Phan Minh Thong, general manager of Phuc Sinh, has spent the past few days contacting customers in Russia and Europe to deal with order and transaction delays.
Every year, the company exports about $30 million worth of coffee, pepper and other products to Russia. But when Russia attacked Ukraine last month, followed by Western sanctions, Phuc Sinh’s export orders were suspended.
After some Russian banks were blocked from the SWIFT payment system, orders to Russia saw their value drop by half due to the devaluation of the ruble and delayed transactions.
Thong said his partners in Russia and Europe are facing similar issues due to the sanctions. And in Vietnam, Thong is not alone in facing these difficulties.
Another company that exports fruits and vegetables to Russia also had to suspend orders due to logistical difficulties, according to a representative. Export vouchers to Russia were also refused by banks because Vietnamese banks and their partners use SWIFT.
“Not all international logistics companies have been able to receive goods, while flights to Russia are limited. Orders are delayed and payments are impossible,” the representative said.
Vietnam’s exports to Russia reached about $3.2 billion in trade value and imports about $2.3 billion in 2021, according to customs data.
Major exports to Russia include computers, components, telephones, textiles, coffee, and electrical products.
As for Ukraine, while its trade turnover with Vietnam is less than 1 billion dollars, the country has always been a traditional trading partner in the region. In 2021, the trade turnover between the two countries reached 720.5 million dollars, an increase of 51% compared to 2020. The main exports to Ukraine are, among others, computers and shoes .
Vietnam would suffer impacts on its production, trade, logistics and payments under the sanctions, according to the Euro-American Market Department of the Ministry of Industry and Commerce. Business cooperation with Russia, Ukraine, Belarus and other relevant markets would also be affected.
“This crisis has global and negative impacts, both short and long term for the economy, trade, finance and global supply chains,” the department said.
The first things to be impacted would be the supply of fuel and raw materials, with the crisis being one of the main factors driving up the prices of oil and gas, flour, aluminium, nickel and corn. as major products of Russia and Ukraine.
Payments for commercial contracts with Russia would also be difficult due to Western sanctions, which also caused the devaluation of the rouble. Several Russian exporters have offered to suspend payments for around two to three weeks to see how the situation develops.
Some shipping companies have refused to deliver goods from Vietnam to Russia, while freight costs are rising with new transport delays.
The air travel sanctions have also forced airlines to choose alternative flight routes, increasing costs and burdens on global logistics systems as well as product prices. Several companies said rising transportation costs could leave them without a profit.
The devalued ruble would also hamper Russia’s export capabilities and force its companies to reconsider their strategies.
Vietnam and Russia’s bilateral trade is unlikely to escape negative impacts if the West decides to step up sanctions, the department noted. Companies exporting products to the two countries should be in touch with their import partners regarding payments and deliveries, he warned.
Thong said companies trying to export to Russia should sell their products in other markets instead. The department urged companies to use free trade agreements between Vietnam and other countries to maximize gains and diversify markets.
At a cabinet meeting last month, Prime Minister Pham Minh Chinh led a task force to respond to the impacts of the Russian-Ukrainian conflict.
