Following its invasion of Ukraine, Russia has tried to shield its economy from a new wave of Western sanctions by leaning on China and India, two major Asian powers. Leveraging its massive arms industry, and offering steeply-discounted energy products, the Eurasian powerhouse has tried to compensate for its rapidly diminishing trade with Western countries.
Britain, the world’s fifth largest economy, saw its historically high Russian energy imports, which reached £499 million a month, effectively flatlining in August. The European Union (EU), meanwhile, is expected to impose more sweeping energy sanctions on Russia later this year.
Steady and significant trade with China and India, however, will likely mitigate economic depression in Russia. Nevertheless, the Eurasian powerhouse is struggling to maintain strategic momentum in critical theaters like Southeast Asia, where China and the United States are expected to remain as the dominant external powers.
In recent months, all key members of the Association of Southeast Asian Nations (ASEAN) have either scaled back their strategic relations with Russia, or are struggling to maintain traditionally robust ties. Southeast Asia’s most advanced economy, Singapore, has publicly condemned Russia for its invasion of Ukraine, and imposed sanctions accordingly.
Meanwhile, ASEAN’s two largest member-states, the Philippines and Indonesia, have canceled massive arms deals with Russia, largely due to fears of incurring U.S. sanctions under its “Countering America's Adversaries through Sanctions Act (CAATSA).” Alternatively, Vietnam, a traditional partner of Russia, is scrambling for new mechanisms to maintain trade and investment momentum with the Eurasian powerhouse.
Old Allies, New Problems
Russia’s closest and most important partner in Southeast Asia is undoubtedly Vietnam. After establishing formal bilateral ties in 1950, Hanoi and Moscow maintained a de facto alliance throughout the most tortuous decades of the Cold War, including multiple wars in Indo-China.
Despite the end of the Cold War, and the subsequent dissolution of the Soviet Union, the two sides remained committed to maintaining robust strategic ties. In 2001, Hanoi and Moscow established a “strategic partnership,” which was upgraded to a “comprehensive strategic partnership” a decade later.
The two partners have vowed to press ahead with bilateral cooperation “in all areas” of strategic relevance until the end of this decade. Only Asian giants China and India enjoy similar levels of strategic partnership with the Southeast Asia country.
Vietnam alone has been responsible for the bulk of Russia’s arms exports to the region, amounting to more than $10 billion in the past two decades, according to the data by Stockholm International Peace Research Institute (SIPRI).
Russia has provided Vietnam with modern military hardware, including fourth-generation fighter jets and kilo-class submarines. The Eurasian country has also been a crucial source of hydrocarbon products and strategic energy investments, including offshore projects in the South China Sea.
Overall, economic relations have been booming in recent years. Bilateral trade reached $7.1 billion (USD) in 2021 amid booming investment relations: Russia reportedly has more than 150 investment projects in the Southeast Asian country, worth close to $1 billion (USD), while Vietnamese investments in Russia are almost $3 billion (USD). With Vietnam’s free trade agreement with the Moscow-led Eurasian Economic Union (EEU) entering implementation this year, both sides are hoping to maintain the current momentum in economic relations.
Marking the 10th anniversary of their “comprehensive strategic partnership,” Vietnam invited Russian Foreign Minister Sergei Lavrov for a high-level meeting earlier this year, with both sides expressing their commitment to maintaining their historically-robust relations. The two sides have also been contemplating potential joint military exercises later this year.
Thanks to the barrage of Western sanctions, however, Vietnam is struggling to keep bilateral ties on an even keel. In recent months, the Southeast Asian country saw a significant drop in its food and agriculture exports to Russia, which, in turn, has struggled to expand shipment of energy and agriculture inputs to Vietnam.
Even Russia’s energy projects in Vietnam are struggling, as Hanoi struggles to navigate rising transaction costs, and logistical and financial hurdles amid intrusive sanctions targeting Russia’s central bank, financial sector, and shipping industry.
Lost Opportunities
Given the depth of bilateral cooperation, Vietnam remains committed to maintaining robust ties with Russia, even in a new era of more punitive Western sanctions. The same, however, can’t be said about other key Southeast Asian countries, which have had relatively minimal strategic interdependence with Moscow and are more sensitive to any potential blowback from Western partners.
Not long ago, Russia positioned itself as a potential ‘third force’ amid a new era of Sino-American rivalry in the region. Russian president Vladimir Putin had legions of fans in Southeast Asia, including former Philippine president Rodrigo Duterte, who described the Russian leader as “my favorite hero” as well as Indonesia’s Defense Minister Prabowo Subianto.
In order to diversify their defense partnerships, both the Philippines and Indonesia began negotiating large-scale defense deals with Moscow, which offered state-of-the-art weaponries on relatively affordable terms to the Southeast Asian nations.
During the COVID-19 pandemic, Moscow upped its regional diplomacy by offering public health assistance, including the en masse provision of Russian-made vaccines. What began as a highly promising charm offensive, which saw Moscow nurturing new friends among U.S. strategic partners and allies, began to unravel this year.
First came Indonesia’s decision to scrap a multi-billion fighter jet deal with Russia, namely the potential acquisition of Sukhoi Su-35 fighters amid a massive military modernization program in the Southeast Asian country. Instead, Indonesia decided to settle for French-made Rafales and U.S.-made F-15s fighters as potential alternatives.
Indonesia’s Air Marshal Fadjar Prasetyo admitted that lingering concerns of potential U.S. sanctions were a big part of Jakarta’s turnabout on the Russian deal.
Meanwhile, the Philippines also began to reassess its once-burgeoning relations with Russia. On one hand, Duterte began to publicly criticize Russia’s invasion of Ukraine, a major departure from his Putin-friendly comments over the past six years. Then came the Philippines’ decision to nix its only major defense deal with Russia, the purchase of 16 Russian-made Mil Mi-17 helicopters worth $244.2 million.
Both top Philippine defense and foreign policy officials confirmed that fears of the U.S.’ CAATSA sanctions underpinned their U-turn on the Russia deal. Similar to Indonesia, the Philippines is also considering Western options, namely Boeing CH-47 Chinook helicopters from the U.S.
On the other hand, Singapore had reconsidered its promising economic ties with Russia when the two sides finalized the Eurasian Economic Union (EAEU)-Singapore Free Trade Agreement (FTA) last year in order to solidify trade and investment relations between Southeast Asia and Moscow. But following Russia’s invasion of Ukraine, Singapore imposed sanctions on the Eurasian country. In response, Moscow imposed restrictions on trade with the Southeast Asia state, which was placed on a list of mostly Western nations accused of “commit[ing] unfriendly actions.”
By and large, Russia has struggled to maintain strategic momentum in the region due to the stranglehold of Western sanctions. And this has diminished its ability to credibly project itself as a potential alternative pole amid intensifying Sino-American competition. Unless the Ukraine conflict is resolved in the near future, Russia’s strategic setbacks in Southeast Asia will ultimately strengthen the centrality of both China and the U.S. in shaping the regional security architecture.
