,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a briefing note last week.

“That will present some opportunities for Chinese firms to take market share from western suppliers and to buy energy at a discount. But any such gains will be small when set against the cost to China of higher commodity prices and the dent that those price rises have put in real consumer incomes in China’s major export markets.”

For Thailand, southeast Asia’s second-largest economy and one of the region’s hardest-hit during the pandemic, the economic aftershocks of Russia’s invasion are being largely felt in specific sectors.

While only 1 percent of Thai exports go to Russia, firms with business in the country are grappling with serious supply chain disruptions.

For Enloe, an American who has worked in Thai agricultural businesses for more than a decade, flying fresh farm produce to Russia and Europe depends on speed and reliable connections.

“Aeroflot has been banned from most European countries already,” he said. “In the long term, that will be a problem.”

Thailand’s Phuket has relied heavily on Russian tourists during the pandemic [File: Jorge Silva/Reuters]

Russia has also been the largest source of tourists to the kingdom as it tries to reboot its tourism sector after two years lost to the pandemic.

Since the invasion, many Russians have had to abandon holidays in the country to manage a business or other affairs at home, or because the rouble’s crash made their stay 30 percent more expensive overnight.

Those still in Russia who wish to travel face difficulties paying for their trips after Russian banks were cut off from the SWIFT international payments system.

Amid the economic fallout, Thailand’s Prime Minister Prayuth Chan-O-Cha has appealed to the public for understanding.

“We’re discussing measures to freeze the price of petrol. But we can’t just help everyone,” he told reporters on March 1. “As you know the government doesn’t really have money so you should understand us.”

Small shippers at Thailand’s Leam Chabang port are already asking for an oil surcharge of nearly four percent from freight customers, one European firm told Al Jazeera on condition of anonymity, with those costs likely to quickly be passed onto consumers who have been struggling with months of rising prices.

On Friday, Thailand’s Commerce Ministry announced that inflation in February rose to 5.28 percent, the highest rate in 13 years and well above forecasts.

Analysts see worse to come as the war in Ukraine casts a cloud over hopes of a swift economic recovery in 2022.

“We’re going to feel the pain deep into this year and most likely into the next,” Chaichan Chareonsuk, chairman of the Thai National Shippers Council, told Al Jazeera. “The geopolitical situation, global inflation, the pandemic – Thailand still has a high number of cases – and freight costs are still very high. All of that is certain to damage our growth.”

Source: Al Jazeera