Key concerns over payment settlement and secondary sanctions that had been obstacles to importing Russian crude oil and naphtha have been partially resolved, after the U.S. temporarily allowed imports of Russian crude and naphtha amid the blockade of the Strait of Hormuz. The government, however, struck a cautious tone on the likelihood of Korean companies actually bringing in Russian crude and naphtha.
Yang Ki-wook, director general of the Industrial Resource Security Office at the Ministry of Trade, Industry and Energy (MOTIE), said at a daily briefing of the Middle East War Response Headquarters held at the Sejong Government Complex on Sunday that "we communicated with the U.S. Treasury Department and received confirmation on the difficulties industry would face when importing Russian crude oil and petroleum products."
"We received two industry concerns — whether payments could be settled in currencies other than the U.S. dollar, and whether imports would trigger secondary sanctions from the United States — and inquired with the U.S. side together with the Ministry of Economy and Finance," Yang said. "We received confirmation from the U.S. that payments can be made in rubles, yuan and other currencies, and that secondary sanctions will not be applied."
MOTIE plans to relay these findings to the refining and petrochemical industries and discuss future response measures together with the business community.
However, the ministry projected that the resolution of these concerns would not easily translate into immediate imports of Russian crude and naphtha. "The refining industry faces multiple uncertainties regarding Russian crude," Yang said. "Since this involves purchasing cargoes floating at sea rather than volumes directly contracted by companies, there is a problem of not being able to guarantee the quality of crude loaded on those vessels. We also need to assess whether the entire process from contracting to payment settlement can be completed within the one-month sanctions relief period presented by the U.S."
Yang added that Russian naphtha appears more likely to be imported than crude oil, given that crude transactions involve much larger volumes.
Meanwhile, the government emphasized that there would be no major disruption to the domestic supply chain regarding foreign media reports that Qatar could declare force majeure to major liquefied natural gas (LNG) importing countries including South Korea.
"The government has been preparing from the outset by excluding Qatar volumes from this year's supply calculations," Yang said. "Even without Qatar volumes, supplies needed through the end of this year have already been secured, and we are managing the situation to ensure there are no supply-demand problems through alternative sourcing."
"Two of Qatar's 14 liquefaction facilities have been destroyed, affecting approximately 20% of total volumes," he added. "Restoration of these lines is expected to take three to five years, so additional consultations between Korea Gas Corporation and the Qatari side are needed to assess the impact on long-term contract volumes."
However, the government expressed concern over price increases. "As the market shifts from a buyer-driven to a seller-driven market, gas prices are likely to fluctuate significantly," Yang said. "This could affect heating fees and electricity prices from the second half onward, so we are coordinating with relevant ministries including the Ministry of Climate and Environment to discuss measures to minimize the impact on the public economy."
