Minimal effect on Malaysia from Russia trade stoppages

The silver lining is that Malaysia is one of the few net commodity exporters in the region 


ANY direct trade stoppages occurring from the Russia-Ukraine conflict should have relatively minimal effect on Malaysia as Russia commands a negligible share in the country’s direct trade links. 

OCBC Bank economist Wellian Wiranto said exports to Russia comprise just 0.33% of Malaysia’s total outward shipment in 2021 while on the flip side, imports from Russia make up just about half a percent of total Malaysian imports last year. 

“We do, however, watch out for any secondary effect from a more marked slowdown in the eurozone economies that might affect end-demand for Malaysian goods. The silver lining, of course, is 

that Malaysia is one of the few net commodity exporters in the region. “With commodity prices doing what they are doing now, it should help to buffer any impact on Malaysia’s trade balances overall,” 

he told The Malaysian Reserve. Recently, the operator of the Kuala Linggi International Port turned down a docking request by a ship carrying crude oil from Russia, which was on its way to Malaysia.

The Transport Ministry (MoT) said in a statement that the request by the ship, which was expected to dock on Saturday (March 5) was rejected to ensure no international sanctions were violated. 

“Quoting media reports, the ship registered as Linda or known as Lady M was allegedly listed under international sanctions. 

“The MoT will continue to monitor the situation periodically for any possible action in accordance with government policy,” it said. 

In addition to being a major oil producer, Russia is also a major supplier of wheat, aluminium, palladium, nickel and other commodities. This explains the importance of Russia as a major trading partner for Europe, as well as China. 

On another note, Ukraine also plays a vital role in the global supply of rare gases, especially neon gas, which is used in semiconductor production. 

Together with rising prices, shortages of these commodities due to the heightened RussiaUkraine tension will add to the disruptions in the global supplies of chips, machinery, equipment and even foods. 

MIDF Research director and head of research Imran Yassin Md Yusof said in terms of external trade, declines in demand from Russia and Ukraine would pose a minimal direct impact to Malaysia’s exports. 

He said the size of exports to both Russia and Ukraine only accounted for 0.4% of Malaysia’s total exports in 2021. The share has been the same (at 0.4% of exports) even between 2015 and 2019, during the pre-pandemic period. 

“Similarly, from the imports’ perspective, only 0.6% of Malaysia’s total imports last year were sourced from Russia and Ukraine. Trade with Russia and Ukraine only covered approximately 1% of Malaysia’s total trade last year. 

“Consequently, the combined size of trade with Ukraine and Russia covered only 0.5% of Malaysia’s total trade,” he said in a thematic report titled “Potential Impact to Russia-Ukraine Conflict” recently. 

While the direct impact is limited, Imran said there could be concerns for the electrical and electronic products sector as prolonged supply disruptions will weigh down on the global production and international trade activity this year. 

“Moreover, the indirect spillover effect on external trade outlook could come from weaker export demand, particularly from European countries and regional countries that are involved in the global supply chain of the semiconductor industry. 

“For the record, exports to European Union’s 27 countries accounted for 8.4% of total exports and 8.1% of Malaysia’s total trade in 2021,” he said.