South Korea will likely turn to Russia for oil imports after the closure of the Strait of Hormuz has cut the east Asian country off from its main suppliers in the Persian Gulf.
Today, South Korean news portal MBC reported that the country’s government had secured permission from the US to import Russian crude oil and petroleum products. The US Government has reportedly confirmed that it will not impose sanctions on South Korea for the imports.
Yang Ki-Wook, from the South Korean trade ministry, told MBC: “Following separate consultations with the US government regarding the import of Russian crude oil, we have secured confirmation that they will not impose so-called secondary sanctions on third-country governments and companies trading with Russia.
“We have also confirmed that payment can be made not only in US dollars but also in Chinese yuan, Russian roubles and UAE dirhams.”
This means everything is in place for South Korea to resume imports of Russian oil for the first time since December 2022, when the country halted them following the Russian invasion of Ukraine.
South Korea’s economy is in dire straits since Iran effectively closed the Strait of Hormuz, a major shipping route for ships from the Persian Gulf. South Korea imports around 70 per cent of its crude oil and half of its naphtha – a generic term for refined petroleum products – through the Strait.
The country also has a strong petrochemicals industry that processes naphtha from the Middle East to produce plastics for automobiles, electronics and construction.
On March 18, South Korean finance minister Koo Yun-Cheol said his country would limit naphtha exports.
According to news site KoreaPro, Russian oil may help to stabilise fuel costs and ease price pressure. Operational challenges remain, though, as Russian oil differs in composition from the Middle Eastern crude South Korean refineries are designed to use, thus reducing operating efficiency.
The logistics of switching to imports from Russia, such as questions of shipping, insurance and payment channels, also remain uncertain.
In Russia, the South Korean pivot was met with satisfaction. Kirill Dmitriev, Russia’s special envoy for economic co-operation, called the country’s decision “smart”, according to newspaper Seoul Economic Daily.
