Calm in the Storm: The Korean Perspective on Russian Default
Moscow and Washington have exchanged competing narratives on whether or not Russia has actually officially defaulted on its foreign debt. A once-in-a-century default on Russian foreign debt would, at first glance, seem to have a notable effect on South Korean firms operating in a country that is the centerpiece of South Korean efforts to foster greater geopolitical connectivity to the Eurasian landmass.
Yet in the spirit of the wisdom that one “who is forewarned is forearmed”, attitudes among the movers and shakers of South Korea’s export-oriented economy are nothing if not calm. Korean firms clearly saw this coming, and appear relatively unfazed by the prospect (or reality, depending on who you ask) of a Russian default on its foreign debt for the first time since shortly after the Russian Revolution.
[Russian default] “Minor” short-term effect on Korean firms operating in Russia… contingency plans needed for the future
Korean economic organizations and businesses believe a Russian debt default will not have large negative effect on activities related to Seoul’s economic relations with Russia. However, experts say import–and export-oriented firms operating in Russia need to make contingency plans with an eye on the possibility that Russia could officially declare a financial default.
The Korean International Trade Association (KITA) views the effects of a Russian default as being limited for Korean businesses. As one KITA official stated, “Given that word of a Russian default has been around since March, major as well as medium-sized firms have already reduced the volume of their transactions, and Russia, which until last year was the 10th largest destination for Korean exports, has fallen to 21st place” adding “recent problematic issues have also been reduced, and as we understand, since payments are made in rubles, many outstanding transactions have already been settled.”
The official went on, “Each company unit has moved past the response phase, and until sanctions are lifted, even if Russia has foreign exchange reserves, they can’t make payments… the government is offering financial support to companies that can’t receive settlement payments as well as assistance in finding other overseas customers, so it will take time to come up with extra response measures.”
The Federation of Korean Industries (FKI) likewise predicted a Russian default won’t shock the Korean economy and businesses in the same way the outbreak of the war in Ukraine did.
According to one FKI official “It doesn’t appear that a (Russian) default will affect Korean firms’ business operations that much… yet companies doing business in Russia nevertheless need to consider the possibility that a situation where Russia officially defaults may come to fruition and seek ways to respond accordingly” the official said.
Companies with operations in Russia view this as a “largely anticipated” situation and have demonstrated a calm wait-and-see attitude. One employee of a major firm stated “There doesn’t seem to be any particular effect on us given that we settle transactions in rubles… business operations have been limited since the outbreak of the war, and because we even anticipated this situation, it doesn’t seem a default will have a particular effect on things” the official predicted.
Original article by Bong-kyun Ham and Young-ho Kim. Translated by Anthony V. Rinna.
 Source: [Russian default] “Minor” short-term effect on Korean firms operating in Russia… contingency plans needed for the future ([러시아 디폴트]한국기업 대북방사업 단기 영향은 ‘미미’…향후 대응책은 마련해놔야), Korea IT News (Electronic Times), June 27, 2022
 Translator’s note 1: The original wording in the article, “대북방사업” literally refers to economic operations as part of the South Korean government’s “northern policy”, which has been a general strategy across administrations aimed at fostering economic relations across the former USSR, particularly Russia, since the 1980’s. Further reading: https://www.koreaherald.com/view.php?ud=20211210000002