Government: "Preparing for Russia-Ukraine Conflict... Introducing Alternative Supplies in Case of Supply Disruptions"

'Industrial Security TF' Convened to Discuss Countermeasures

Park Jin-gyu, Vice Minister of the Ministry of Trade, Industry and Energy, is delivering a congratulatory speech at the 2022 Korea Green Mobility Awards hosted by Asia Economy at Lotte Hotel in Jung-gu, Seoul on the 26th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Sejong=Reporter Dongwoo Lee] The government announced that it will secure quantities of energy sources such as gas, crude oil, and thermal coal in advance to prepare for the armed conflict surrounding Russia and Ukraine, and will take timely measures such as introducing alternative supplies in case of supply disruptions.

Although short-term economic shocks are expected to be limited due to sufficient stockpiles and reserves, there are concerns that energy prices such as oil and natural gas could rise if Russia reduces supply, such as by halting gas imports to the EU.

On the 10th, the Ministry of Trade, Industry and Energy held the 19th Industrial Security Task Force (TF) meeting at the Korea Trade Insurance Corporation to discuss these matters.

The meeting was chaired by Park Jin-gyu, the first vice minister of the Ministry of Trade, Industry and Energy, and attended by major industry associations from sectors such as semiconductors, shipbuilding, and automobiles, public energy and resource institutions, the Korea Chamber of Commerce and Industry, KOTRA, and the Korea Institute for Industrial Economics and Trade. The Korea International Trade Association and the Korea Trade Insurance Corporation also participated to conduct in-depth discussions on export and financial sanctions, and logistics impacts.

Experts emphasized that while the impact of the Ukraine crisis on the real economy remains limited, preparations must be made for key risks such as potential export and financial sanctions against Russia, and disruptions to industrial and energy supply chains if the situation prolongs.

The automobile industry stated, "Although the proportion of Russia and Ukraine in total automobile exports is not high, if the situation worsens, the profitability of companies operating locally will inevitably deteriorate," and requested government support. The shipbuilding industry also expressed concerns, saying, "If U.S. financial sanctions expand to halt payments, there is a possibility of disruptions in projects already ordered from Russia."

Energy public enterprises forecast that if the conflict intensifies, concerns about energy prices and supply instability originating from Europe will spread. They particularly emphasized that if crude oil and liquefied natural gas (LNG) prices rise, domestic electricity and gas rates will inevitably increase due to fuel cost linkage.

In response, the Ministry of Trade, Industry and Energy stated, it will do its utmost to minimize damage such as export declines and worsening management of local companies if the situation deteriorates.

Regarding supply chains, it explained that most imported items from Russia and Ukraine can be replaced with alternative sources, so there have been no supply anomalies so far. However, to prepare for possible supply disruptions, it plans to review domestic supply possibilities focusing on some highly dependent items and expand inventories in cooperation with the industry. It also plans to focus on supply chain stability by utilizing specialized institutions such as the 'Global Supply Chain Analysis Center,' which detects and responds to real economy crises in Korea.

Energy supply and demand also raised concerns that if Russia halts gas imports to the EU and supply decreases, gas prices will rise, and instability in crude oil and coal due to a balloon effect will increase. Accordingly, the government has set a policy to secure quantities of energy sources such as gas, crude oil, and thermal coal in advance and to introduce alternative supplies in case of supply disruptions. The Ministry of Trade, Industry and Energy is also closely monitoring international oil prices and is reviewing with related ministries the extension of the fuel tax reduction, which is scheduled to end at the end of April.

Vice Minister Park said, "The Russia-Ukraine situation is variable and difficult to predict, so we will assume the worst-case scenario to establish countermeasures and thoroughly prepare together with the industry."

This content was produced with the assistance of AI translation services.