Russian shipping companies may struggle to pay for newbuildings at South Korean shipyards after authorities in Seoul sanctioned the warmongering country’s major banks.
South Korea will ban financial transactions with seven major Russian banks and their affiliates as part of its economic sanctions on the country, the finance ministry said late on Tuesday.
Sanctioned are Sberbank, VEB, PSB, VTB, Otkritie, Sovcombank and Novikombank.
South Korea will also block Russian banks from the SWIFT global payments system.
The ban is likely to put the brakes on newbuilding contracts worth several billions of dollars that Russian companies have on order at South Korean shipyards, shipbuilding sources said.
TradeWinds reported on Friday that South Korea’s major three shipbuilders — Hyundai Heavy Industries, Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering (DSME) — are building LNG carriers, tankers and offshore units that are linked to Russian companies.
Among the three South Korean shipyards, shipbuilding sources said SHI would be the most affected by the sanctions as it has two large technology transfer contracts with Russian companies.
The shipbuilder is supplying hull blocks and equipment for 15 Arc7 LNG carriers — the first contracted by Sovcomflot and the remaining 14 by Sovcomflot-Novatek joint venture Smart LNG — under a $2.5bn deal it signed in 2020.
SHI also has newbuilding contracts worth $1.7bn to supply designs, blocks and parts for seven shuttle tankers as part of a joint venture that SHI formed with Russia’s Zvezda Shipbuilding Complex in 2019.
In addition, SHI is building an LNG carrier and three aframax tankers for Sovcomflot, and is also constructing four 174,000-cbm Arc4 LNG carriers that were jointly ordered by Japan’s NYK Line and Sovcomflot.
DSME and HHI are also building a smaller number of LNG assets for Russian clients Sovcomflot and Novatek, which have also been sanctioned by the US.
Those sanctions would make it almost impossible for both companies to find alternative financing outside of Russia to fund the newbuildings, industry observers said.
HHI told TradeWinds on Wednesday that it was “carefully investigating” the implications for its Sovcomflot orders.
“Conversation with Sovcomflot is ongoing thus we are waiting for their countermeasure under these circumstances,” a company spokesperson said.
SHI and DSME did not immediately respond to emailed requests sent on Wednesday requesting comment on the sanctions imposed by the South Korean government.
This article has been updated to include comment from HHI
