Asia’s role in framing the global economic response to war in Europe

Author: Editorial Board, ANU

No matter what their diplomatic stances over Russia’s invasion of Ukraine, the countries of the Asia Pacific have an urgent interest in seeing the conflict in Europe halted but that won’t see them signing on to the western agenda of economic sanctions and diplomatic censure of Russia.

As Susan Thornton writes in our lead article this week, in Asia ‘the attitude towards Russia’s invasion and accompanying de-globalisation effects are viewed with more ambivalence by many’.

The Western-led response to the war has had three main elements. First, directly boosting Ukraine’s resistance to invasion with arms and intelligence while remaining below the threshold of direct conflict with Russia. Second, diplomatic censure of the Russian government and attempts to exclude it from global multilateral forums. Third, a regime of sanctions designed to precipitate a financial crisis within Russia, the collapse of its economy, and limits to its ability to finance the war.

‘Asian states are generally loath to alienate a major power, especially one that is a big commodity exporter’. With supply chains and commodity markets already disrupted by the pandemic, ‘countries that depend on Russia for minerals, energy, food or weapons worry about the effects of shortages and price increases on their domestic economic trajectories.’’

That’s before the issue of some Asian countries’ dependence on Russian defence equipment, notably India and Vietnam, is taken into account. Even if either country were of a mind to wean itself off Russian equipment, that would be a years-long enterprise — not an option at a time when they are feeling the pressure from China’s adventurism in the South China Sea and the Himalayas.

The United States, where US President Joe Biden has just hosted a US–ASEAN special summit, seems to appreciate the position in which many Asian countries find themselves. There was reportedly little effort to lean on Southeast Asian leaders to break from Russia, and the Summit’s communique reflected ASEAN’s reluctance to name Russia as the aggressor in Ukraine.

Read this as a sign that the US administration understands that it can’t make its attempts at a renewed Asia-Pacific ‘pivot’ hostage to unrealistic expectations of sign-on to punishment of Russia. The United States spent too much time engaging with key countries in the region through the prism of the War on Terror when that was a front-of-mind issue in Washington.

With war having returned to Europe, it would be equally short-sighted for the United States to let this (hopefully temporary) war divert it from the main game in the Asia Pacific — (re)building its reputation as a reliable security partner and balancing economic counter to China. Indeed, as Thornton observes, ‘governments in East Asia, who were already caught uncomfortably in the rapidly escalating US–China tensions, now face further concerns. As Western allies turn inward towards G7, NATO and Quad structures, the majority of countries outside of the G7 with their own interests will not stand on the sidelines awaiting instruction.’

There is ample scope for Asian agency in ameliorating the war’s global effects. Ironically, some of the paragons of non-alignment are bearing the brunt of the war’s impacts on global food and energy markets. Before the war, Indonesia was the world’s second-largest market for Ukrainian wheat, importing about a quarter of its supplies from the country in recent years; wheat-based staples are now growing more expensive and scarce. Resurgent food inflation in India threatens the food security of households that were already battered by the pandemic. All are suffering from disruptions to global fertiliser supplies and a spike in energy prices.

Yet Asian countries, individually or collectively, can’t change the unavoidable fact that this war will continue until the Russians lose, or are forced into a negotiated peace that’s acceptable to Kyiv and its Western backers. The mood in Washington is entirely against capitulating to its surrogate Russian rival. Ukrainians, having outfought Russia so far, are unlikely to accept a ‘peace’ that leaves large parts of their country under occupation; its Western backers, meanwhile, don’t want to see anything resembling a Russian victory, even if they are more sanguine than Kyiv about a prolonged stalemate, or de facto Russian control of parts of Ukraine. What Russia would settle for is anybody’s guess — if its president was able to make rational, evidence-based decisions, this war would never have happened.

Insofar as the Western response to the war serves to hasten Russia’s defeat or acceptance of a negotiated peace, then the non-aligned countries that need the war to end are diplomatically free riding on allied efforts. But insofar as the campaign to push Russia out of Ukraine is prolonging the conflict, they are not the only countries in for more economic pain as the war drags on.

The war in Europe makes a global economy and global economic system that are already fragile because of the impact of the COVID-19 crisis, even more fragile as it knocks confidence in global growth, and further corrodes a reliable framework for global trade and economic development.

A shout-out to multilaterism beyond the war has never been more important, as was its invention during the Second World War for post-war prosperity and peace.

The silver lining is that Asia is heavily invested in multilateralism, and home to multilateral platforms that bring together the United States, key Asian states, the European Union and Russia. Indonesia’s presidency of the G20 this year offers to focus on the economic agenda for reconstruction and peace, and practical measures to address the immediate global threat of food and energy insecurity.

This is a high stakes game that must engage Russia in an exit strategy that protects Ukraine at the same time as it puts pressure on Russia to become the valued partner that it claims to be and the United States and its NATO allies to set out genuine foundations for peace.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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