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South Korean exports to Russia of motor lubricants that can be utilized in tanks, armoured automobiles and different army automobiles greater than doubled final 12 months, as Korean corporations took benefit of their western rivals’ 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 keeping 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 struggle.
Russian import knowledge exhibits 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 power big Chevron, have been the 2 fundamental Korean beneficiaries of the western corporations’ exits.
Each corporations denied that their merchandise have been being utilized by Russia’s army, 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 not possible to confirm that motor lubricants, which can be utilized for civilian or fight automobiles, weren’t filtering via to army makes use of.
“Any POL [petrol, oil and lubricant] product can have twin use — civilian or army,” stated Patrick Donahoe, a retired US main common 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 Occasions 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 exhibits 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 companies can enter area of interest markets in Russia left by larger worldwide corporations,” stated Jeong Min-hyeon, head of the Russia and Eurasia workforce on the Korea Institute for Worldwide Financial Coverage. “However realistically, I don’t suppose that Korean corporations can management who may be the top customers of their exports to Russia.”
GS Caltex, which makes the Kixx model of engine oils, and SK Enmove acknowledged they’d benefited from their rivals’ withdrawal from the Russian market however insisted they took precautions to make sure their merchandise weren’t diverted for army use.
GS Caltex stated there was “no likelihood” its merchandise might be diverted to army use in Russia, including that its “contract with a Russian personal firm comprises clear guidelines on reselling of our merchandise”.
“As a result of US and EU sanctions, they will’t promote our merchandise to the army 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 rivals’ exits, stated most international locations relied on native manufacturing of motor oils for army use to make sure a secure 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 bought largely for premium automobile customers.”
A South Korean automobile components dealer who has exported lubricants globally stated it was “ridiculous” for the businesses to counsel they may observe the top 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 army use or weapons of mass destruction, however lubricants are like a commodity”. Imposing restrictions on motor oil might “take appreciable time”, the official stated.