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Russia Ukraine conflict and its effects on international trade of Vietnam
Mar
The opening of tension of Russia in eastern Ukraine has created fluctuations in the world. International trade activities are affected because Russia is kicked from the SWIFT payment system. In Vietnam, trade with Russia and Ukraine faces many challenges. Exports of some agricultural products of Vietnam are in danger of decline.
Export of Vietnamese goods to Russia and Ukraine faces many challenges
– Russia is a potential market for Vietnam, both in terms of import and export. Customs data shows that in 2021, Vietnam exports to Russia 3.2 billion USD; imports from this country 2.3 billion USD, up 15%.
– Not only Russia but Ukraine is also an important market for Vietnam. The export turnover is not large, less than one billion USD. However, this country is a important trading partner of Vietnam. In 2021, the trade turnover between the two countries reached 720.5 million USD.
– Vietnam will be affected on production, import and export. Enterprises with cooperation projects with Russia, Ukraine, Belarus and other countries involved in the crisis will also be affected.
– The payment of commercial contracts with Russia will also be difficult, after the US and Western countries launched a series of restrictions for Russia.
– These steps will affect the settlement of many contracts using USD payments in the future. Some Russian importers asked to stop paying for 2-3 weeks to wait for the situation to stabilize.
– A number of shipping lines have refused to accept orders to transport goods from Vietnam to Russia. Freight rates will continue to soar along with shipping delays that will affect trade in goods.
– In addition, the air embargo also causes airlines to choose longer routes, high costs, increasing pressure on the global logistics. The cost of exported goods has been too high recently. The increase in freight rates has caused costs increased.
Effects on Vietnam
On February 26, the US and its allies decided to kick Russia out from the SWIFT (Society for Worldwide Interbank Financial Telecommunications) international payment system.
– Therefore, Vietnamese businesses will have to choose another payment option. International payment transactions are handled mainly through the International Money Transfer Service via the SWIFT system and the Western Union Money Transfer Service (WU).
– In 2020, about 38 million transactions are made every day through the SWIFT platform, worth trillions of dollars. As there is currently no more convenient global alternative channel, SWIFT is essential to the world’s finance. The move to exclude some Russian banks from SWIFT will bring many negative effects to the economy in Russia.
– In particular, the processing through the SWIFT system is the main one. Because this is a modern, fast global payment system with very high security.
– However, in international payment activities of commercial banks, the means of communication used include: mail and telex. Prior to SWIFT, Telex was the only available means of message confirmation for international money transfers. Telex is not effective because of low processing speed, security risks, so it often leads to errors.
Exports of some agricultural products of Vietnam are in danger of decline
The export of agricultural and aquatic products in 2022 will decrease because of many difficulties related to Russia’s “special campaign” in Ukraine.
– According to the Vietnam Cashew Association, this will certainly make businesses face many difficulties in payment, especially for Russian customers. Russia ranks 11th out of 104 cashew export markets of Vietnam, accounting for 1.63% market share.
– Currently, there are about 50 Vietnamese enterprises export seafood to Russia. There are many businesses that have delivered goods to their partners in Russia but have not received the money.
– Tension between Russia – Ukraine will affect Vietnam’s fertilizer market. Russia is a huge NPK fertilizer exporter to Vietnam. The risk of fertilizer prices may continue to increase due to the affected supply.
– Russia’s exclusion from the SWIFT payment system could lead to slower payments. Russian businesses can look to other currencies for payment. Besides SWIFT, there are other payment options such as IBAN, but the coverage is narrower than SWIFT… Businesses will respond and find new payment methods.
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