Russia's Successive Economic Sanctions... Prolongation Inevitably Hits Samsung and Other Korean Companies

Following Ruble repayment, ban on overseas transfer
'Adding insult to injury' as remittance routes blocked
Prolonged situation and additional sanctions expected to impact domestic companies

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] Due to Russia's successive economic sanctions, it is anticipated that domestic companies such as Samsung Electronics, Hyundai Motor Company, and LG Electronics will inevitably suffer impacts. They are already facing considerable difficulties due to the West's exclusion of Russia from SWIFT, and with Russia responding by designating unfriendly countries, companies caught in the middle have become, in short, "shrimp crushed in a whale fight."

According to major foreign media and business circles on the 12th, about 40 domestic companies and associations currently operating or trading in Russia are closely monitoring the effects of Russia's sanctions against unfriendly countries and are carefully considering their responses.

Earlier, on the 7th (local time), Russia included South Korea and others in the list of countries that have taken unfriendly actions against Russia. The first measure against unfriendly countries is economic sanctions. For foreign creditors included in the unfriendly countries list, the Russian government, companies, local governments, and individuals with foreign currency debts can repay those debts in rubles.

The problem is that the ruble has been plummeting to record lows daily since the full-scale invasion of Ukraine. In particular, there are concerns that it is difficult to receive debt repayments in rubles due to Russia's exclusion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

For Korean companies operating locally or exporting products to Russia, significant restrictions on business activities are expected, and realistically, it has become more difficult to receive export payments.

Additionally, Russia recently announced a list of about 200 types of goods and equipment prohibited from being exported abroad as a countermeasure against Western sanctions. Raw materials such as iron and electrical equipment are included in the export ban list. It is highly likely that mineral resources used in secondary batteries and semiconductors are included, which is expected to be a considerable burden for domestic companies.

Domestic companies such as Samsung Electronics and LG Electronics are not expected to suffer immediate major damage or operational difficulties due to Russia's successive sanctions, but they are paying close attention to the aftermath of the situation and the possibility of additional sanctions. An industry insider said, "Since the proportion of the Russian market in the global market is low, there will be no immediate major damage," but added, "If the situation prolongs or additional sanctions are imposed, they will inevitably be affected." Another industry insider said, "Since remittances have been suspended and additional measures have been taken, there will be more difficulties related to payments."

Meanwhile, about 40 companies, including large corporations such as Samsung Electronics, LG Electronics, and Hyundai Motor Company, have established operations in Russia. Samsung Electronics produces TVs at its factory in the Kaluga region near Moscow, and LG Electronics manufactures home appliances and TVs at its factory in the Luza area on the outskirts of Moscow.

Samsung Electronics currently holds the number one market share in Russia's smartphone and TV markets, and in the home appliance sector, including washing machines and refrigerators, LG Electronics competes closely for the top market share. Hyundai Motor Company and Kia operate a factory in Saint Petersburg.

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