Will Korean firms return to Russia?

Peace talks raise hopes for return of Hyundai Motor, Samsung, LG to Russian market

By Park Jae-hyuk

The recent negotiations between the United States and Russia on ending the latter's three-year war in Ukraine have brought cautious optimism that major Korean companies may resume their operations in the world's largest country.

This outlook emerged after Russian Direct Investment Fund (RDIF) CEO Kirill Dmitriev told the press that U.S. companies are expected to return to his country in the near future.

"RDIF expects that a number of American companies will return to the Russian market as early as the second quarter of the year," the Russian sovereign wealth fund chief said in Riyadh, Tuesday (local time), after participating in peace talks with U.S. officials in the Saudi capital.

His remarks drew the attention of Korean investors to Hyundai Motor's next steps following the suspension of operations at its Saint Petersburg plant in March 2022, a month after Russia's invasion of Ukraine. The company later sold the factory to a Russian firm in December 2023 for 10,000 rubles ($112), with a binding option to repurchase the facility by the end of this year.

Although the carmaker stated that nothing has been decided yet, the company has consistently worked to protect its trademark rights in Russia throughout the war.

In January, the company obtained approval from Russia's Federal Service for Intellectual Property (Rospatent) for the right to keep using the Hyundai trademark there. Last August, the Korean firm applied to Rospatent for the registration of at least 17 trademarks, including Genesis.

Additionally, Hyundai Motor has never condemned Russia's invasion of Ukraine, unlike many Western companies, which framed their exit from Russia or suspension of operations there in moral terms.

Despite an anti-Russian civic group's denunciation of them, Hyundai Motor, Samsung and LG just cited setbacks in sourcing components as the main reason for their suspended operations in Russia.

"Once the war ends and global carmakers start returning to Russia, Hyundai Motor is highly likely to buy back the Russian plant," Daishin Securities analyst Kim Gwi-yeon said.

However, Hyundai Motor is required to pay an amount equivalent to the current market value of the factory. Prior to the sale, the plant's market value was estimated at 410 billion won ($286 million).

The growth of Chinese carmakers in Russia is seen as another challenge to the Korean carmaker.

Industry officials expect Samsung Electronics and LG Electronics to face difficulties in regaining their previous market shares in Russia from Chinese, Turkish and Belarussian companies should the Korean tech firms reactivate their Russian factories, which have been suspended since 2022.

The RDIF CEO also cautioned that American companies will face challenges in reentering the Russian market, as many niches are already occupied.