The Impact of the Iran Conflict on South Korea: By the Numbers

CSIS identified 23 of 26 South Korean–owned or operated ships stranded in the Strait of Hormuz. The fleet’s composition reflects the full breadth of South Korea’s trade exposure: 17 crude and oil tankers, 5 bulk carriers, 2 gas carriers, a container ship, and an auto carrier.

Since the conflict began, South Korean shipping through the Strait of Hormuz has been effectively halted. In February, before the conflict, there were 33 South Korean–flagged ships that transited through the Gulf, excluding additional South Korean–owned or operated (but not flagged) ships.

Three out of four major South Korean refiners have U.S. or Saudi ownership stakes, with the exception of SK Energy.

In addition to crude oil dependence, roughly 35 percent of South Korea’s naphtha, a key feedstock for petrochemicals, plastics, and synthetic fibers, transits through the strait. In response to potential shortages, Seoul quickly banned naphtha exports and designated it as an economic security item.

Beyond energy supplies, the blockade has exposed vulnerabilities in South Korea’s semiconductor supply chain. South Korea sourced 64.7 percent of its helium from Qatar, impacted by the same Iranian strikes that halted production at Ras Laffan Industrial City. The price of helium has since increased by more than 40 percent, and there is no viable alternative to helium. The Korea Semiconductor Industry Association said short-term supplies are sufficient and companies have diversified supply routes, though Seoul has added helium among the 14 semiconductor inputs under heightened monitoring.

South Korea’s official petroleum reserve position looks more robust on paper than in operational reality. It holds 208 days’ worth of strategic oil reserves under the IEA standard, but that is calculated on a net-import basis, not actual consumption. At South Korea’s actual refinery throughput of 2.9 million barrels per day, government-only stocks (100.1 million barrels) will only last 34 days, while the combined total with private sector stocks covers approximately 67 days. South Korea’s contribution of 22.5 million barrels to the IEA’s coordinated 400-million-barrel emergency release on March 12 reduced government reserves to 77.6 million barrels, or roughly 26 days. The separate UAE emergency procurement of 24 million barrels on March 18 adds a further eight to nine days.

What Are the Policy Paths Going Forward?

• High Political Stakes: The Lee government faces not just economic but political pressures as a result of the war. The various negative externalities of the war could affect the performance of the ruling party in June’s local elections, which in turn could strengthen the more progressive base of the party, whose inclinations Lee has generally leaned away from in his relations with Japan and the United States.
• Watch Japan: Regarding the Strait of Hormuz, Seoul is looking to thread the needle between a deal with Iran for free passage and not invoking President Trump’s wrath. South Korea is unlikely to be the first-mover on cutting a deal with Iran. Seoul will probably peg its courses of action based on what Japan does.
• Risky to Cut a Deal with Iran: If Trump wants to keep pressure on Iran, he will see any deal cut by Seoul with Tehran negatively and might retaliate against Seoul with increased tariffs, as he has done before. But if Trump’s latest comments about leaving the problem of tanker transits to those countries most affected, then the Lee government may have some political space to pay the transit toll or seek exemptions from the blockade for its stranded tankers. However, such a solution would potentially release only a portion of the tankers since the majority of the South Korean–flagged tankers have relationships with Saudi and U.S. companies (see Figure 3).
• Seek Russian Exemptions: If the situation remains ambiguous, South Korea’s least risky path forward would be to consult with the United States about seeking another exemption for oil from Russia, though this is not a long-term solution and will alienate relations with Ukraine. Seoul received a temporary 30-day sanctions waiver to import Russian crude and petroleum products loaded onto ships between March 12 and April 11. LG Chem purchased 27,000 tons of Russian naphtha through non-dollar payments to address a shortage, making it South Korea’s first such purchase in four years.

Victor Cha is president of the Geopolitics and Foreign Policy Department and Korea chair at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Andy Lim is deputy director and fellow with the Korea Chair at CSIS.

The authors appreciate Madison Bruno’s and Sabina Hung’s work in publishing this commentary.