Russia's Retaliatory Financial Measures Likely to Deal Blow to S. Korean Businesses | Be Korea-savvy

Russia’s Retaliatory Financial Measures Likely to Deal Blow to S. Korean Businesses


This photo, taken Feb. 28, 2022, shows a bank official sorting Russian ruble-denominated bank notes. (Yonhap)

This photo, taken Feb. 28, 2022, shows a bank official sorting Russian ruble-denominated bank notes. (Yonhap)

SEOUL, March 8 (Korea Bizwire)South Korean companies with business ties with Russia will likely be hit by Moscow’s retaliatory moves to allow Russian companies to make payments to foreign creditors in the Russian currency.

Moscow announced a list of a few dozens of “unfriendly” nations on Monday, including South Korea, the United States, Switzerland, Japan and Taiwan, which imposed or joined the international sanctions against Russia over its invasion of Ukraine.

The Russian government said all business deals with companies from the listed nations should be approved by it, and allowed its companies and citizens to pay foreign creditors from the list of countries in ruble, which has plummeted since Russia’s unprovoked attack against Ukraine late last month.

The measures are seen by some as an indication that there are enhanced risks of the Russian government’s defaulting on its foreign debts.

The ruble plummeted to a record low against the U.S. dollar Monday, trading at 155 rubles per US$1. It has lost almost 90 percent of its value against the greenback since the start of this year.

Moscow’s latest move is feared to cause additional financial damage to South Korean businesses with exposure to Russia, which have already been hurting from unfavorable exchange rates.

“Given the fact that the ruble’s value nosedived and seems likely to plunge further, Russia’s measures, while retaliatory, also signal the country is near defaulting on its debts,” said Sung Tae-yoon, an economics professor from Yonsei University in Seoul.

“Businesses with ties to Russia are exposed to default risk,” he said.

Global ratings agencies, including Moody’s, Fitch and S&P, have recently downgraded Russia’s credit ratings deep into junk territory on intensified financial sanctions against Russia and growing default risk.

“We need to receive outstanding payments in U.S. dollars. If the payment is made in rubles, losses seem inevitable,” one industry source said.

A notice, saying, "The transactions of KINDEX Russia MSCI ETF, the only Russian exchange-traded fund listed on the South Korean bourse (ETF), will be suspended starting March 7, 2022, to protect investors," is posted on the homepage of its operator, Korea Investment Management Co., amid the plunge in the Russian stock market. (Yonhap)

A notice, saying, “The transactions of KINDEX Russia MSCI ETF, the only Russian exchange-traded fund listed on the South Korean bourse (ETF), will be suspended starting March 7, 2022, to protect investors,” is posted on the homepage of its operator, Korea Investment Management Co., amid the plunge in the Russian stock market. (Yonhap)

Samsung Electronics Co., which has been operating in Russia for nearly 30 years, temporarily suspended product shipments to the country due to major disruptions in global logistics over the geopolitical unrest in the region and risk over exchange rates.

Global shipping companies, including Maersk, have halted most deliveries to Russia following a slew of Western sanctions against Russia.

Samsung has a TV factory in Kaluga, southwest of Moscow. It is also the biggest mobile phone vendor in the country, taking up around 26 percent of the market.

LG Electronics Inc. operates a plant in Ruza, some 100 kilometers west of Moscow, manufacturing home appliances and electronics with more than a thousand employees. The company, however, does not export much to Russia and relies on local production.

Shipbuilders, carmakers and airlines are also expected to suffer or are already suffering from foreign exchange losses in trade with their Russian counterparts.

For shipbuilders, such losses seem unavoidable as most of their orders are heavy tail contracts where a buyer makes a larger payment when a ship is delivered.

The country’s three major shipbuilders — Korea Shipbuilding & Offshore Engineering Co. (KSOE), Daewoo Shipbuilding & Marine Engineering Co., and Samsung Heavy Industries Co. — have received orders worth over 7 trillion won ($5.6 billion) since 2020 to build seven liquefied natural gas carriers and supply equipment to a Russian shipyard.

Carmakers and auto parts companies operating in Russia are already suffering hefty foreign exchange losses as local clients make payments in ruble.

Airlines are believed to suffer less compared to shipbuilders and automakers as they have mainly served the Incheon-Moscow route with limited flights amid the extended COVID-19 pandemic.

Currently, flights to the Russian capital city are suspended since the invasion, which sparked sweeping sanctions from governments around the world.

(Yonhap)

One thought on “Russia’s Retaliatory Financial Measures Likely to Deal Blow to S. Korean Businesses

  1. samir sardana

    EU sanctions will not work now – unless EU sanctions Chinese and other companies,who are trading with PRC.

    That is the NEXT LEVEL of the sanctions

    That is the CRUX and the TEST.If Chinese companies are sanctioned – then Emperor Xi ,will take note !

    As of today,the Russia sanctions are pushing up prices in the market and thus BUILDING THE CASE FOR CHINESE TO BUY FROM RUSSIA AS 60-70% OF MARKET RATES – AS A WAY TO REDUCE COSTS and also get an edge in the markets, as the competitors of Chinese companies,are buying the materials, at market rates.

    There is no need for SWIFT or CIPS as PRC and Russia can do BARTER TRADES – as barter is the best way to bypass SWIFT and sanctions.

    In fact,Russian companies can get equity swaps in Chinese rare earths and Chinese can take equity in Nickel,Coal,Steel and Oil and Gas in Russia

    And then,Russia can choke the rare earth exports to US and EU – as a sanction response by Russia !

    The US has banned Russian Oil and Gas

    What is the impact of this ban ?

    It will push up NYMEX crude -unless Iranian crude flows (which will not as they are in the Russia/China camp)

    WILL THE SAUDIS PUMP MORE ? IN LIGHT OF BIDEN VIEWS ON MBS AND THE KHASOGGI DISASTER !

    What is the impact of this OIL SPIKE,on PRC ?

    It will push PRC to buy Russian discounted Oil

    Russia needs only the Marginal Cost of Oil to be paid cash down – which will be 15% -20% of Oil prices, and the rest the Chinese can pay on barter or CIPS mode.

    So long as there is food,oil and gas for Russians and incomes – Putin is safe.So manufacturing should keep rolling and PRC should keep buying

    If there is an equity swap between Russian and PRC companies to make Russian mineral and Oil – Chinese owned in part – then that will insulate Russia from all UN Sanctions and allow use of SWIFT and CIPS – legally – with no risk of EU sanctions !

    EU cannot sanction PRC.dindooohindoo

    If all the above goes as per Putin plan – he will seal off NORD 1 – as once spring comes, EU might stop buying Russian Gas – in any case,and so Putin might give a SHOCK to EU.- to push UP LNG rates – and then,if some disaster happens in the Persian Gulf or Qatar …..

    Oil at 130

    Means that Edible oils will blow up

    No wheat from UKR and Russia = disaster

    No Gas = No Urea

    No Russian fertilisers

    Food price spike and Food shortages

    Which is part of the plan !

    COVID MASK + FOOD MASK = BREATH LESS + TALK LESS AND EAT LESS !

    The best way to reduce carbon is to STOP eating food,and living off supplements and capsules

    That time has come !

    Reply

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