Exports to Russia, CIS surge despite war in Ukraine

Cranes load containers for export on outbound ships at a port in Busan on June 12. [YONHAP]

Korea’s exports to Russia and the Commonwealth of Independent States (CIS) are on the rise despite the country's overall exports plunging for eight straight months since October last year. Indirect exports and parallel exports to the region have accounted for the climb, experts say.

The CIS is a regional intergovernmental organization consisting of eight former Soviet states — Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan — as full members.

Exports to Russia surged 103.9 percent on year in May and exports to the CIS by 78.8 percent, according to a trade data report released by the Korea Customs Service and Korea International Trade Association (KITA) on Thursday.

Russia and the CIS were among only a handful of trading partners where Korean exports grew on year. In fact, both recorded the largest on-year jumps for Korean exports in May.

Korea’s exports to the CIS for the January-May period also topped the list at $5.77 billion, up 34.3 percent on year. Total exports to the CIS in the first five months of this year were also greater than that in 2021, which stood at $5.09 billion.

Korea’s overall exports dipped 15.2 percent on year in May.

Outbound shipments to Russia and CIS have been growing since March this year, regaining energy after losing gas in March last year due to the war in Ukraine.

Experts say the increase in indirect and parallel exports to the region, amid anti-Russian trade sanctions, played a role in the trend.

“It’s not that the demand for imports from Korea rose in the CIS; indirect and parallel export routes to countries adjacent to Russia, such as Kazakhstan, have become stabilized,” Jeong Min-hyeon, the head of Russia and Eurasia Team at the Korea Institute for International Economic Policy (KIEP), told the JoongAng Ilbo.

Exports to Kazakhstan between January and May soared 76.4 percent on year, and exports to Kyrgyzstan surged 509.2 percent.

Exports to Kazakhstan and Kyrgyzstan — both members of the Russia-led economic circle Eurasia Economic Union — between January and May soared 76.4 percent and 509.2 percent on year, respectively. Exports to Russia advanced 16.3 percent over the same period.

Non-sanctioned consumer products such as cars and cosmetics led the surge. Cars, car parts, soap, toothpaste, cosmetics and construction and mining machines were sold the most.

The amount of car exports to Kyrgyzstan spiked 1,514.4 percent on year in May, and cleansing and beauty products to Kazakhstan upped 82.7 percent.

Heavy machines and used cars led exports to Russia. The number of secondhand vehicle exports to Russia in the first five months this year rose more than tenfold on year to $370 million.

In contrast, imports from the regions fell as companies diversified their supply chain to avoid Russia-related risks.

Imports from the region are mostly relatively cheap coal or region-exclusive products, according to Jang Sang-sik, head of the analysis and forecasting department at KITA.

Exports to Russia and the CIS are likely to continue their upswing on the back of their recovering economies. Russia’s economy shrank by 2.1 percent last year but is expected to grow by 0 to 1 percent this year, according to the International Monetary Fund.

“Human networking is crucial in the area around Russia, and is difficult to restore once it is severed,” said Jeong.

Korea needs to build a groundwork for cooperation in the region by improving ties with the CIS countries and continue selling consumer goods, added KIEP’s Russia team head.

BY JUNG JONG-HOON [sohn.dongjoo@joongang.co.kr]