South Korea, which has a crucial role in global technology and a world-leading shipping industry, must balance Euro-Atlantic security concerns with its security interests in North Korea. It also has a significant manufacturing base in Russia, which accounts for about a third of its exports. However, the outbreak of the war in Ukraine has forced many companies to suspend shipments and shut down local factories. In addition, the ruble’s devaluation has made transferring payments between Russia and South Korea more challenging.
As a result, some Korean firms have decided to sell their Russian assets. But others are holding on, awaiting the end of the conflict and news that Russia will reopen its markets. The experience of these companies will provide valuable lessons for the wider West on how to manage sanctions against Russia and its impact on business with the country.
Among the significant carmakers, Hyundai Motor has avoided a shutdown of its plant in St Petersburg by taking advantage of a Russian policy called “parallel imports.” Parallel imports allow foreign products to enter the country without the manufacturer’s consent, but they are authentic and have not been changed in any way. In 2021, Hyundai sold more than 200,000 vehicles in Russia, including about 25 percent of its exports. Since the beginning of the war in March, however, sales have plummeted, and the company has had to rely on restocking its local inventory.
A Hyundai official said the company would take a 287 billion won ($219.19 million) loss on selling its HMMR LLC plant in Saint Petersburg, which used to produce Tucson and Palisade SUVs. In a regulatory filing, the company said it had approved a plan to sell its stake in the plant to Art-Finance LLC.
Hyundai will join other global automakers who have sold their Russian assets, such as General Motors Co. (GM) in the United States and Volkswagen AG in Germany. The move follows a global exodus of other foreign investors, including companies in the oil and gas industries, following Moscow’s invasion of Ukraine.
The exodus has also impacted the shipbuilding industry, with orders for cruise ships and LNG carriers from Russia being put on hold. Some of the biggest names in shipbuilding have already sold their Russian assets to private investors or moved production elsewhere. Daewoo Shipbuilding & Marine Engineering has been hit hardest, with orders for two LNG gas carrier ships from Novatek and a project to build an icebreaking LNG terminal in Murmansk being put on hold due to the war.