Trade minister Yeo Han-koo, second from left, is being briefed about the impact of Russia-Ukraine crisis on Korean firms at the Russia Desk of the Korea Strategic Trade Institute in Seoul, Thursday. Yonhap

By Lee Kyung-min

Korean exporters are expected to see a significant drop in profitability, crippled by spiking oil and raw material prices amid the escalation of the Russia-Ukraine crisis, market watchers said Friday.

The sales increase by manufacturing, which accounts for over half of the country's exports, will hardly be good news, since higher production costs led by soaring commodity prices will mean sharper losses. This means that the more they sell, the steeper their profitability will fall.

Korea's key manufacturers ― encompassing the steel, petrochemical, chemical, automobile and transport industries ― rely heavily on coal-powered fuels, notably crude oil, a reason why sustained volatility in global oil prices will crimp exports and hamper the economic recovery from the COVID-19 pandemic.

U.S. President Joe Biden said Thursday (local time) that the country will impose export controls on Russia to curtail high-tech imports to Russia and sanction major Russian banks, in a move aimed at penalizing Russia for its military attack against Ukraine.

An immediate drop in local firms' corporate profits brought on by reduced exports to Russia will be limited, given that Russia is Korea's 12th-largest trading partner, accounting for just 1.6 percent, $9.98 billion (12 trillion won), of Korea's export total of $644.5 billion. Ukraine accounts for only 0.08 percent of Korea's exports.