The conflict between Russia and Ukraine has little impact on Vietnam’s economy

The direct impact from the Russia-Ukraine situation on the Vietnamese economy is not large, but the indirect impact should be paid attention to in order to have a timely response.

The developments related to Russia’s special military campaign in Ukraine are threatening the global economic recovery from the Covid-19 epidemic.

The West increases pressure on Russia

The sanctions announced so far by the US, UK and European Union (EU) are aimed at preventing the Russian government and banks from accessing global financial markets, as well as restricting Moscow’s technology exports. .

In the latest move to increase pressure on Russia, the West decided to use “financial nuclear weapons” – as French Finance Minister Bruno Le Maire put it. Specifically, the US and its allies on February 26 agreed to sanction the Central Bank of Russia as well as remove some of its banks from the international payment system SWIFT (an acronym for the Association of Financial Telecommunication). major global interbank).

Born in 1973 and now headquartered in Belgium, SWIFT is a global messaging system connecting more than 11,000 banks and financial institutions in more than 200 countries and territories, thereby providing information to banks. about transactions. SWIFT also supports fast cross-border payments.

According to the Russian National SWIFT Association, about 300 of the country’s top banks and institutions use SWIFT, while more than half of the credit institutions participate in the system. Moscow’s access to SWIFT is important, allowing Russian energy companies to receive payments from outside oil and gas sales. Now, according to USA Today (USA), banning Moscow from using SWIFT can harm the Russian economy in the short and long term. For example, Russia will find it difficult to conduct international transactions, affecting revenue from oil and gas exports.

However, experts warn that it is not only Moscow that suffers from the above sanctions, especially when Russia’s big banks are now closely linked to the global financial and economic system. As Russia is a major energy exporter, the current situation could cause oil prices to soar, threatening the global economic recovery from the Covid-19 pandemic. As for SWIFT, Western countries also have difficulty paying for energy purchased from Russia, thereby causing oil prices to rise. In addition, it is not easy for creditors to collect money from Russian companies.

In summary, as expert Markos Zachariadis of the University of Manchester (UK) points out, all countries trade with Russia, including many EU countries and countries that buy a lot of energy from Moscow and businesses (DN) that trade with Russia. Translations with Russian organizations are also affected.

FILE PHOTO: A policeman stands guard at the main entrance to the Bank of Russia in Moscow, Russia, June 15, 2015. REUTERS/Maxim Zmeyev/File Photo

Risk of rising inflation

Referring to the fact that Western countries may exclude Russia from the SWIFT system, Mr. Tu Tiet Phat, General Director of Asia Commercial Bank, said that SWIFT is managed by G10 central banks and the European Central Bank. Europe (ECB) and top management belongs to the National Bank of Belgium. As punishment, Western countries can disconnect Russia’s SWIFT at any time.

However, as the country has the second largest SWIFT-connected financial institutions after the US, the fact that Russia is not allowed to transact through this system causes damage not only to Russian banks but also to many banks. In the world. Many debts of European banks that are due can be borrowed by Russian banks as an excuse to not connect to delay the payment period. At that time, European banks will fall into a precarious situation.

“Russia’s and Ukraine’s economies only account for less than 2% of the global economy, so the conflict of these two countries does not have much impact on the world economy. However, if the West punishes Russia by excluding Russia from SWIFT, then there will be no consequences. This could make the country unable to export crude oil (due to inability to pay). At that time, crude oil prices could increase sharply, causing global inflation to rise, greatly affecting the world economic growth. “- Mr. Phat analyzed.

According to the head of the currency business department of a large bank in Ho Chi Minh City, Russia is not a major trading partner of Vietnamese enterprises. Data from the Vietnam Trade Office in Russia – the Ministry of Industry and Trade shows that the import-export turnover between Vietnam and Russia in 2021 will reach just over US$7.14 billion.

“Assuming that the West removes Russian banks from SWIFT, it will affect the transactions of Vietnamese enterprises in the Russian market but not significantly. Because Russian enterprises can do round-trip transactions through banks. goods from a third country” – the head of this department analyzed.

Meanwhile, Dr. Le Quoc Phuong, former deputy director of the Center for Industry and Trade Information – the Ministry of Industry and Trade, commented on the political-military situation between Russia and Ukraine, culminating in a special military campaign. will have a great impact on the global economy, especially oil prices. As the world’s largest oil producer and exporter, Russia in tension with Ukraine and the threat of US sanctions, Europe will continue to push the price of oil and gas products higher.

“When this military campaign has not taken place, the tension between Russia and Ukraine has brought oil prices close to the 100 USD/barrel mark, causing a general impact on the world, including Vietnam. Under the impact of world oil prices. The increase in the world economy is high in the context that it is not known when the tense situation between Russia and Ukraine will end, the Government needs to continue to develop scenarios to cope with foresight, in which, consider further reducing taxes and fees to drag the world. the retail price of petrol and oil in the country is down,” said Mr. Phuong.

Regarding trade and investment, Dr. Le Quoc Phuong said that because Russia and Ukraine are not big partners of Vietnam, the direct impact from the two sides’ tensions does not affect our country too much. In particular, Russia only ranks 25th-26th in the list of countries having trade – investment relations with Vietnam, although the two countries have shared a free trade agreement between Vietnam and the Eurasian Union since 2015. Nguyen The reason is because Russia does not have a great demand for Vietnamese goods and vice versa.

“Thus, the direct impact of the situationRussia – UkraineThe impact on Vietnam’s economy is not great, but the indirect impact through oil prices or the impact from countries that apply sanctions against Russia during this time with Vietnam is also an issue that needs to be paid attention to in order to have solutions. timely” – Dr. Phuong acknowledged.

Concern about “energy shock”

Bloomberg predicts that if the fighting ends quickly, it will help prevent another bullish spiral in the commodity market. At that time, the economic recovery of the US and Europe was still on track.

In the event that tensions persist, the West has a tougher response and Russia’s oil and gas exports are disrupted, a larger energy shock is expected and global markets are hit hard. The worst-case scenario is that Russia stops supplying gas to Europe in retaliation for harsh sanctions. At that time, the European economy may fall into recession, while the US has to significantly tighten financial conditions, negatively affecting growth.

Seafood exports to Russia are affected

Truong Dinh Hoe, General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), predicted that the conflict between Russia and Ukraine would reduce the growth rate of seafood exports to both markets. The first is the psychological effect that makes both customers and businesses afraid of transactions in the current context. The latest development is that the US and its allies agree to remove some key Russian banks from the SWIFT international banking system, which also makes the payment process more difficult. Some European customers who buy Vietnamese seafood to sell to Russia are also affected by the chain. Moreover, the escalating oil price continues to affect the input costs of enterprises, especially domestic transportation and shipping charges, causing more difficulties for enterprises. VASEP recommends to businesses that need to diversify markets,

VASEP data shows that export growth to Russia has increased by 21% in 2021. The number of enterprises allowed to export to this market has doubled, to 50 enterprises in 2021 and the competitiveness of Vietnamese seafood South is improved by Russia. By the end of November 2021, seafood exports to Russia reached nearly 150 million USD, including: shrimp, pangasius, tuna, octopus, squid…