With the US and other Western powers disputing Russia's claim to have withdrawn some troops from the Ukrainian border, the risk of a Russian military assault persists. While Asian countries would not be directly involved in any conflict, the geopolitical and economic implications for the region would still be significant.
Why does it matter?
The immediate consequence of a Russian invasion of Ukraine would be economic volatility that would upset the growth outlook for Asia. Market concerns tied to Ukraine have been a factor in keeping global energy prices high, and an outbreak of hostilities could cause a price surge that would stimulate additional inflation and harm consumer spending. Rises in the energy import bill would have the greatest impact on net energy-importing Asian countries that are managing balance-of-payment strains, such as Pakistan.
Asia relies much less than Europe on Russian energy. China is the largest regional market, with Russian mineral fuel shipments likely to have surpassed US$50bn in 2021, accounting for around 13% of such imports. A narrow majority of China-Russia trade is no longer conducted in US dollars; other Asian countries will need to have similarly diversified payment options to access Russian energy if US sanctions are widened. US allies, such as Japan and South Korea, will come under pressure to reduce their energy reliance on Russia.
US sanctions would complicate existing and planned investments in Russia by Asian countries, as well as lending by their banks. China's commercial banks would probably prove reluctant to risk their global operations, but the country's more insulated policy banks could be willing to provide additional commodity-backed credit to Russian firms.
Geopolitically, events in Ukraine will be watched for clues as to how a security crisis might unfold in Asia. A weak Western response to an invasion could undermine confidence in the ability of the US to act as a security guarantor in the region. The parallel should not be overdrawn, however, and US national security interests in relation to Taiwan, for example, are deeper than for Ukraine.
Asian governments would also watch to see the extent to which any Russian incursion was supported by China, amid warming China-Russia ties. Chinese support would be seen widely in the region as a grim warning sign and would undercut any notion of "non-interference" in the country's foreign policy.
Several countries in Asia may look to adjust their energy supply amid concern about access to Russian shipments. The crisis is unlikely to trigger immediate geopolitical developments in Asia (it is very improbable that China would use the Ukraine situation as cover for an invasion of Taiwan), but it will be important in shaping future trends in the region.