S.Korea bans exports of strategic items to Russia, joins SWIFT sanctions

Reuters

Published Feb 27, 2022 11:55PM ET

Updated Feb 28, 2022 04:25AM ET

By Hyonhee Shin and Cynthia Kim

SEOUL (Reuters) -South Korea will tighten export controls against Russia by banning shipments of strategic items and join Western countries' moves to block some Russian banks from the SWIFT international payments system, Seoul's foreign ministry said on Monday.

"The Korean government condemned Russia's armed invasion of Ukraine and, as a responsible member of the international community, decided to actively participate in the international community's efforts, including economic sanctions, for a peaceful resolution of the situation," the ministry said in a statement.

Among the strategic items that could be controlled are supplies of electronics, semiconductors, computers, information and communications, sensors and lasers, navigation and avionics, and marine and aerospace equipment.

Shortly after the announcement, Russia's Ambassador to South Korea Andrey Kulik expressed regret, blaming "strong outside pressure" on Seoul from the United States its western partners to join them in applying sanctions.

He called Moscow's actions in Ukraine a "special operation" aimed at defending Russia from those western forces trying to use Ukraine "as a tool" to mount military threats.

Two leading banks in South Korea confirmed on Monday that while they haven't yet received specific guidelines from SWIFT, or the member-owned cooperative for interbank payment system, they stopped trade financing with at least seven Russian banks.

South Korea's Shinhan Bank and one other leading lender said that they stopped issuing letters of credit and other trade financing to PSB, VEB, VTB, Bank Otkritie, Novikombank, Sovcombank, and Sberbank. The second Korean bank declined to be identified due to the sensitivity of the matter.

"Blocking SWIFT will adversely affect trade financing although South Korea's overall imports of natural gas and oil from Russia isn't that huge, at about 5-10%" of the total, said Jeong Min-hyeon, an economist with expertise in Russia and Europe at the Korea Institute for International Economic Policy.

"The difficulties South Korean buyers of Russian commodities and other exporters go through with payment difficulties could lead to supply disruption and price increases."

In its statement, the foreign ministry also said the Korean government has decided to promote the additional release of strategic oil reserves for stabilisation of the international energy market, and to further review other measures such as the resale of liquefied natural gas (LNG) to Europe.

South Korea will boost humanitarian aid to Ukraine, the ministry added, saying its decisions have been officially notified to the U.S. government through diplomatic channels.