In response to the Middle East situation, the government will execute the supply chain stabilization fund. Using this fund, it is pushing a plan to lend the full amount of purchase funds to corporations seeking to buy crude oil outside the Middle East, in regions such as North America and Central and South America.
As of last year, Korea relied heavily on Middle Eastern crude oil, with the share of Middle Eastern crude accounting for 70% of total imports and more than 95% of that passing through the Strait of Hormuz.
On the 4th, relevant ministries held a joint meeting to review the supply chain impact on the economy, chaired by Deputy Minister Kang Gi-ryong of the Ministry of Economy and Finance, and discussed these measures.
First, the government decided to expand support for corporations by using the 10 trillion won supply chain stabilization fund. The supply chain fund, created at The Export-Import Bank of Korea to secure a stable production network in the wake of COVID-19 and the urea solution crisis, was launched in September two years ago.
The government has operated a cap allowing low-interest loans of up to 90% of crude oil purchase funds for corporations using this fund, and has now decided to raise it to 100%. It also plans to provide necessary funds to corporations experiencing temporary liquidity strains due to fluctuations in raw material prices, including international oil prices.
After reviewing economic security items with high dependence on the Middle East, the government assessed that there are concerns about the supply and demand of naphtha. A government official said, "Fifty-four percent of imported naphtha uses the Strait of Hormuz," and added, "If the situation is prolonged, there are concerns, so we plan to prepare support measures such as diverting export volumes to domestic demand."
On energy, it said, "There are no unusual trends related to domestic supply and demand, and we have emergency response capacity with 208 days of strategic reserves based on International Energy Agency (IEA) standards," and on materials, parts, and equipment, it said, "With alternative import sources secured and the possibility of switching to domestic production, the impact on domestic supply and demand is limited."
Deputy Minister Kang said, "We will spare no necessary support so that our corporations can smoothly secure alternative volumes."