$300 Million Economic Cooperation Loan to Russia Faces Default Risk

Repayments Halted After Russia-Ukraine War... Overdue Interest Reaches KRW 30 Billion
Ando Geol: "Risk Management and Recovery Roadmap Must Be Disclosed Transparently"

Ando Geol, member of the Democratic Party of Korea.

There are concerns that the $210 million (KRW 300 billion) economic cooperation loan that South Korea extended to Russia is facing a risk of default as it approaches maturity in December this year. Since June 2023, Russia has failed to meet its repayment commitments for five consecutive times, raising worries not only about national losses but also about a decline in South Korea's international credibility.

Ando Geol, a member of the Democratic Party of Korea (representing Gwangju Dongnam-eul), stated on the 29th, based on audit materials submitted by the Ministry of Economy and Finance and the Export-Import Bank of Korea, "There is a growing concern that the risk of default is becoming a reality," and called on the government to make more active efforts to recover the funds.

This economic cooperation loan is part of the $1.47 billion provided to Russia in 1991 under the Northern Policy of the Roh Tae-woo administration. As repayments were repeatedly delayed, South Korea and Russia agreed in 2003 to restructure the debt to a total of $1.58 billion. Since then, $1.38 billion has been recovered through cash and in-kind repayments, but a balance of $210 million remains outstanding. Russia had promised to repay the entire principal by December this year, with two installments each year in June and December, paying $35 million in principal and interest per installment.

However, following the outbreak of the Russia-Ukraine war, all repayments on the loan have been suspended since June 2023. Russia has failed to meet the agreed payment dates five times. As of now, overdue interest alone amounts to $21.21 million (KRW 3.03 billion), and if the December payment is also delayed, overdue interest will increase to $35 million (KRW 5.01 billion), bringing the total unrecovered amount to an estimated $231 million (KRW 33.1 billion).

Until now, the government has explained Russia's failure to repay the loan as an unavoidable situation resulting from U.S. sanctions against Russia. However, this position lost its validity in May, when the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) reissued a special license for Russia, securing a legal pathway for loan payments.

Ando Geol pointed out this issue, stating, "With sanctions resolved through the OFAC special license, there is no longer any reason for a passive response," and emphasized, "The government should finalize and notify Russia of specific payment scenarios-including alternative currencies, settlement banks, and escrow methods-and if the payments are not made within the deadline, immediately initiate procedures for overdue interest and accelerated repayment."

Ando Geol also added, "Intergovernmental loans are not just simple monetary claims but matters of national credit and principle. The Ministry of Economy and Finance and the Export-Import Bank of Korea should not treat this merely as a diplomatic issue, but should promptly establish a risk management and recovery roadmap, report it to the National Assembly, and transparently disclose it to the public."

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