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To co-prosperity with Saudi Arabia

Published: 24 Oct. 2023, 20:07

South Korea and Saudi Arabia inked preliminary agreements on investments worth $15.6 billion during President Yoon Suk Yeol’s first state visit to the oil-rich Middle East country. The projects are separate from the $29 billion deals the two countries struck during Crown Prince Mohammed bin Salman’s visit to Korea in November last year. The expectations for another “Middle East” boom for Korean companies are raised as the bilateral cooperation broadens to encompass the clean energy, infrastructure, ICT and defense sectors.

Stronger ties with the oil giant are imperative for Korea, whose reliance on energy imports tops 90 percent amid the tumultuous developments in the Mideast due to the war between Israel and Hamas, the Palestinian militant group that controls the Gaza Strip.

State-owned Korea National Oil Corporation signed an agreement with Saudi Aramco to jointly share the crude reserve worth 5.3 million barrels to keep them in the tanks in Ulsan, Korea, until 2028. Korea can replace its oil imports with domestic stock for five years in exchange for the tank lease and also has the priority to buy the Aramco stock in Korea under contingent events. The design by Yoon to strengthen energy security in the face of growing uncertainties in the international fuel market has helped to deepen the partnership with Saudi.

For Korea, the Middle East is not just the source of oil. It brought abundant opportunities for Korean companies, just like the construction-led boom 50 years ago. The market can help offset Korea’s losses in China as a result of the realignment in the global supply chain due to the fierce contest between the United States and China. Korea’s exports to the Middle East increased by double digits last year despite the country’s biggest trade deficit that year.

Business matters are the top priority for Yoon in his six-day visits to Saudi and Qatar, as it had been for his first overseas visit this year to the United Arab Emirates. His entourage is composed of heads of 139 companies and business organizations, much bigger than during former conservative President Park Geun-hye’s visit to four Gulf states in 2015.

Yoon watched the signing of Hyundai Motor’s first production base in Saudi Arabia and reminded the Crown Prince of Korea’s chances in the $500 billion NEOM project. He visited the historic site of Diriyah, the birthplace of the al-Saud family, and pitched for a Korean role in the $20-billion Diriyah Gate development project.

Riyadh has a lot of interest in future growth and migration to the hydrogen economy to be ready against the depletion of oil. Under the Vision 2030 Initiative, it plans to replace its power sources with renewable energy by 2030. Korea must capitalize on the momentum to steer out of the low-growth trajectory now.