South Korean motor lubricant exports to Russia surge after oil majors retreat

South Korean motor lubricant exports to Russia surge after oil majors retreat
South Korean motor lubricant exports to Russia surge after oil majors retreat

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South Korean exports to Russia of motor lubricants that can be utilized in tanks, armoured automobiles and different navy autos greater than doubled final yr, as Korean corporations took benefit of their western opponents’ retreat from the market following Vladimir Putin’s invasion of Ukraine.

Motor lubricant exports from South Korea to Russia elevated 116.7 per cent in 2022 to $229mn, in accordance with Korean authorities statistics. The surge got here after western oil majors together with Complete, Shell and BP voluntarily scaled again their Russian operations, together with gross sales of lubrication oils utilized in car transmissions and engines, following the outset of the battle.

Russian import information reveals that SK Enmove, a subsidiary of South Korean conglomerate SK Group, and GS Caltex, a three way partnership between South Korea’s GS Group and US vitality large Chevron, had been the 2 fundamental Korean beneficiaries of the western corporations’ exits.

Each corporations denied that their merchandise had been being utilized by Russia’s navy, claiming sturdy compliance requirements amongst their native companions. There are not any South Korean restrictions on exports of motor lubricants or engine oils to Russia. Neither firm has been accused of violating sanctions.

Consultants stated it was all however inconceivable to confirm that motor lubricants, which can be utilized for civilian or fight autos, weren’t filtering by way of to navy makes use of.

“Any POL [petrol, oil and lubricant] product can have twin use — civilian or navy,” stated Patrick Donahoe, a retired US main normal and former commander of the US Military’s Maneuver Heart of Excellence. “Anybody promoting POL to Russia helps their aggression in Ukraine.”

Russian import information examined by the Monetary Instances present that SK Enmove and GS Caltex shipped about $2.8mn of engine oil to Russia in January 2022, previous to the full-scale invasion of Ukraine. Their volumes have since soared, reaching a peak of about $28mn in March 2023.

The information reveals that SK Enmove now accounts for six.5 per cent of Russian motor oil lubricant imports, with GS Caltex supplying simply over 5 per cent.

“Korean corporations can enter area of interest markets in Russia left by larger worldwide corporations,” stated Jeong Min-hyeon, head of the Russia and Eurasia crew on the Korea Institute for Worldwide Financial Coverage. “However realistically, I don’t assume that Korean corporations can management who may be the tip customers of their exports to Russia.”

GS Caltex, which makes the Kixx model of engine oils, and SK Enmove acknowledged that they had benefited from their opponents’ withdrawal from the Russian market however insisted they took precautions to make sure their merchandise weren’t diverted for navy use.

GS Caltex stated there was “no probability” its merchandise might be diverted to navy use in Russia, including that its “contract with a Russian non-public firm accommodates clear guidelines on reselling of our merchandise”.

“As a result of US and EU sanctions, they will’t promote our merchandise to the navy and our Russian subsidiary is nicely conscious of the significance of this matter,” the corporate stated.

Chevron, which withdrew its personal lubricant and chemical merchandise from the Russian market following the invasion of Ukraine, stated it “doesn’t touch upon the enterprise issues of our non-operated joint ventures, together with GS Caltex”.

SK Enmove, which additionally acknowledged that its Russian gross sales had profited from its opponents’ exits, stated most nations relied on native manufacturing of motor oils for navy use to make sure a steady provide.

“Lubricants produced by Russian refiners are so low-priced that they command a big market share,” it stated. “Our engine oil merchandise are comparatively high-priced that they’re offered largely for premium automobile customers.”

A South Korean automobile elements dealer who has exported lubricants globally stated it was “ridiculous” for the businesses to recommend they may monitor the tip customers of their Russian exports.

“A lubricant exporter claiming they know the place their merchandise find yourself is sort of a ramen exporter claiming they know who’s going to eat their noodles,” stated the dealer.

A commerce ministry official in Seoul stated the nation had export controls on “gadgets that may be diverted for navy use or weapons of mass destruction, however lubricants are like a commodity”. Imposing restrictions on motor oil may “take appreciable time”, the official stated.

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