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Muslim countries maintain clumsy neutrality on Russian-Ukrainian war | Salaam Footbridge

While Western countries have imposed sanctions on Russia, a Malaysian research institution calls for leniency and other Muslim countries have adopted a precarious neutrality.

Selangor, Malaysia; Dhaka and Dubai: the Russian invasion of neighboring Ukraine has sparked a political divide over the global response, with Western nations imposing sanctions while many Muslim countries, governments and businesses adopt a strained neutrality towards the global superpower.

Malaysia is a good example: its close relations with European, North American and Asian countries, including Japan and South Korea, make it reluctant to breach the agreements of these trading partners. punishments on Russia. However, the Southeast Asian country has not imposed its own sanctions.

Azmi Hassan, Senior Researcher at Nusantara Academy for Strategic Research (NASR) in Selangor, told Salaam Gateway that if Russian companies were subject to non-Malaysian sanctions, the Malaysian government and companies would have “considerable leeway” in deciding whether to impose similar restrictions.

In March, a Russian-registered ship was denied entry into Malaysian ports after the country’s transport ministry confirmed the action was in line with international sanctions. Azmi said that in this case, the country imposed sanctions “if other countries specifically sanction a company or, in this case, a vessel.”

Last year, Russia celebrated 30 years of ties with the Association of Southeast Asian Nations (ASEAN) and adopted a revised version 2021-25 ASEAN-Russia Trade and Investment Cooperation Roadmap. However, Russia’s economic and trade performance with ASEAN has been disappointing, with turnover between the partners peaking at $23 billion in 2014 and falling to $15 billion by 2020.

Singapore regional economists Bank of the Overseas Chinese Banking Corporation (OCBC) said Malaysia’s exports to Russia accounted for just 0.33% of the country’s total shipments in 2021, while its imports of Russian goods were less than 1% during the same period.

Azmi claimed that Russia’s overall trade with Malaysia is worth less than $1 billion, which is not enough to incentivize companies to resist (or promote) compliance with sanctions.

“So far we are not on any side, even though we supported the UN General Assembly resolution a few weeks ago (which condemned the invasion of Russia), but we are neutral, so I don’t see any slowdown in our trade with Russian counterparts,” Azmi said.

The same goes for all Malaysian businesses, whether run by its Muslim Malay majority or (largely) Chinese, Indian and other non-Muslim minorities, with Azmi saying there would be “some impact”, but that it would be minimal rather than drastic.

Bangladesh’s position

Bangladesh has shown a similar reluctance to take sides. Despite unprecedented sanctions against Russia by key Western trading partners, Bangladesh is expected to continue doing business with the superpower.

One of the reasons was Russian support for Bangladesh during the 1971 Liberation War who delivered the country’s independence from Pakistan. Russia is also one of Bangladesh’s main trading partners and largest supplier of wheat, oil and fertilizer and the country has helped develop Bangladesh’s first nuclear power plant at Rooppur, Pabna.

Khondaker Golam Moazzem, Industrial Economist and Research Director of Policy Dialogue CenterBangladesh added ready-to-wear products to Russia, mainly knitwear, fabrics, leather, some agricultural products and some light engineering products.

As with the rest of the world, Moazzem said the war has had an impact on Bangladesh in terms of oil and fertilizer price inflation, as the country now imports these products from alternative sources like Brazil.

This will eventually result in higher electricity, gas and food prices, with Moazzem pointing out that the government faces the possibility of increasing oil and fertilizer subsidies as a cost-cutting measure being given that inflation affected the purchasing power of consumers.

“One solution that Bangladesh can explore is to take out a short-term loan from international banks like the Islamic Development Bank Where world Bank to (help fund) the grants,” Moazzem said.

As for clothing exports to Russia, according to the financial newspaper Business Insider Bangladeshthe country exported goods worth $700 million to Russia in the 2020-21 financial year, of which 90% were ready-to-wear clothes.

The problem now was that the international sanctions imposed by the European Union, the United States, the United Kingdom, Japan and Australia against Russian banks and large companies, including the exclusion of large banks linked to the state of global financial payment network SWIFTprevented the receipt of payments for up to 300 Bangladeshi factories, said Mohiuddin Rubel, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“The government is trying to find an alternative transaction system. They have dialogues with their Russian counterparts, but when it comes out, it is a matter of concern,” he added, indicating that one solution explored was for Bangladesh to use other banks not subject to the SWIFT sanctions.

The country may also consider making transactions through a third country such as China or Iran.

Meanwhile, Russia has expressed interest in importing potatoes from Bangladesh to better secure its food supply, with Rubel saying this could be a potential future market.

However, Moazzem warned that Bangladesh should be careful in establishing new diplomatic and economic relations with Russia and advised the government to monitor its neighbor India‘s trade policies, among others, “to be on the safe side. with Russia and the Western world”.

The position of the GCC

With their multifaceted relations with Moscow and their links with the West, the six Gulf Cooperation Council The GCC states, namely Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates (UAE), have taken a neutral stance. The UAE, that the country WAM state news agency credited with being the biggest Arab investor in Russia and accounting for more than 80% of Arab investment in the superpower, has particularly high stakes in the crisis and has refrained from sanctions.

More than 4,000 Russian companies operate in the United Arab Emirates and several dozen Emirati companies are registered in Moscow, including Mubadala, the sovereign investor of Abu Dhabiwith more than 3 billion dollars of Russian investments.

The UAE is also Russia’s second largest Arab trading partner. In 2021, foreign trade between the two countries reached $4 billion, up from $3.3 billion the previous year, WAM said.

“A lot of Gulf-based Sovereign Wealth Funds have significant exposure to investments in Russia, often in partnership with Russian Direct Investment Fund and have already suffered significant declines in value,” said Kristian Ulrichsen, nonresident principal investigator at the Washington Arab Center.

The Russian Direct Investment Fund has been heavily sanctioned by the West.

Russia’s flagship carrier, Aeroflot, has halted international flights, including to the GCC region, while Dubai’s low-cost carrier, flydubai, has suspended some flights to Russia. However, the United Arab Emirates, AirArabia and Etihad Airways, the second largest airline in the United Arab Emirates, continue to operate flights to Russia.

“Travel restrictions and downward pressure on the Russian currency, as well as individual sanctions and sanctions against Russian banks and companies, could impact the region’s real estate and hospitality sector (CCG). Conversely, the conflict could encourage some financial transfers and attempts to hide assets in the Gulf,” said Karen Young, senior researcher and director of Economics and Energy Program at the Middle East Institute.

The influx of capital into Dubai through Russians seeking safe financial havens has created lucrative opportunities for the property sector. Tabani Real Estate, one of Dubai’s oldest brokerage firms, participated last year in Moscow Real Estate and Overseas Investment Fair and said he was “overwhelmed” by the response received regarding its properties.

Emirati business leader Hussain Sajwani, founder of Property developer in Dubai DAMACalso told CNBC that the United Arab Emirates could benefit as the Russians seek to protect fortunes threatened by sanctions.

On the other hand, the tourism sector is expected to take a hit as the UAE relies heavily on Russian tourists. In 2021, Russia was Dubai’s second-largest source market for tourists, with nearly 440,000 people visiting the city – a 50% increase on 2020 figures, according to government statistics.

“Dubai can reduce tourism from Russia for the time being. With the collapse of the Russian rubleas well as the likely increase in travel costs due to the inflation generated by oil supply, it will be very expensive for Russians to travel and invest abroad,” said Mohanad Alwadiya, CEO of Harbor Real Estate.

Likewise, the invasion has raised concerns about food security in the GCC, said Li-Chen Sim, an assistant professor at Khalifa University in Abu Dhabi.

Among the GCC countries, the United Arab Emirates, Oman and Qatar are heavily dependent on wheat imports from Russia and Ukraine. Between 2015 and 2019, Russia and Ukraine increased their market share from one-third to nearly half of all wheat imported by the UAE, Sim said.

She said while extensive grain storage facilities mean there is no short-term risk of supply shortages in the United Arab Emirates, Saudi Arabia – which has only opened its market to Russian wheat that in 2020 – the disruptive effects on the reliability of supply could cause it to reassess the increase in wheat imports from Russia to compensate for the decline in local production.

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