Singapore may join Russia sanctions; no major hit to trade sector, but risks remain

SINGAPORE is not likely to take a direct economic hit from putting export curbs on Russia, observers said on Wednesday (Feb 23), amid media reports that the Republic may join international sanctions over a dispute involving Ukraine.

But trade disruptions and energy and commodity price spikes remain key risks - whether or not Singapore takes part in sanctions.

"(Imposing) export controls on Russia would not have a material impact on Singapore's trade," UOB economist Barnabas Gan told BT, pointing to statistics that place the Russian market at about 0.1 per cent of Singapore's total exports.

OCBC chief economist Selena Ling agreed that "the immediate impact should be limited", especially as Russia does not have an important role in the semiconductor trade that is critical to Singapore exports.

But extended sanctions or tit-for-tat retaliation from Russia - especially on commodities - could cause "knock-on effects to global commodity prices and a potential loss of confidence", she noted.

Gan warned that, "while trade exposure remains limited, there might be higher inflation risks" from oil prices if tensions escalate.

Citing unnamed US sources, Foreign Policy this week reported that Singapore supports Washington's plan to slap export controls on Russia under a sanctions package.

The US has also won Japan and Taiwan's backing for this plan, and "is in talks with economic powerhouses in Asia to gain their support for severe sanctions and export control packages against Russia", according to Foreign Policy.

Russia risks broader economic sanctions from the West should mounting tensions at the Ukraine-Russia border boil over into intrusion onto Ukrainian territory. The Russian military has already been ordered into separatist-held parts of eastern Ukraine that Russian President Vladimir Putin recognised as independent on Monday.

In response, the United States, European Union and United Kingdom have unveiled plans to sanction Russian banks, while Germany called a halt to the US$11 billion Nord Stream 2 gas pipeline project.

Michael Taylor, managing director at Moody's Investors Service, wrote in a note that a conflict would drive up oil and liquified natural gas prices, "which will be positive for the relatively few exporters in the Asia-Pacific region and negative for the substantially greater number of net energy importers".

He also said that trade in the Asia-Pacific could see import diversion and diversification, "although there may be opportunities for commodities producers in Central Asia to increase supply to China".

Addressing the Russia-Ukraine conflict in a statement on Tuesday, Singapore's Ministry of Foreign Affairs affirmed that concerned parties should continue to pursue dialogue towards a peaceful settlement, in accordance with international law.

Foreign Minister Vivian Balakrishnan remarked in a speech that Singapore is "gravely concerned" by the situation "because the independence, the sovereignty and the territorial integrity of Ukraine must be respected".

BT has reached out to MFA and MTI for comments, and is awaiting a reply.