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South Korean exports to Russia of motor lubricants that can be utilized in tanks, armoured automobiles and different army autos greater than doubled final 12 months, as Korean firms 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 Whole, Shell and BP voluntarily scaled again their Russian operations, together with gross sales of lubrication oils utilized in automobile transmissions and engines, following the outset of the conflict.
Russian import knowledge reveals 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 vitality large Chevron, have been the 2 most important Korean beneficiaries of the western firms’ exits.
Each firms denied that their merchandise have been being utilized by Russia’s army, claiming robust compliance requirements amongst their native companions. There aren’t any South Korean restrictions on exports of motor lubricants or engine oils to Russia. Neither firm has been accused of violating sanctions.
Specialists mentioned it was all however inconceivable to confirm that motor lubricants, which can be utilized for civilian or fight autos, weren’t filtering by means of to army makes use of.
“Any POL [petrol, oil and lubricant] product can have twin use — civilian or army,” mentioned Patrick Donahoe, a retired US main normal 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 reveals 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 corporations can enter area of interest markets in Russia left by greater worldwide firms,” mentioned Jeong Min-hyeon, head of the Russia and Eurasia staff on the Korea Institute for Worldwide Financial Coverage. “However realistically, I don’t assume that Korean firms can management who will be the tip customers of their exports to Russia.”
GS Caltex, which makes the Kixx model of engine oils, and SK Enmove acknowledged that they had 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 mentioned there was “no probability” its merchandise might be diverted to army use in Russia, including that its “contract with a Russian personal firm accommodates 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 mentioned, including that solely Russian merchandise may obtain the mandatory certification to be used in Russian army autos.
Chevron, which withdrew its personal lubricant and chemical merchandise from the Russian market following the invasion of Ukraine, mentioned 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, mentioned most nations relied on native manufacturing of motor oils for army use to make sure a steady provide.
“Lubricants produced by Russian refiners are so low-priced that they command a big market share,” it mentioned. “Our engine oil merchandise are comparatively high-priced that they’re offered principally for premium automobile customers.”
A South Korean automobile elements dealer who has exported lubricants globally mentioned it was “ridiculous” for the businesses to recommend they might monitor the tip 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,” mentioned the dealer.
A commerce ministry official in Seoul mentioned 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 may “take appreciable time”, the official mentioned.