Latest News

Singapore Foreign Minister warns that Asia is facing a crisis due to the disruption in the Middle East

Singapore's Foreign Minister warned on Monday that the war against Iran could send Asian economies into a crisis. This is a "stark warning" in a region which is highly exposed to disruptions of Middle East energy supply.

Vivian Balakrishnan said that the 'Closure of the Strait of Hormuz' is a crisis in Asia.

In an hour-long interview, he raised questions on the legality and necessity of the U.S./Israeli war against Iran, which is now in its fourth week. He said that the "entire world economy" has been held hostage by a conflict, which could lead to a financial crises.

The war has closed the Strait of Hormuz, through which 20% of all oil and gas liquefied flows. This has pushed up oil prices, and raised fears of another spike in global inflation.

Balakrishnan stated that while the United States is now a net exporter of oil, the industrialized economies in Asia are?more dependent on crude oil imported from the Middle East.

Most vulnerable to the Hormuz disruption is Asia, which is the largest oil-importing region. Nearly 60% of Asia's crude and petrochemical feedstock comes from?the Middle East. This exposure has caused countries such as China to stop refined fuel exports. Many petrochemicals and refineries have also scaled back their operations or declared force majeure.

Reporting shows that around 80% of oil shipped through Strait of Hormuz is headed to Asian buyers.

Balakrishnan warned that much would depend on whether U.S. President Donald Trump followed through with his warning to destroy Iranian power plants if the Strait of Hormuz was not open for all shipping by around 2345 GMT on Monday. He said that a lot would depend on if U.S. president Donald Trump followed through with his threat to destroy Iranian nuclear power plants if the Strait of Hormuz wasn't open to all ships by 2345 GMT on Monday. Iran, for its part, said that it would 'attack Israel’s power plants as well as plants supplying U.S. base in the Gulf. If you do indeed get tit for tat destruction, you will not only be dealing with an immediate blocking of the straits but also scarring the energy infrastructure in the Middle East, which means that energy exports from this region will be reduced over a longer period of time," Balakrishnan warned. He cautioned that it would lead to higher oil and gasoline prices as well as increased inflation.

Balakrishnan says it's too early to say if this crisis will reach the same level as the Asian Financial Crisis of 1997-1998, which plunged many countries in Asia into recession. This then spread to the world economy. He said that Singapore has been dusting off its contingency plans in order to not only weather this storm, but also look for new opportunities. Singapore's planning scenarios are focused on the next 18-hour period, the next three months and the next three years. But the country is also looking to capitalize on its strengths, such as fiscal conservatism, international collaboration and adapting to global supply chain changes, according to the official.

Balakrishnan stated that "in the current state of the globe, a little predictability, a little'safety' will be able to brighten up an otherwise dark, unstable world."

He said that countries in Asia must accelerate their efforts to promote renewable energy. They should also upgrade digital infrastructure and update power grids. And retrain their workforce, while keeping the government's coffers topped up and preventing a run on the currencies or economies of the country.

SURPRISED by the outbreak of war

Balakrishnan expressed disappointment that the talks between Iran and the United States failed.

"I'll admit that I was shocked by the outbreak of hostilities. I did not think it necessary. "I don't believe it is helpful and there are doubts about the legality even now."

Singapore has been a U.S. security and investment partner for many years. This includes extensive military training and support, as well as intelligence sharing and logistical support.

Singapore also has a strong trade relationship with China. Balakrishnan stated that it was not in Singapore's best interest to be forced into a choice.

He said: "Singapore will need to say no from time to time to the United States and China. But it is important to be clear that when we do, it's done not at the request of either but after careful calculation of our long-term interests." Reporting by Mark Bendeich and Xinghui Kok; Writing by Josh Smith, Editing by Saad Saideed

(source: Reuters)