South Korea and its efforts to become the world's number one arms exporter

South Korea is using a $13.7 billion arms deal with Poland, its biggest ever, to lay the groundwork for a massive military industry that is expected to satisfy Europe's future arms needs with defense companies from the two countries.

According to the South Korean Ministry of National Defense , the country's arms export revenue jumped from $7.25 billion in 2021 to more than $17 billion in 2022, as Western countries sought to provide equipment to Ukraine and tensions continued to escalate at hotspots.

The arms deal that South Korea signed last year with Poland, a key NATO member, includes hundreds of Chunmoo missile launchers, K2 tanks, K9 self-propelled guns and FA-50 fighter jets. The deal is notable even among the world's largest defense forces for its value and quantity.

South Korean and Polish officials say their partnership will help them dominate the post-Ukraine European arms market, with Seoul providing high-quality weapons faster than any other country and Poland providing manufacturing capabilities and trade links into Europe.

Reuters spoke with 13 senior company officials and officials, including those directly involved in the deal, who said the deal would provide a blueprint for how to leverage international partnerships and public-private partnerships to expand South Korea's influence and satisfy its desire to become the world's top arms supplier.

“The Czech Republic, Romania, Slovakia, Finland, Estonia, Latvia, Lithuania and other countries used to be interested in buying defense products only from Europe, but now they know that they can buy similar products at lower prices and faster delivery speeds from Korean companies,” said Oh Kyeahwan, a director at Hanwha Aerospace, one of the companies involved in the military contract with Poland.

Korean companies do not give prices for their weapons, which are often sold with support vehicles and spare parts.

Hanwha Aerospace already has a 55% share of the international howitzer market and the arms deal with Poland will push that figure to around 68%, according to NH Researches & Securities.

The deal establishes a consortium of Korean and Polish companies to produce weapons, maintain fighter jets and set up frameworks for supplying weapons to other European countries, said Lukasz Komorek, director of the Export Projects Office at Poland's state-owned Polish Armaments Group (PGZ).

The deal will include licensing the production of South Korean weapons in Poland, according to Seoul and Warsaw government officials. The two countries plan to produce 500 of the 820 tanks and 300 of the 672 howitzers at Polish factories starting in 2026.

“We don’t want to be just a subcontractor, a technology transfer provider and an investor. We can offer cooperation and leverage our experience to dominate the market in Europe,” said Mr. Komorek.

Sash Tusa, a defense and aerospace analyst at UK-based Agency Partners, said that while both countries have strong defense industries, their long-term plans could face obstacles. Political situations could change, reducing demand for weapons such as howitzers and tanks.

Even if demand and supply match, European countries will likely want to sign their own contracts with South Korea similar to Poland's — such co-production deals could create jobs and stimulate growth in their industries, Tusa said.

Commenting on the possibility of South Korea exporting its weapons through Poland, as well as the obstacles that a deal between the two countries might face, he added: “Exporting through Poland could be effective in some countries at very low export volumes.”

World - South Korea: Inside the race to become the world's number one arms exporter — A K9 howitzer fires during a military exercise in the village of Wierzbiny, on the outskirts of the town of Orzysz, Poland, March 30, 2023. (Photo: REUTERS/Kacper Pempel/File Photo)

Fast delivery

At Hanwha Aerospace's factory in southern South Korea, six automated robots and more than 150 workers work tirelessly to produce 47-ton K9 howitzers for export to Poland.

These self-propelled guns fire NATO standard 155mm ammunition, utilize a computerized fire control system, are designed to be easily integrated into command and control networks, and offer performance comparable to more expensive weapons options from Western countries. Many powers such as Australia and India are using them in their militaries.

To meet demand, the company plans to hire 50 more workers and install more production lines, production manager Cha Yong-Su said during a recent tour. Automated robots handle about 70 percent of the welding work in the K9 howitzer production process, and they are key to expanding production capacity, he said. The robots work about eight hours a day but can work nonstop if necessary.

“Simply put, we can satisfy any order volume,” says Mr. Cha.

According to Polish officials, the fact that South Korea can deliver weapons faster than any other country is a key consideration. The first batch of 10 K2 tanks and 24 K9 howitzers was delivered to Poland in December, just a few months after the contract was signed, and at least five more tanks and 12 howitzers have been delivered since then.

In contrast, Germany – another major arms exporter – has yet to deliver any of the 44 Leopard tanks Hungary ordered in 2018, according to Oskar Pietrewicz, a senior analyst at the Polish Institute of Foreign Affairs.

“Countries will certainly be increasingly interested in Korean products considering the limited production capacity of the German defense industry, a major arms supplier in the region,” he said.

That will be a point of attraction for customers in the future, said senior officials in the South Korean arms manufacturing industry.

The South Korean military's close ties to the country's arms industry allow it to shift domestic orders to satisfy production capacity for export orders and expand production capacity at its highly industrialized manufacturing facilities, officials said.

“They can produce what we produce in years, and they only need weeks or months,” said one European defense industry executive, who asked to remain anonymous because of the sensitivity of the matter.

According to Cho Woorae, Vice President of International Business and Strategy at Korea Aerospace Industries, the constant escalation of tensions with North Korea has kept South Korea's military production lines running, and their weapons are designed, tested, and upgraded under high-pressure conditions.

According to Kim Hyoung Cheol, deputy director at the Defense Acquisition Program Administration (DAPA), South Korea has been promoting its products to Poland since before the Russia-Ukraine conflict broke out, but Russia's troop deployment in Ukraine has heightened Poland's interest.

After the Polish Defense Minister visited in May 2022 to inspect South Korean weapons, and Yoon Suk Yeol met with Polish President Andrzej Duda on the sidelines of the NATO summit in June 2022, the groundwork was laid for the signing of the huge contract the following month, Kim said.

South Korean weapons are designed to meet US and NATO standards, a key selling point. According to data from the Stockholm International Peace Research Institute, South Korea is the third-largest arms supplier to NATO and its member states, accounting for 4.9 percent of all arms consumed by those countries.

This is far below the US figure of 65% and France's 8.6%.

Co-production

Seoul government officials told Reuters they had proposed producing South Korean weapons in Poland to the Polish government to simplify the process of exporting weapons to European countries.

“The South Korean government is promoting military diplomacy and defense cooperation so that relations with importing countries can develop into cooperative relationships that go beyond buyer-seller relationships,” the South Korean Defense Ministry said in a statement.

The Polish Defense Ministry did not respond to requests for comment.

Mr. Oh said that Hanwha Aerospace has successfully implemented many technology sharing agreements with India, Egypt and Türkiye.

“So I don't think there are many concerns regarding production capacity,” he said.

The 2022 military contract was initiated after the Korean companies signed a framework agreement with the Polish government, he said. The companies formed a consortium with PGZ and its subsidiaries, which signed the final contract with the Polish government.

“A decade-long plan”

In the past year, South Korea successfully launched its first domestically produced space rocket, witnessed the successful maiden flight of its domestically produced KFX fighter jet, and announced contracts worth billions of dollars.

“For most other countries, this is a decade-long plan. We have underestimated South Korea for a long time,” said a member of a European defense company who asked to remain anonymous because of the sensitivity of the issue.

Last month, Yoon told Reuters that South Korea could expand its support for the Kyiv government beyond economic and humanitarian aid if Ukraine suffered a large-scale attack on civilians.

Since then, the Seoul government has approved some South Korean weapons parts for use in Ukraine.

South Korea's arms sales to the Asian region accounted for 63 percent of the country's total defense revenue from 2018 to 2022, according to data from SIPRI.

South Korea is co-designing the KFX fighter with Indonesia, and Polish leaders have signaled interest in the project. Malaysia has ordered several FA-50s worth nearly $1 billion in 2023. Seoul is also in the running to win a $12 billion contract to supply Australia with its Future Infantry Fighting Vehicle.

“Asian countries see us as an ideal partner for defense contracts because we all want to guard against escalating tensions,” said a diplomat in Seoul. “We are allies of the United States, but we are not the United States.”

Nguyen Quang Minh (According to Reuters)

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