Tougher sanctions on Russia put S.Korean exporters on high alert

As the US and its allies are toughening up sanctions against Russia, South Korean exporters of smartphones, home appliances to automobiles are raising their alert for the impact of the international pressures against the country's 10th-largest trading partner.

In particular, South Korea's top exporters of Samsung, LG to Hyundai are keeping a close watch on whether South Korea will be joining other US allies in the export control package against Russia, which have so far received support from other major Asian countries such as Singapore and Japan.

"If the tensions between the US and Russia escalate into an all-out war, South Korea will have no choice but to join in the export control measures against Russia," Yonhap news quoted a foreign ministry official as saying in a media briefing on Thursday.

He said the South Korean government is in close discussions with the US and other allies on how to respond to the heightened tensions in Ukraine, after Russia deployed troops across the Ukrainian border. 

The new sanctions on Russia, announced on Tuesday, include cutting off a key natural gas pipeline to Russia and blocking global financing to two Russian banks and three wealthy Russian families. The announcement pummeled global financial markets on Tuesday, sending oil prices sharply higher.

Further, Korean exporters are concerned whether the US-led sanctions will result in cutting off Russia's access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global financial system used in over 200 countries and territories.

Without access to the SWIFT, Russia will be unable to settle most of its trade.

Samsung Electronics Co. and LG Electronics Inc. take top spots in Russia's major home appliances market. In the smartphone segment, Samsung is the No. 1 brand in Russia with a market share of 30% in 2021.

By industry, cars and car parts make up 40.6% of South Korea's exports to Russia. 

Apart from exports, their local operations in Russia and Ukraine will also be affected by international sanctions against the country.

Hyundai Motor and Kia Corp. of the Hyundai Motor Group operate plants in St. Petersburg in Russia. In 2020, the automotive group acquired a General Motors factory in the port city on the Baltic Sea. 

POSCO International Co. has operated a grain export terminal with an annual capacity of 2.5 million tons in Ukraine on the Black Sea coast. It recently ordered all of its eight full-time employees to evacuate and return to South Korea, or move to nearby countries. 

Although their evacuation does not mean the immediate suspension of its business there, POSCO said it has been cautious about making new investments in Ukraine.

Hyundai Corporation has put on hold its bid for an $18 billion high-speed train deal in Ukraine since it was unable to carry out a feasibility study on the project. The Korean trading company was considered a frontrunner for the project.

Write to Jeong-Min Nam at peux@hankyung.com
Yeonhee Kim edited this article