Providing Asian investment advisory for non-sanctioned Eurasian Economic Union investors since 2011.
By Emil Avdaliani
Thailand holds a strategic position in Southeast Asia for Russia, acting as a gateway to the broader ASEAN region. It’s notable for being second in the region in economic strength. Recognizing this, Russia inaugurated a consulate in Phuket in July 2023, underscoring its keen interest in bolstering trade relations with the country, which is also popular with Russian tourists, some of whom establish small businesses.
Thailand, along with other Southeast Asian nations, has refrained from imposing sanctions on Russia, acknowledging its role as a crucial trade partner. Furthermore, Russia plays a central role in Thailand’s foreign policy, which is increasingly focused on diversifying its international relationships.
However, despite these dynamics, the bilateral trade between Russia and Thailand has experienced a substantial decline which has not been caused solely by the conflict in Ukraine but rather illustrated the overall challenges – distance and lack of viable trade routes – Russia is facing in redirecting its trade focus towards Asia.
In 2022, the trade volume between Russia and Thailand reached US$2 billion, marking a decrease of 9% from the previous year. This decline was largely attributed to technical challenges, including disruptions in logistics and payment systems. In contrast, the trade turnover in 2021 stood at US$2.3 billion, showing a 29% increase from the previous year. For perspective, in 2014, the bilateral trade was valued at US$3.9 billion.
Thai and Russian officials have projected the trade turnover potential with Russia to be around US$10 billion, while other assessments suggest that Russia could potentially export goods worth up to US$20 billion to Thailand. However, these targets appear unattainable under the current geopolitical constraints.
Although Russia’s share in Thailand’s total trade turnover is no more than 0.5 percent, the country is reliant on imports of Russian metals, rubber, chemical products, petroleum products and fertilizers. Over the past 2-3 years, there is a notable increase in trade in agricultural products. Russia’s main exports are metals (40%), chemical products (23%), mineral fertilizers and precious stones (10% each). Other products are ferrous metals, aluminum, lime, cement and plastering materials, rubber and caoutchouc, cardboard and related items.
The main products Thailand exports to Russia are vehicles, tyres, canned and processed fruits, equipment and mechanical parts, refined oil, canned seafood, processed rubber, rice and other consumables. Ukraine conflict has heavily impacted the Thai exports to Russia which, overall, decreased 43.3% to US$585.44 million in 2022. Exports of heavy vehicles were the most impacted, falling by 74.01%.
30 percent of all Thai exports to Russia are made up of high-value items including automobiles, machinery, and components, which have long been Thailand’s top export to the Russian market.
Other Thai exports to Russia, however, had a significant growth in 2022. Exports of refined oil rose by 62.77%, those of canned and processed seafood by 61.14%, and those of food seasoning by 41.33% as Thai and Asian cuisines grow in popularity in Russia. Exports of rice rose by 372.94%.
The expansion of Russian rice imports from Thailand is consistent with the latter’s total increase in rice consumption, which from January to August this year increased by 11.91% in comparison with the corresponding period from 2022 and reached 5.29 million metric tons of rice.
Western sanctions imposed on Russia complicate the payment systems between Russia and Thailand and both sides regularly discuss the possibility of using the cards of the Russian payment system Mir in Thailand. However, achieving this has yet to be fully achieved, although Russia’s Tinkoff bank has some solutions.
Concerning mutual investments, Russia and Thailand regularly discuss practical ways to further expand trade, economic and investment cooperation. For instance, in May dozens of Thai and Russian companies took part in the business dialogue “Russia’s Far East and Arctic – opening up new prospects and opportunities,” which was held in Bangkok.
One of the channels for Russian investments into Thailand is the buying of real estate. Russians were in second place (after the Chinese) among foreigners in terms of the number of transactions, as well as the volume of investments in real estate in residential complexes in Thailand at the end of 2022. In 2022 Russians purchased 813 apartments in residential complexes in Thailand for about US$75.5 million.
Russia and Thailand are especially interested in promoting tourism industry. In 2022 both sides restored direct regular flights with Aeroflot and charter flights with tour operators Pegasus Touristik. From January to June 2023, around 767,000 Russians visited Thailand reaching close to pr-covid levels. Before the pandemic, about 1.2 million Russian tourists per year spent their holidays in Thailand. In addition, the Thai cabinet adopted a proposal in early October to extend the 30-day visa exemption to Russian visitors who are staying in the country for less than 90 days.
Overall, Russian investments into Thailand remain small. For example, in 2015 investments of Thai companies in Russia amount to more than US$500,000, while the volume of Russian manufacturing investments in Thailand is about US$300,000, although this can be expected to rapidly develop.
Thailand’s investments in Russia are mainly focused on agro-industry where “CP Foods” remains the largest Thai investor in the Russian economy. Presently, Thai businesses are interested in the Russian Far East, with Khabarovsk and Vladivostok featuring as most attractive. Given the ongoing conflict in Ukraine and resulting shifts in the Eurasian connectivity with Russia paying special attention to the trade with Asia, Thailand’s interests toward Vladivostok grow as it will allow the Asian country to build seaborn links with Russia.
From its side Thailand is interested in Russia’s participation in the Eastern Economic Corridor project which provides better connectivity between Thailand and its neighbours, including direct rail to China.
During 2018-19, there was a significant increase in Russian capital flowing into Thailand, with some US$689 million channelled into the country. However the covid pandemic and Western sanctions have hampered Russian investments.
That said, with Thailand being part of ASEAN, it has free trade with other ASEAN members, which include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Vietnam.
That means goods produced in Thailand can be exported to other ASEAN nations, making the country an ideal central ASEAN hub.
ASEAN also has Free Trade Agreements with China and India.
Russia’s relations with the Thailand are generally trade-focused, however, progress has been made to improve the current situation. As connectivity improves and the Russian diaspora in Thailand becomes more familiar with the environment, Russian trade and investment into the country should increase over coming years.
Emil Avdaliani is a professor of international relations at European University in Tbilisi, Georgia, and a scholar of silk roads.
About Us
Dezan Shira & Associates assist foreign investors into Thailand and the ASEAN countries, and have an office in Bangkok. Please contact us at asean@dezshira.com or view our related Doing Business Guides below.
During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email russia@dezshira.com or visit www.dezshira.com
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