Our SMEs Suffer the Largest Payment Damage Related to Russia

44 Reports of Damage Filed by Small and Medium Enterprises

[Asia Economy Reporter Kim Cheol-hyun] Regarding Russia's invasion of Ukraine, our small and medium-sized enterprises (SMEs) have been found to suffer the most damage related to non-payment of funds.

According to the Ministry of SMEs and Startups (Minister Kwon Chil-seung, hereinafter referred to as the Ministry) on the 7th, since the 2nd, 60 damage reception centers have been established nationwide at local offices, the Korea Federation of SMEs, and regional headquarters of the Korea SMEs and Startups Agency to receive damage reports, and a total of 44 reports have been received so far.

Among the reported damage cases, those related to non-payment of funds accounted for 70% of the total, the highest proportion. Due to sanctions on Russian banks, exclusion from SWIFT, and the depreciation of the ruble, Russian buyers have delayed or refused payments, worsening cash flow.

For example, Company A in the machinery sector was proceeding with the shipment of contracted equipment to a Russian factory but was notified that payment was difficult because a Russian state bank and its subsidiary were designated as sanction targets. In the case of Company B, the Russian buyer ordered machines to be shipped in March and at the end of May respectively, but due to the suspension of payments, there are concerns about cash shortages.

Logistics delays and stoppages accounted for 11% of the total, making it the second biggest difficulty for SMEs. With air and sea transport to Russia being controlled, additional costs are incurred due to shipment waiting and return voyages. In the case of Company C, after exporting goods and proceeding with payment, the situation worsened as flights were blocked and logistics companies boycotted, making entry into Russia difficult. The buyer has not paid the second shipment amount, and returning to Korea increases logistics costs.

Some SMEs are also complaining about decreased exports due to contract delivery suspension or stoppage. Remaining order shipments with Russian buyers have become uncertain, and exports have been completely halted due to the war situation in Ukraine, creating a need for alternative export countries. In fact, Company D, which exports cosmetics, contracted to export a total of $300,000 to a Russian buyer this year and shipped $80,000 in the first batch, but the shipment of the remaining orders is uncertain.

There are also issues related to raw material imports. One food company paid an advance to Ukraine but did not receive the goods due to the war, and complained about insufficient payment funds to import rare gases from Russia.

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