Washington rewards Seoul for getting tough on Moscow

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Washington rewards Seoul for getting tough on Moscow

Korean Trade Ministry delegation including Minister Yeo Han-koo discussing export control to Russia with U.S. counterpart including Deputy Commerce Secretary Don Graves in Washington DC on March 3. Korea was initially left out of the lists of countries exempted from the U.S. export control. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

Korean Trade Ministry delegation including Minister Yeo Han-koo discussing export control to Russia with U.S. counterpart including Deputy Commerce Secretary Don Graves in Washington DC on March 3. Korea was initially left out of the lists of countries exempted from the U.S. export control. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

 Korea is no longer subject to U.S. export controls as a result of its weak stance on Russia's invasion of Ukraine.
 
Korea's Ministry of Trade, Industry and Energy and the U.S. Commerce Department announced Monday that Korea was exempted from Washington's foreign direct product rules.
 
“The U.S. Department of Commerce, through the Bureau of Industry and Security (BIS) added the Republic of Korea to the list of countries to receive an exclusion from the license requirements required under the U.S. Russia/Belarus Sanctions rules, including the foreign direct product (FDP) rules for Russia/Belarus,” according to a statement released by the Commerce Department.  
 
The foreign direct product rules require products that are exported to Russia -- regardless of where they are manufactured -- to get the approval of the U.S. government if the product uses U.S. technology.  

 
The rules were applied on Feb. 24 when Russia invaded Ukraine.  
 
The export controls applied to sensitive products such as semiconductors, computers, telecommunication equipment, sensors, lasers and aviation electronics.
 
Korea initially was excluded from a list of countries exempted from the controls, which included U.S. allies like the EU, Japan, Canada, Australia, New Zealand and the U.K.  
 
Only when it increased its sanctions on Russia was it put on the list.
 
On Monday, Seoul announced that it was sanctioning the Russian central bank along with the Russian National Wealth Fund and the Russian Direct Investment Fund, and increased the number of commercial banks it sanctioned.  
 
The Blue House on Tuesday announced that U.S. President Joe Biden sent a letter to President Moon Jae-in about the sanctions.  
 
"President Biden in the letter said Korea's stringent actions will send a power message supporting Ukraine's sovereignty," said Blue House spokesperson Park Kyung-mi.
 
The export controls were expected to have a major impact on Korean exports, especially smartphones.  
 
Samsung Electronics holds the biggest market share in Russia, controlling 30 percent of the smartphone market.  
 
Hyundai Motor has the biggest market share in Russia for cars of 27 percent. Cars would have come under the export ban.  
 
Korea’s exports to Russia last year only accounted for 1.6 percent of all its exports. Automobiles accounted for 25.5 percent and automotive parts 15.1 percent. 
 
“We, as a proud ally and partner, are pleased to join the global coalition of nations that are standing against Russia’s aggression by implementing stringent export control policies, dedicated to supporting Ukraine in its path towards peace and stability,” Trade Minister Moon Sung-wook said in a statement.  
 
“This unprecedented multilateral coordination on export controls is an essential component to ensuring our response to Russia’s invasion is swift, severe and successful,” Gina Raimondo, Commerce Secretary said. “I’m proud to accept the ROK’s commitment to that effort.”  
  
Meanwhile Russia included Korea among countries it has labeled as "unfriendly" along with the Ukraine, the U.S., EU, Japan, Canada, U.K. Australia, New Zealand, Singapore and Taiwan.  
 
Being listed as an unfriendly country temporarily bans non-Russian residents of Russia from wiring foreign currency to the country; prohibits Russian companies and government entities from paying debts to creditors in countries labeled unfriendly in dollars; and requires all transactions between companies in countries labeled unfriendly and Russian companies or residents to be approved by the Russian Commission on Monitoring Foreign Investment.  
 
Trade Minister Yeo Han-koo presided over a meeting Tuesday to assess the situation.  
 
“Our country as a responsible member of the international society has joined the sanctions against Russia and as a result was listed by the Russian government as unfriendly,” said Yeo.  
 
The Russian currency, which was trading around 70 to 80 against the U.S. greenback before the Ukraine invasion, has depreciated to 150 to the dollar.  
 
With the value of the ruble falling, Korean companies like shipbuilders may have trouble getting paid by Russian customers. 
 
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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