DailySA: Asia braces for inflation hit from Russia/Ukraine conflict – Forward Observer

DailySA: Asia braces for inflation hit from Russia/Ukraine conflict

Good morning. Here’s your Daily Situational Awareness for Monday, 28 February 2022. You can receive this daily briefing by signing up at https://forwardobserver.com/daily-sa

TODAY’S BRIEFING:

  • Asia braces for inflation hit from Russia/Ukraine conflict
  • China’s Xi calls for Russia to negotiate with Ukraine
  • Belarus wants Russian nukes
  • U.S. Cyber advisory for malware used in Ukraine
  • USDA forecasts 2022 food price increase
  • Hazards Warning

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SITUATIONAL AWARENESS

ASIA BRACES FOR INFLATION HIT FROM RUSSIA/UKRAINE CONFLICT: Asian countries are preparing for significant economic impacts from the Russia/Ukraine conflict. The conflict is expected to drive energy prices higher across Asia and create supply chain disruptions of critical commodities. Andreas Harsano of Human Rights Watch in Jakarta stated, “If the Ukraine invasion and sanctions against Russia get out of control, they could put upward pressure on Asian currencies, disrupting trade and supplies in the market. If the disruption makes basic food goods, especially rice, cooking oil, sugar and milk disappear from the shelves, then we could expect chaos.” Analysts in China and Indonesia are now warning of upstream inflationary pressures that will impact ordinary citizens’ lives. (Analyst Comment: While much of the U.S. is distracted by the events on the ground in Ukraine, expect the price of gas and heating oil to increase over the next several weeks. Russia is the world’s second largest exporter of natural gas and third largest exporter of petroleum products. The pressure on the world’s energy market will likely cascade into other areas of the supply chain, including food and consumer goods, resulting in significantly higher inflation in the U.S. – M.M.)

CHINA’S XI CALLS FOR RUSSIA TO NEGOTIATE WITH UKRAINE: In a Friday telephone call between China’s Xi Jinping and Russian President Vladimir Putin, Xi acknowledged the security concerns of Russia that drove its invasion of Ukraine but called for negotiations to settle the conflict between the two countries. According to a transcript of the call read over China’s television news channel CCTV, Putin told Xi, “The United States and NATO have long ignored Russia’s reasonable security concerns, repeatedly reneged on their commitments, and continued to advance military deployment eastward, challenging Russia’s strategic bottom line.” Putin added that Russia is willing to conduct high-level negotiations with Ukraine.” (AC: China is walking a fine diplomatic line with regards to Russia’s invasion of Ukraine. Xi’s statement is an attempt to mitigate any early economic sanctions on China due to its loose alliance with Russia. If the West bans Russia from the SWIFT international finance network, expect China to offer its CIPs hard currency exchange network as an alternative. This may result in attempts by the West to sanction China, however, it is doubtful such attempts would succeed. – M.M.)

BELARUS WANTS RUSSIAN NUKES: The Belarussian government passed a constitutional referendum removing its non-nuclear status. President Lukashenko contends that NATO aggression requires Russia to relocate nuclear missiles to Belarus. The Belarussian military may supplement Russian forces in a renewed push toward Kyiv. Russia continues to use Belarus for Iskander-M missile launches against Ukraine’s strategic military infrastructure. Russia claims its nuclear posture increased due to provocative statements and actions from Western nations. (AC: Belarus’ demands come as conflict negotiations between Ukraine and Russia begin. Russia believes the Belarussian forces are an option due to Union State and Collective Security Treaty Organization [CSTO] commitments. Russia is likely to increase its threats of nuclear engagement as its war effort inside Ukraine stalls. Expect renewed flights by Boeing WC-135 “nuke sniffer” aircraft in Eastern Europe to investigate Russia’s nuclear force deployments. Belarus’ involvement in Ukraine is likely to increase materiel and training support to Ukrainian forces from NATO members. – D.M.)

U.S. CYBER ADVISORY FOR MALWARE USED IN UKRAINE: The Cybersecurity Infrastructure Security Agency (CISA) and Federal Bureau of Investigations (FBI) issued a joint cyber advisory covering the malware used during the Russian invasion of Ukraine. The advisory urges immediate adoption of cybersecurity measures to mitigate against WhisperGate and HermeticWiper malware. Agencies state that there are “no specific or credible cyber threats to the U.S. homeland at this time”; however, imposing stricter sanctions might bring about a Russian cyber response. (AC: The federal government is continuing its public release and cataloging of known cyberthreats and vulnerabilities to compensate for the lack of authority and access in privately controlled critical infrastructure. While cyber leaders are doubtful about a large-scale cyberattack against U.S. critical infrastructure, there is concern that Russian proxy groups will use ransomware tactics to exacerbate existing problems, such as rising oil and wheat prices. – D.F.)

USDA FORECASTS 2022 FOOD PRICE INCREASE: The United States Department of Agriculture (USDA) has increased its consumer food price forecast. Food price increase estimates due to inflation ranged between 2-5%. Estimate adjustments were based on final numbers from last month. Consumer prices from restaurants are expected to see the highest rise. (AC: USDA estimates are not including recent geopolitical effects towards increasing prices. Officials highlight that it’s still too early in the crisis to provide realistic estimates for domestic increases; however, there is concern that alternative grain suppliers cannot produce enough capacity. Domestic wheat conditions continue to degrade, with 73% of U.S. production in drought conditions. – D.F.

HAZARDS/WX

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