Phones and components account for 33.1 percent of Vietnam's export turnover to Russia in 2021.

Minimal trade ramifications

Vietnam's trade turnover with Russia reached US $5.5 billion in 2021 (13.8 percent yoy), with exports to Russia reaching US $3.2 billion (13.2 percent yoy) and imports from Russia reaching US $2.3 billion (14.9 percent yoy), according to Vietnam's Customs. As a result, Vietnam will have a trade surplus with Russia of US $0.9 billion in 2021. Phones and components account for 33.1 percent of Vietnam's export turnover to Russia, followed by computers and electronic items (13.3 percent), textiles (10.5 percent), coffee (5.4 percent), and seafood (5.4 percent) (5.1 percent ). Meanwhile, coal and steel are two of Vietnam's key imports from Russia, accounting for 22.9 percent of the country's total imports (21.2 percent).

Meanwhile, trade turnover between Vietnam and Ukraine reached US$720.5m (50.6% yoy), of which exports to Ukraine climbed to US$344.6m (21.0% yoy) and imports from Ukraine reached US$375.8m ( 94.2% yoy). Thus, Vietnam has a trade deficit of US$31.2m with Ukraine in 2021. Vietnam's main exports to Ukraine include phones and components (accounting for 48.8% of Vietnam's export turnover to Ukraine), seafood (8.3%), machinery and equipment (5.4%), footwear of all kinds (4.9%), computers and electronic products (4.8%). Meanwhile, wheat is Vietnam’s main import from Ukraine, with a value of US$81.8m (accounting for 21.8% of Vietnam’s imports from Ukraine).

Because Vietnam's exports to Russia and Ukraine account for only 1.1% of Vietnam's total exports, and Russia and Ukraine are not major export markets for any of Vietnam’s products, Mr. Dinh Quang Hinh, analyst of VNDirect believes that the Russia-Ukraine crisis will have a small direct impact on Vietnam's exports. However, if the Russia-Ukraine conflict persists, the indirect impact on Vietnam's trade will be greater due to slowing demand from the EU and the US. Currently, the US and EU member countries account for about 40% of Vietnam's export market, while Asian countries account for about 48% of the export market.

In addition, the Russia-Ukraine conflict is less likely to disrupt the supply chain of Vietnam's manufacturing industry because Vietnam's imports from these countries account for only 0.8% of Vietnam's total imports (in which the main imports are steel and coal). However, Vietnamese producers may face increased input cost pressure as the prices of basic commodities rise sharply due to the conflict between Russia and Ukraine.

Further delay for Russian-invested energy projects

According to the Ministry of Planning and Investment, as of the end of February 2022, Russia ranked 24th among countries and territories investing in Vietnam, with a total value of US $953 million. Russian investment projects in Vietnam mainly focus on the energy sector.

Mr. Dinh Quang Hinh stated that penalties, such as the blockade of many Russian banks' SWIFT connections, will have an impact on Russian investment initiatives in Vietnam, particularly in the energy industry. According to VNDirect's study, the embargo has put Power Machines (RussiaLong )'s Phu 1 Thermal Power Project (overall capacity of 1,200MW) two years behind schedule. The 340MW Quang Tri gas-fired power project, in which Gazprom (Russia) is a partner, is likewise two years behind schedule. The joint venture Zarubezhneft JSC (Russia) and DEME Concessions (Belgium) signed a memorandum of understanding in April 2021 for the Vinh Phong offshore wind power project (capacity of 1,000MW). Except for the Quang Tri gas power project, Long Phu 1 and Vinh Phong, have been included in the Draft Power Master Plan 8. While Vinh Phong was not yet built, the Long Phu 1 project is falling into "deadlock" because the device has not been installed yet. However, these projects have actually been delayed from previous years, so the new sanctions have little impact on the economy.

In addition, partners Gazprom and Zarubezhneft are also participating in oil and gas exploration projects such as Blocks 129-132 (Nam Con Son basin), the Bao Vang field integrated development project at Blocks 111/04, 112, and 113. However, according to VNDirect’s assessment, these projects are all small in scale, are at the stage of exploration and have not yet been deployed. Therefore, the mining shutdown does not affect the size of the industry much.

Meanwhile, Ukraine invested US $30.0m in 26 projects in Vietnam, which ranked 69th among countries and territories.

In general, in VNDirect’s view, the Russia-Ukraine crisis has little impact on the investment environment and foreign direct investment flows into Vietnam because direct investment from Russia and Ukraine into Vietnam accounts for only 0.4% of total foreign direct investment in Vietnam and because this crisis has a small direct impact on the production supply chain of FDI enterprises in Vietnam.