[WHY] Korea's growing role as a weapons supplier to Europe

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[WHY] Korea's growing role as a weapons supplier to Europe

Published: 13 Dec. 2022, 17:16 Updated: 13 Dec. 2022, 17:55

K-2 battle tanks manufactured by Hyundai Rotem in a South Korean Army drill [NEWS1]

In July, Poland’s Defense Ministry surprised the global weapons industry with an announcement that it had signed contracts worth $5.78 billion for K-2 battle tanks, K-9 self-propelled howitzers and FA-50 light attack aircraft from Korea.

The sales boosted what had already been expected to be a bonanza year for Korean defense exports, which were expected to exceed $10 billion this year — following an upward trend in which the total value of the country’s arms deals rose from $3.54 billion in 2015 to $7 billion last year.

The collective value of Korean defense companies’ contracts with Poland, which could be worth as much as $15 billion if Warsaw exercises all of its options under the deals, dwarf the $3.5 billion price tag of the United Arab Emirates’ purchase of the Cheongung-II missile defense system in January, which is Korea’s single largest defense system export to date.

While Warsaw’s most recent defense buying spree is not the first time Korea has clinched a deal to supply a European country with weapons, it does solidify the country’s status as the only Asian country selling arms to members of the North Atlantic Treaty Organization (NATO).

But how did Korea get there, and can it keep up the pace to fulfill the demands of European defense?

How did Korea become a weapons supplier to Europe?

According to a report by Kevin Martin, a researcher at the Paris-based Institute for Strategic Studies, Korean weapons sales in Europe came “as part of an opportunistic strategy,” and was “not designed with exports in mind,” considering pre-2022 sales of the K-9 Thunder by its main contractor Hanwha did not result in major industrial agreements or the establishment of production facilities in European countries that purchased it.

“The K-9 system was specifically created in response to [Korea’s] national needs to be able to conduct high-intensity operations against a designated adversary on a disputed border,” Martin wrote, referring to the standoff between North and South Korea along the demilitarized zone.

Korea’s entry into the European defense market can be traced back to the 1990s, when Seoul began to shift in earnest away from its longtime reliance on U.S. weapons systems by indigenizing its defense production.

It was during this period that the K-9 Thunder self-propelled howitzer manufactured by Hanwha Defense, which in recent years has become Korea’s best-selling defense export, was developed and produced with support from the Korean government.

Although the first purchase of K-9 howitzers by a NATO member state took place in 2001, where it formed the crux of an export and technology transfer agreement with Turkey, exports of Korean weapons such as the K-9 only truly took off in earnest following Russia's annexation of Crimea, according to Bang Jong Goan, a research fellow at the Korean Institute for Defense Analysis.

“The changing security environment in Europe, particularly over Crimea, really pushed countries in eastern and northern Europe to reassess the threat from Moscow and upgrade their capability needs,” Bang said.

“Before the Crimean crisis, I can’t think of a major Korean weapons system exported to Europe. But in 2014, the year the Russian takeover occurred, Korea negotiated a K-9 licensing agreement with Poland, then Norway and Finland in 2017 and Estonia in 2018,” he added.

According to Bang, the civilian arm of the K-2 manufacturer Hyundai Rotem had already won contracts for tram systems in Poland, adding to Korean companies’ overall reputation for reliability and cost-effectiveness.

The speed and nature of the recent Polish contracts with Korean defense companies also highlight the urgency with which Poland needed to secure weapons.

“Since the end of the Cold War, the party with bargaining power in most weapons sales was the buyer,” Bang noted. “Most weapons contracts since have required the weapons seller to buy some kind of product, usually civilian in nature, from the purchasing nation, but the Polish contracts unusually don’t have such conditions attached.”

What are the advantages of buying Korean weapons?

Even as Seoul sought to advance its ability to fulfill its own defense needs, its defense industry continued to build weapons and equipment so that they would remain compatible with U.S. gear, since the two countries would be expected to fight side-by-side in any conflict with North Korea or China.

According to a defense industry expert who spoke on condition of anonymity, the compatibility of Korean defense products with U.S. weapons systems was not only a deliberate choice, but also a consequence of technology transfers that built the country’s military industrial complex.

“The rise of our defense industry, which can be traced back to the Park Chung Hee administration’s push to indigenize basic weapons manufacturing in the 1970s, relied heavily on technological know-how imparted by the United States and other advanced countries,” the expert said.

“This in turn led to natural interoperability between Korean and U.S. systems, which was reinforced when Korea also leaned on U.S. technological transfers to produce more advanced defense products domestically, such as the KF-16 fighter and the T-50 training aircraft.”

That compatibility, coupled with the relatively lower costs and quicker turnaround times of Korean defense production, have made Korean arms attractive to European countries looking to re-arm cheaply and swiftly.

For example, Poland, which initially looked to purchase 500 High Mobility Artillery Rocket Systems (HIMARS) from the United States, decided to instead sign a contract with Hanwha Defense for 288 K-39 Chunmoo rocket artillery systems, the first batch of which are scheduled for delivery next year, after learning HIMARS deliveries could take several years.

At an Oct. 19 signing ceremony with his South Korean counterpart, Polish Defense Minister Mariusz Blaszczak said that the decision to buy the Chunmoo was “unfortunately due to limited [U.S.] industrial capabilities,” which he said made it impossible for the desired number of HIMARS systems to be delivered within the country’s desired timeframe.

“We therefore started talks with South Korea — our proven partner,” the Polish defense minister said, adding that Warsaw aims to possess “both HIMARS and the Chunmoo.”

Poland’s decision to buy the Korean-made Chunmoo system while waiting for HIMARS highlights the cost-effectiveness of Korean defense systems vis-à-vis high-end U.S. or other Western counterparts.

“While our defense industry is not on the forefront of cutting-edge products, such as unmanned aerial systems and missiles, Korean defense products designed for conventional terrestrial warfare do not differ significantly in their capabilities compared to U.S., British, French or German products, even as they are quite a bit cheaper,” said a Korean defense researcher who spoke on condition of anonymity.

Another advantage of buying Korean for European defense customers is that Korean companies typically partner with defense companies in purchasing countries to set up manufacturing facilities, which can reduce their dependence on Korea’s own production capabilities for future deliveries.

For example, under the terms of the contracts between Hyundai Rotem and the Polish Defense Ministry, the first 180 K2 tanks were delivered to Poland in early December, but the remaining 800 tanks will be at least partially manufactured in Poland.

The arrangement mirrors the deal between Korea and Australia for the localized production of the K-9 howitzer in Geelong, Victoria, which was signed between Canberra and Hanwha Defense in December last year.

“For a country that wants to build up its defense production base, Korea is a very appropriate partner,” Bang said, referring to the mutually beneficial nature of the recent contracts between Warsaw and Korean defense companies.

“These deals help countries that want to build up their industrial capacity with an eye to meet their future defense needs,” Bang said.

Future Korean defense export deals with Europe, if paired with the creation and expansion of local industrial bases, could also relieve the burden on the U.S. defense industry to supply NATO member states as countries on both sides of the Atlantic seek to replenish their weapons stocks while supplying Ukraine’s war effort.

Take the example of the Javelin, the shoulder-fired, precision-guided anti-tank missile produced by Raytheon and Lockheed Martin that has proven crucial in destroying Russian tanks.

While the Javelin has been employed to great effect by the Ukrainian military to destroy Russian battle tanks, U.S. production has hovered at only around 800 units per year. According to the Washington-based Center for Strategic and International Studies, the United States has sent 8,500 Javelins to Ukraine so far — more than a decade’s worth of production.

Korea’s defense industry is already speculated to be playing a role in indirectly restocking weapons supplies of countries that are actively arming Ukraine, with the Pentagon saying in early November it was seeking to buy 100,000 rounds of 155 millimeter howitzer ammunition from Korean weapons manufacturers to provide to Ukraine.

Although Seoul’s Defense Ministry was quick to issue a statement saying it believed the “end user” of the ammunition to be the United States, the arrangement highlights the growing importance of Korea as a global weapons supplier.

Can Korea keep up with additional European defense orders?

The scale of Korean companies’ deals with Poland and their promises of quick deliveries has raised the profile of the Korean defense industry, according to one insider who requested to remain anonymous because of the sensitivity of ongoing talks.

“It’s inevitable that interest has piqued [in Europe], because many countries in eastern and northern Europe are in the same position as Poland” where Russia is concerned, he said.

But the Korean defense analyst expressed doubt that Korean companies could ramp up production at home or abroad to meet the demands of multiple new deals with Europe.

“My understanding of the Polish contracts is that the K-2 battle tanks that are scheduled for delivery to Poland next year were originally earmarked for the Korean Army, but the Defense Acquisition Program Administration (DAPA) allowed Hyundai Rotem to export these tanks after assessing that the sales would not be detrimental to the Korean Army’s defense posture,” he said.

“While localized production would likely be part of any new European deals, it still takes years to ramp up production. The quick turnaround in the Polish contracts is more of an exception than the norm, even for Korean companies,” he added.

The defense researcher also cautioned that the current drivers of demand for Korean defense products may not last.

“The current situation — the war in Ukraine — is an extraordinary one that has boosted demand for weapons around the world,” he said. “It’s very hard for defense companies and state arms procurement agencies to not only predict future demand in such a situation, but also plan investments for production expansion, which necessarily requires large investments, which in turn rely on contracts.”

Bang, on the other hand, was optimistic that future weapons sales could be scaled up relatively quickly once deals are inked, but added the caveat that another major incident impacting the stability of the global supply chain could throw a wrench into the speed of deliveries.

“Our defense production is not completely indigenized — some weapons still rely on receiving components from other countries, and another destabilizing event, such as a mainland Chinese invasion of Taiwan, could alter the pace of domestic defense production,” he said.

What does the future hold for Korean defense production?

While industry insiders were tight-lipped on the possibility of more weapons deals in Europe, it is clear that the Korean defense industry has set its sights on regions farther afield than those impacted by the war in Ukraine.

Hanwha Defense’s Redback infantry fighting vehicle (IFV) is currently one of two tenders hoping to be selected by the Australian Department of Defense’s Land 400 Phase 3 project, worth $18-21 billion and aimed at acquiring 400 next-generation IFVs to replace the country’s M113 armored personnel carriers.

Hanwha’s Redback bid follows in the heels of its successful bid to supply 30 K-9 howitzers and 15 K-10 armored ammunition resupply vehicles to Australia — a contract worth 930 billion won ($733 million).

Hanwha Defense is also part of a consortium with Oshkosh Defense to design a U.S. Army optionally manned fighting vehicle (OMFV) to replace around 3,500 M2 Bradley vehicles in a project worth approximately $47 billion, with the Oshkosh-Hanwha design for an OMFV expected to be based on the chassis of the Redback.

But Korea is unlikely to be the only rising defense supplier in the global weapons market.

According to Bang, both Japan and Turkey are focused on bolstering their domestic weapons industries in response to the changing global security environment.

“In some ways, we already see these two countries gearing up to become serious weapons producers, with Turkey currently supplying drones to Ukraine, while Japan launched its Acquisition, Technology and Logistic Agency to further its military technological innovation and to develop a sixth-generation stealth fighter,” he noted.

For Korea to continue growing as a major player in the global weapons market, the country would have to shift its budget allocation from systems development to technological research, he added.

“The current proportion of Korea’s defense budget dedicated to research and development is around 7 percent, but we need to increase that to at least 10 percent so we can develop or indigenize key technologies,” Bang said, noting that 15 percent of the U.S. defense budget is dedicated to R&D.

Bang also said that Korea’s defense industry would need to diversify to reduce its reliance on a few big industry players.

“If you look at the example of Israel, they have a robust defense industry that is made up of strong, medium-sized companies,” he said, adding that Korea’s defense industry would be better served if it, too, had smaller players that strongly specialized in components that would strengthen military supply chains.

BY MICHAEL LEE [lee.junhyuk@joongang.co.kr]