Intensifying Russia-Ukraine War... Korean Companies "Operating Costs Keep Coming, But Can't Withdraw Business"

Concerns Over Ongoing Operating Cost Burden, Responsibility for Local Staff Safety, and Remaining Asset Damage

[Image source=Yonhap News]

[Asia Economy Reporters Park Sun-mi, Choi Dae-yeol, Choi Seo-yoon] As Russia attacks Kyiv, the capital of Ukraine, again, Korean companies with corporations and branches in the area are facing increasing concerns. Although all local expatriates have been relocated, they cannot withdraw their local corporations due to the war, so they must continue to bear operating costs, ensure the safety of local employees, and worry about additional damage to remaining assets.

According to the industry on the 11th, more than 10 Korean companies with corporations and branches in Ukraine have relocated their local expatriates to neighboring European countries or back to Korea, so there have been no casualties from Russia's airstrikes on Ukraine. The building housing Samsung Electronics’ research and development (R&D) center and sales corporation in Kyiv was partially damaged by a missile that landed about 150 meters away, but Samsung Electronics shifted hundreds of local employees to work from home, so no casualties occurred.

Samsung Electronics plans to repair the broken windows and some equipment to normalize the office but will maintain remote work for local employees until the war ends. LG Electronics also early repatriated all Korean staff stationed in Kyiv and will continue to instruct local employees to work from home or take shelter in air-raid shelters. The KOTRA trade office chief, who used to commute to the Kyiv trade office before the missile attacks, is currently working from home due to safety concerns.

Even if Russia’s airstrikes on Kyiv continue for the time being, the possibility of additional casualties is low, but Korean companies cannot determine when to resume their suspended local operations, signaling prolonged damage.

An industry insider said, "If we withdraw from the Ukraine business due to the war, re-entry will be difficult, and there will be strong backlash from Western countries. Most local employees are in evacuation status, so business cannot proceed, but we cannot reduce the number of local employees either, so operating costs continue." Another industry official also said, "All local companies have suspended business and are waiting for the war to end. It seems the difficult situation of neither progressing business nor withdrawing will continue."

Hyundai Corporation and Hyundai Rotem, which initially considered participating in a national-level 20 trillion won Ukraine high-speed rail project, have also found it practically impossible to proceed with the project as the government’s preliminary feasibility study for local high-speed rail participation has been suspended due to the war. A Hyundai Corporation official said, "We have been collaborating with the government on the Ukraine railway project since 2010, and we cannot give up on it. Hyundai Corporation is mentioned as one of the leading partners for the future Ukraine high-speed rail project and post-war reconstruction, so withdrawal from the project is unthinkable."

Trade between Korea and Ukraine, which was already small-scale, has completely shrunk. According to the Korea International Trade Association, Korea’s exports to Ukraine amounted to $130.15 million from January to August this year, a 64% plunge compared to the same period last year. Compared to August last year, export value halved from $49.74 million to $22.6 million.

Damage to Russian business is also increasing. In the case of Hyundai Motor Company, some automakers such as Renault and Toyota have abandoned and withdrawn from the Russian market, but since suspending factory operations in March this year, there has been no significant movement. Russia has a complete car factory in Saint Petersburg with an annual capacity of 200,000 units. Hyundai acquired the General Motors (GM) factory, which had withdrawn several years ago, in 2020, completed facility construction, and planned to operate it this year. However, the factory has been unable to operate for several months due to blocked local parts procurement. A local official said, "The inventory of finished cars remaining in local sales networks has run out, and since August, there have been no local sales at all. The difficulty in deciding to withdraw is because it would mean losing thousands of billions of won in investment and the valuable market position built locally."

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