Local producers were harmed by the fall of the ruble… “Even if it sells well or production stops, it’s all a problem”
Expert “It seems that the Russian default situation is getting closer”… Russia’s credit rating, the stage just before ‘national bankruptcy’
(Moscow EPA = Yonhap News) Pedestrians walk in front of a billboard displaying the exchange rate of the ruble once morest the euro and dollar at the foreign exchange exchange in downtown Moscow on the 2nd (local time). 2022.3.3 sungok@yna.co.kr
(Seoul = Yonhap News) Industry Team = As the Russian government allows Russian companies to repay foreign currency debts in rubles (RUB) for countries designated as non-friendly countries, including Korea, a blow to domestic companies is inevitable.
Domestic companies that have mainly transacted in rubles in Russia are expected to suffer additional damage as they have already suffered large foreign exchange losses due to the depreciation of the ruble.
In particular, some are interpreting this measure as proof that Russia is in fact close to default (default), raising concerns that domestic companies may withdraw their export proceeds altogether.
◇ “Russia is getting closer to default”
According to foreign media and industry sources on the 8th, Russia designated the United States, the United Kingdom, Australia, Japan, and 27 EU member states as unfriendly countries, including Korea, on the previous day, and Russian companies that owe these countries A government decree has been issued that allows the payment of debts in the Russian ruble.
This measure is a measure of sanctions once morest countries that have participated in sanctions once morest Russia in relation to the invasion of Ukraine.
(Seoul = Yonhap News) Reporter Ahn Jung-won = The ruble is lying at the counterfeiting and counterfeiting response center of Hana Bank’s headquarters in Jung-gu, Seoul on the morning of the 8th while the value of the ruble is plummeting due to Western sanctions following Russia’s invasion of Ukraine. 2022.3.8 jeong@yna.co.kr
However, there is an interpretation that, in a situation where the value of the ruble continues to plummet, to pay off debt in ruble means that it will not actually pay it back.
According to CNN, the ruble soared to 155 rubles to the US dollar the day before. As a result, the ruble has plunged 90% once morest the US dollar since the beginning of the year, hitting an all-time low.
The ruble exchange rate was below 80 rubles to the dollar before the invasion of Ukraine, but has plummeted following heavy economic sanctions from the West.
Sung Tae-yoon, a professor of economics at Yonsei University, said, “As the ruble is expected to plunge further, this measure by Russia has the meaning of sanctions, but it proves that we are actually getting close to default.” “Companies are exposed to the risk of default.”
In fact, the possibility of a Russian default is constantly being discussed.
The three major international credit rating agencies, including Standard & Poor’s (S&P), also downgraded Russia’s credit rating to the brink of ‘national bankruptcy’.
S&P downgraded Russia’s long-term U.S. dollar-denominated government bonds from ‘BB+’ to ‘CCC-‘. CCC- is at a level where the possibility of repayment of principal and interest is questionable, which is two steps higher than grade D, which means national bankruptcy.
(Saint Petersburg EPA = Yonhap News) A passerby walks in front of a billboard displaying the exchange rate of the ruble once morest the euro and dollar in St. Petersburg, Russia on February 28 (local time).. March 1, 2022 jsmoon@yna.co. en
◇ Companies “Risk of losing money in foreign exchange hands”
Samsung[005930]and LG Electronics[066570] Korean companies that do business with Russia expected that some losses would be inevitable as Russia allowed to repay foreign currency debts in rubles.
An industry official said, “In relation to the debt relationship established before this incident, the transaction amount should be received in dollars, but if it is received in rubles, of course there will be losses.”
However, some analysts say that the impact is not as big as expected, as trade with Russia has recently been significantly reduced and the amount of local production in Russia has been transacted in rubles from the beginning.
In the case of Samsung Electronics, export to Russia itself has been suspended due to the ruble depreciation and disruptions in local maritime logistics following Russia’s invasion of Ukraine. LG Electronics has few exports to Russia and mostly depends on local production.
Samsung Electronics is producing TVs at its Kaluga plant near Moscow, while LG Electronics is producing home appliances and TVs at its Luza plant outside Moscow.
Shipbuilders mainly sign long-term construction contracts in the form of heavy-tail (a contract that receives a small advance payment and a large delivery payment) method.
Korea Shipbuilding & Marine Engineering, a ‘big 3’ shipbuilder[009540]and Daewoo Shipbuilding & Marine Engineering[042660]Samsung Heavy Industries[010140]has received orders for a total of seven LNG carriers from Russia since the end of 2020, and Samsung Heavy Industries has also signed a long-term facility supply contract with the local Zvezda shipyard. The amount of transactions between these shipbuilders and Russia exceeds 7 trillion won.
An official from the shipbuilding industry said, “Loss is expected due to the decline in the ruble. However, even if a significant amount of the construction amount has already been repaid, and even if the Russian government has placed an order, Japanese or Canadian shipping companies chartering the ship will sign the order contract. The ripple effect may not be as great as expected because there are many cases where it is concluded.”
The auto industry, where not only local sales of finished cars but also payment for parts, etc., are paid for in rubles, has already suffered a huge loss due to the collapse of the ruble.
An official from a parts industry said, “Most local companies have received delivery payments in rubles and remitted to Korea, so the damage caused by foreign exchange losses is already severe.” said.
An official from the automobile industry also said, “If the ruble exchange rate falls by more than 50%, it will take a huge hit in terms of profitability.” It’s a problematic situation,” he said.
The airline industry predicted that there would be no immediate impact as there was not much money to be received from the Russian government or companies.
Korean Air[003490]In the case of Russia, when selling a Moscow-Incheon route ticket through a travel agency, it is expected to receive payment in rubles, but the route is suspended until next week, so there is no transaction itself.
Korean Air and Asiana Airlines[020560]has temporarily suspended flights to Moscow cargo routes due to refueling problems at Moscow Airport.
However, Russia’s measures increased the possibility that the suspension of flights to Moscow would be prolonged.
In addition, if Russia bans Korean airlines from passing through airspace, Korean Air and Asiana Airlines will have to adjust the routes of flights to Europe. If the south bypass route is used, it is estimated that the fuel cost will increase by 20% compared to the existing route.
fusionjc@yna.co.kr
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