Russia’s invasion of Ukraine: What will happen to the APEC Forum, where Russia is a member?

In the early hours of Wednesday, February 23, the Russian President Vladimir Putin announced a military operation in Ukrainea, which began the invasion of Ukrainian territory. The consequences occurred the following day, where world leaders condemned the attack.

In Peru, officials disclosed the impacts of this military attack that on its first day left 137 dead, between civilians and Ukrainian soldiers.

The Minister of Economy and Finance, OscarGraham, He pointed out that the war between Ukraine and Russia will have an impact on Peruvian imports, causing a rise in their prices.

Russia and Ukraine represent about 29% of world wheat exports, 19% of world corn supplies and 80% of world sunflower oil exports. Furthermore, Russia is the third largest oil producer in the world and the second exporter.

For his part, the Minister of Foreign Trade and Tourism, Robert Sanchez, He said that the aforementioned conflict will minimally affect Peruvian exports.

Impact on the APEC Forum

Russia is part of Asia Pacific Economic Cooperation Forum (APEC). Along with Russia, this bloc is made up of 20 other economies, including Peru.

APEC represents 60% of world GDP and 50% of global trade, with a market of some 2.85 billion consumers, and aims to establish a free trade area among the 21 member economies (Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Chinese Taipei, Thailand, United States and Vietnam ).

What will happen to this Forum considering that Russia is part of it? In this regard, the former Minister of Foreign Trade and Tourism, Edgar Vasquezexplained to Management.pe that this forum, as its name indicates, is dedicated to the economic cooperation among member countries, so the political military conflict is not involved.

“The first thing is that there would not be a meeting space in this forum to address this matter (the Russian invasion). Nor is the forum a commercial agreement (Free Trade Agreement) so there are no agreements to eliminate tariffs or binding commitments between countries, so there is no direct relationship”, precise.

He specified that the summit of the APEC forum is held every year and even before this summit was complex since at the time the presidents of Russia, China, and the United Statescountries in constant conflict with each other.

“Now the stage will be more tense, but it is not the main stage where the movements and conversations about this situation in Russia and Ukraine will take place”said Vásquez, who is the current director of the CIEN-ADEX Global Economy and Business Research Center.

Thus, in economic terms, he said that the Russian economy is important, but it does not surpass China and the United States. He explained that Peruvian exports to Russia border on $194 million, The main products shipped are lead, agricultural products (grapes, silver, tangerines and mangoes) and aquaculture products (squid and fish fillets).

Exports to Ukraine, he specified, reach $8 million and among the products that are sent are elements of machinery and also agricultural and aquacultural products.

Similarly, he said that joint imports from these countries represent about $800 million. Agricultural fertilizers and machinery parts are imported from Russia, while machinery parts and products from the iron and steel sector are also imported from Ukraine.

Logistics impact

For your part Charles Posadaexecutive director of the Foreign Trade Research and Development Institute of the CCL, agreed that the APEC Forum will not be the point where a solution to a geopolitical issue is sought; and since the creation of the Forum there has been no intersection between economic and political agendas.

“In APEC we don’t talk about countries, we talk about economies and the number of countries that comprise it precisely have a political diversity that To some extent one might wonder how they have managed to get together. Each member has a different political composition and despite knowing each aspect, in economic terms they have been able to find a common ground, which is development through economic and commercial cooperation”, Held.

Thus, considering that the APEC Forum is about economies, he said that the Russian economy is important for this economic bloc and any war -generated by this country or another- can impact within the bloc.

“Any situation of military tension decreases and puts a strain on what is commercial current, especially because it is it can affect logistics, that is, roads, ports are closed or certain operations are limiteds, then somehow it has an impact”, said.

He stressed that Russia is an important supplier of hydrocarbons and oil; and is an important supplier of wheat in Peru. “Foreign trade between the two countries is not very large, but this recent invasion may put wheat imports at risk“, Held.

He specified that if Russia receives economic sanctions, this could interrupt the volumes that are exported today and cut the supply chains of everything that wheat requires, including the food chains of other industries.

In this context, he said that Russian wheat is marketed in the APEC economic bloc and now other suppliers must be sought, which will result in higher prices worldwide. “Wheat is widely used to make cereals, flour, bread and this is family basketthen it is something important to consider in the case of Peru”, Held.

The data

• The country hosting the APEC Forum rotates. Thailand will assume the presidency this year 2022, the United States will host it in 2023 and Peru will do the same in 2024.