No Immediate Impact from South Korea's Designation as an Unfriendly Country...Concerns Grow Over Delays in Local Projects

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] As Russia has designated South Korea as a non-friendly country, construction companies operating locally are experiencing growing concerns. Although this decision by Russia does not immediately cause losses, business progress may be delayed depending on the severity of Russia's sanctions.

According to the construction industry on the 8th, DL E&C has signed a contract for the Russia Baltic Complex project. The contract amount is approximately 1.6 trillion KRW, and DL E&C is responsible for design and procurement of equipment. Earlier, in March last year, DL E&C also secured the Moscow Refinery Hyundai W Project (327.1 billion KRW). Hyundai Engineering and Samsung Engineering are also managing the Orenburg Gas Processing Facility (100 billion KRW) and Baltic Ethane Cracker (1.3722 trillion KRW) projects, respectively.

All these projects were won last year and are either in the early stages of construction or business progress, so the economic losses due to the designation as a non-friendly country are expected to be minimal. Losses from payment due to the depreciation of the ruble vary depending on the currency in which each company signed the contract. Typically, contracts with Middle Eastern countries such as Saudi Arabia are settled in dollars, while contracts with European countries are settled in euros. DL E&C, which won the Baltic Complex project at the end of last year, signed a contract in euros.

However, business delays are a concern depending on the content and duration of the Russian sanctions. A representative from Construction Company A said, "The project is in its early stages, and since we are responsible for design and procurement, most of the work is done at headquarters," adding, "However, if the project is delayed due to these sanctions, sales may not reach expected levels depending on the progress of the project because payments are structured based on project milestones."

It is also difficult for local companies to respond independently. Due to economic sanctions from the West, including the United States, companies find it awkward to openly express their difficulties or propose countermeasures.

A representative from Construction Company B said, "It is a situation where even complaining about difficulties in doing business in Russia requires caution," and added, "For now, it is best to respond according to government policies rather than voicing corporate concerns."

Meanwhile, the government announced the day before that it will actively consider measures to resolve payment difficulties with Russia for Korean companies, local residents, and students.

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