For 48 years, an ally and trading partner
Since establishing diplomatic relations in October 1962, the two countries have conducted economic, political and cultural exchanges.
Korea opened its embassy to Saudi Arabia in Jeddah in March 1973. The capital later moved to Riyadh. Saudi Arabia opened an embassy in Seoul in April 1974.
One of South Korea’s closest allies, Saudi Arabia has actively supported Seoul’s stance on peaceful unification with North Korea on the international stage through the United Nations and the Non-Aligned Movement.
Many Saudi citizens are also big fans of the Korean pop culture wave, known as Hallyu. “Daejanggeum,” the epic 2003 TV drama also known as “Jewel in the Palace,” was a huge hit in the Middle Eastern country.
Yet trade is still the strongest link between the two countries. Last year, it totaled $23.6 billion, making Korea Saudi Arabia’s fourth largest trading partner - and vice versa. Exports to the Middle Eastern country were worth $3.85 billion and focused on automobiles, steel, rubber, industrial machinery and home appliance products.
Imports, led by oil, far outweigh exports, totaling $19.7 billion. Of that, $16.8 billion came from oil shipments. Last year, Korea imported 265 million barrels of oil from Saudi Arabia, equivalent to 31.8 percent of all its incoming oil. Liquefied petroleum gas is another major import from Saudi Arabia, with Korea buying 1.4 million tons last year, accounting for 26.2 percent of all its LGP imports.
Korea hopes to solidify this economic relationship through a free trade agreement with the Gulf Cooperation Council (GCC), which includes Saudi Arabia. The regional economic body also counts the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait as members.
The council, which holds around 40 percent of the world’s oil reserves, was Korea’s second-largest trading partner after China in 2008, with two-way trade reaching $101 billion.
Negotiations for a South Korea-GCC FTA started in July 2008 in Seoul, and two more rounds took place later in Riyadh and Seoul. Initially, the two sides hoped to reach an agreement by the end of last year, but as of today a fourth round of talks has yet to be held. Seoul’s Trade Minister Kim Jong-hoon said earlier this year that Korea is now planning to conclude the deal sometime this year.
The points of contention left to settle include automobile and petrochemical tariffs. The Korean government, which exported $1.84 billion worth of motor vehicles to Saudi Arabia last year, is demanding the early abolition of the automotive tariff, but the GCC has shown resistance, citing policies to foster its own automotive industry and concern that it could set an unfavorable precedent for FTA talks with Japan and Australia.
The council, on the other hand, is demanding Korea abolish its tariffs on petrochemicals, aluminum and some seafood items, but Korea has shown reluctance, concerned about possible damage to the large local refining industry.
Despite the delays in the talks, cooperation on a smaller scale continues between Korea and Saudi Arabia.
On July 17, the two countries held the 15th Korea-Saudi Arabia joint committee meeting, which included the trade and economic chiefs of both countries. At the meeting, Korea explained its efforts so far to deliver in four areas: economic development projects, nuclear energy development for commercial use, elementary school education and smart electrical grids. Saudi Arabia, for its part, expressed its willingness to cooperate on nuclear power plant development at the meeting.
Saudi Arabia is also a major destination for Korean overseas construction projects. In the 1970s, local companies began signing contracts to build infrastructure in Saudi Arabia, and ended up winning projects worth more than $10 billion during that decade, or more than 80 percent of all overseas Korean building contracts for the period.
The country is still a strong market for local building contractors, with more than 90 Korean companies operating there.
About 2,000 Koreans live in Saudi Arabia, mostly small business owners and employees for Korean construction contractors. Saudi Arabia is 2.15 million square kilometers (830,000 square miles) in area, which is approximately 20 times the size of South Korea. But its population is only 27 million, about half that of South Korea.
By Moon Gwang-lip [email@example.com]