Sanctions on Russia Tightened... "Exports of Automobiles, Cosmetics, and Other SME Products Hit"

High Export Items Like Automobiles and Cosmetics Hit
Damage Such as Payment Delays Under SWIFT Sanctions
"Prepare Thoroughly Assuming the Worst-Case Scenario"

[Asia Economy Reporter Kwak Min-jae] Amid escalating economic sanctions against Russia following its invasion of Ukraine, there are forecasts that domestic small and medium-sized enterprises (SMEs) will suffer significant impacts.

Western countries are intensifying sanctions such as blocking financial transactions with Russian banks, controlling exports of key industries to Russia, and expelling Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

According to a recent report titled "The Impact of the Russia-Ukraine Situation on Our SMEs" published by the Small and Medium Business Venture Institute, sectors with a high export ratio among SMEs expected to be affected include automobiles (used cars, 24.4%), cosmetics (9.9%), steel plates (5.1%), and automobile parts (4.7%).

Russia holds a significant share in SME exports. The report states that Russia ranks 10th in terms of SME export value. SME exports to Russia amount to $2.75 billion (approximately 3 trillion KRW), which is about 2.8% of the total SME export value of $117.1 billion (approximately 142 trillion KRW).

[Image source=Yonhap News]

The Small and Medium Business Venture Institute warned that if SWIFT sanctions are implemented, domestic companies could suffer losses due to delayed or halted payment settlements. Excluding Russia from the SWIFT payment network could cause difficulties such as delays in trade payment collection and restrictions on remittances from local production and sales subsidiaries to headquarters.

The institute also expressed concerns about foreign exchange losses caused by ruble depreciation if Russia demands payment in rubles or price reductions (losses occur when the export amount converted to KRW decreases due to a drop in exchange rates).

A representative from the Small and Medium Business Venture Institute stated, "In preparation for a prolonged crisis, it is necessary to assume the worst-case scenario and make thorough preparations. Regarding support for affected companies, it is essential to identify practical difficulties during policy implementation and make efforts for rapid execution through a fast track."

Meanwhile, during the international economic sanctions following Russia's annexation of Crimea in 2014, exports to Russia in 2015 decreased by 53.7% compared to the previous year. Particularly, passenger cars (△62.1%), tires (△55.7%), and color TVs (△55.0%) saw significant declines.

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