Eastern Link: ASEAN countries want to sign long-term contracts with Russia

The crisis in the Strait of Hormuz has increased the interest of Southeast Asian countries in long-term energy cooperation with Russia, Lubarto Sartoyo, president of the Alliance of Business Structures and Entrepreneurs of the Southeast Asian Countries, told Izvestia. According to him, this applies in particular to Indonesia, Malaysia, Vietnam, Laos and Thailand. It is possible that such contracts are more profitable than spot purchases: for example, Jakarta could save hundreds of millions of dollars a year. However, Western sanctions can disrupt the plans, especially given that the United States has not extended the relief for purchases of Russian raw materials. In addition, there are also OPEC+ quotas — they limit the export of major oil suppliers to the world market.

Long-term cooperation with ASEAN countries

Almost a month and a half of the crisis in the Strait of Hormuz has shown how vulnerable the countries of Southeast Asia (Southeast Asia) remain in the face of supply disruptions. Lubarto Sartoyo, President of the Alliance of Business Structures and Entrepreneurs of the Southeast Asian Countries, who recently visited Moscow, told Izvestia that the interest of ASEAN countries in long-term energy cooperation with Russia has increased significantly in the current crisis.

According to him, this is most noticeable in Indonesia, Malaysia, Vietnam, Laos and Thailand. It is worth noting that Russia is a dialogue partner of ASEAN, which unites 10 states (in addition to the above, Brunei Darussalam, Cambodia, Myanmar, Singapore and the Philippines).

— Of course, this is a long-term story. We need to start with nuclear energy — with large plants, with small plants. If we are talking about the oil and gas side, then yes, too," he said, answering a question about whether the countries of the region are interested in concluding long—term agreements in the energy sector.

According to the International Energy Agency (IEA), more than half of ASEAN's crude oil imports come from the Middle East, primarily the UAE, Saudi Arabia and Kuwait. At the same time, the IEA's overall forecast for 2026 remains disappointing. The agency has worsened its assessment of global oil demand as the war in the Middle East, supply disruptions through Hormuz and a spike in prices began to put pressure on consumption.

Previously, the IEA expected demand to grow by 640,000 barrels per day, but now it predicts a decrease of 80,000 barrels. High prices and a shortage of supply lead to the so-called destruction of demand, especially in Asia and the Middle East. At the same time, the price per barrel has so far stabilized around $100, while physical shipments of oil for immediate delivery to Europe rose to almost $150 per barrel on April 13.

Exchange taste: Russia increases trade in national currencies with ASEAN countries

Instead of the dollar, Moscow is also actively using the yuan, which is increasing its weight in Southeast Asia.

This results in serious costs for the countries of the region. Vietnam on April 12 extended the abolition of part of fuel taxes until the end of June.: This measure costs the budget about 7.2 trillion VND per month ($273 million). Indonesia estimated a total of additional energy subsidy costs of up to 100 trillion rupees ($5.9 billion) over the already pledged 381.3 trillion rupees ($22.4–22.5 billion). Thailand is preparing a new support package, and the deficit of its fuel fund increased to 59.4 billion baht ($1.85 billion) by April 10.

The media previously reported that several Asian buyers, including Vietnam, Thailand, the Philippines and Indonesia, had lined up for Russian oil. However, the existing American restrictions allowed the purchase of Russian raw materials only in the short-term transactions mode: it was a 30-day license issued on March 12 and expired on April 11.

At the same time, Indonesian Leader Prabowo Subianto met with Russian President Vladimir Putin in Moscow on April 13. According to media reports, the parties discussed, among other things, the potential purchase of Russian oil. It is possible that we could also talk about long-term contracts.

The benefits of long-term contracts

The exceptions to the sanctions gave countries the opportunity to purchase Russian oil under short-term contracts and the spot market. The latter makes it possible to purchase raw materials often at lower prices if they temporarily decrease due to oversupply or other factors, Sergei Tolkachev, professor at the Financial University under the Government of the Russian Federation, explained to Izvestia. However, long-term agreements may turn out to be more profitable in the long run, as they ensure a guaranteed flow of oil.

— Confidence in stable supplies and prices stimulates investments in national energy infrastructure, oil refining and other related industries. The predictability of prices and supply volumes also allows countries to plan their economic development more effectively, taking into account the cost and availability of energy resources, the expert emphasized.

According to him, the ASEAN countries, seeking to meet their energy needs and reduce dependence on traditional suppliers, will look for new reliable partners. Russia, which has significant hydrocarbon reserves and a developing supply infrastructure, may become one of them.

Moreover, due to shortages and disruptions around Hormuz, Russian oil in Asia was sold not at a discount, but at a premium to Brent: according to media reports, suppliers were paid an additional $8-10 per barrel. In such circumstances, long-term agreements with the Russian Federation would allow the countries of the region to reduce their dependence on market turbulence and obtain a more predictable pricing formula.

Indonesia is an example. According to media reports, in March, oil imports from Saudi Arabia to the country decreased to 23 thousand barrels per day against 104 thousand in February. If we assume that the dropped volume — about 81,000 barrels per day — would have been closed under a long-term contract without the current crisis premium of $8-10 to Brent, the potential savings could amount to about $240-300 million per year.

However, Russia's ability to dramatically increase such supplies is not unlimited. Although Russia remains one of the world's largest oil exporters, it is bound by obligations under the OPEC+ agreement, where agreed production parameters apply. At the same time, in April, it was decided to increase the limits for May by 206 thousand barrels per day. For Russia, the permitted oil production level is 9.699 million barrels per day.

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The transition to long-term contracts with Russia in ASEAN is also hampered by a lack of strategic planning, Pavel Maryshev, a member of the expert council at the Russian Gas Society, believes. Such agreements require a clear energy balance for the years ahead, an audit of future needs and full-fledged policy documents, and some countries in the region do not yet have this expertise.

— Therefore, they largely live for today and continue to buy oil and LNG on the spot. Moreover, now the market is gradually becoming a buyer's market, which means that importers can demand more harshly both in terms of price and discount," the expert noted.

US sanctions against Russian oil remain an additional deterrent. In such circumstances, it is easier for ASEAN countries to work through short-term deals than to conclude politically sensitive contracts for years ahead. However, the crisis in the Middle East has demonstrated that such an energy supply chain can be more fragile.

What can ASEAN countries offer Russia?

Meanwhile, Russia is able to offer ASEAN countries not only oil, but also nuclear projects. At the end of March, Moscow and Hanoi signed an intergovernmental agreement on the construction of the Ninh Thuan-1 nuclear power plant. In 2025, an intergovernmental agreement was signed with Myanmar on the construction of a low-power nuclear power plant. In addition, Rosatom is also negotiating with other countries in the region — Malaysia, Indonesia and the Philippines.

According to Tolkachev, Moscow also has expertise in the design and construction of large hydroelectric power plants, which may be in demand in countries with appropriate natural conditions.

In addition, Russia remains a major exporter of coal and can cover some of the needs of the region's states, where it still plays a significant role in generating electricity. Russian companies are also able to supply equipment and engineering solutions for the oil and gas industry, including offshore production, the development of hard-to-recover reserves, as well as the construction and modernization of refineries.

At the same time, energy for the ASEAN countries is becoming a driver for related areas of cooperation.

— The energy sector seems to be pushing other directions. This is food security, because Russia has the resources for fertilizers, technologies, food supplies, and so on. Therefore, there is a very large amount of work here," Sartoyo said.

In March, fertilizers rose in price by about 26% due to the Middle East crisis, and Reuters reported an increase in urea prices by about $80 per 1 ton.

— In response, Southeast Asian countries can offer Russia access to fast-growing markets, joint infrastructure projects, and participation in on-site refining and energy. This is especially important in an environment where logistics and geopolitics directly affect the sustainability of export flows," said Vladislav Airapetov, President and Chairman of the Management Board of the MRT Group of Companies.

In general, cooperation with ASEAN is not a short—term response to the crisis, but a strategic turn to a region with growing energy demand. And in this sense, those partnerships that are built not only on supplies, but also on long-term integration into the energy systems of the region benefit, the expert concluded.