SEOUL, South Korea — South Korean defense contractor LIG Nex1 will export its Cheongung mid-range surface-to-air missile system to Saudi Arabia in a deal valued at $3.2 billion, Seoul’s Ministry of National Defense announced Tuesday.
The second Middle Eastern sale for the system, following a 2022 deal with the United Arab Emirates, marks another win for South Korea’s fast-rising arms industry.
Elsewhere, though, the industry is running into headwinds over joint programs and — more ominously — questions over its ability to fulfill a massive, highly touted arms order to Poland.
The U.S. and Europe are arming Ukraine, and Russia has kicked its defense industry into overdrive while also sourcing arms and munitions from Iran and North Korea. With both sides strained, South Korea’s capacity matters.
For the West, South Korea, a prosperous, stable democracy, looks like an ideal solution: The country is a high-tech manufacturing powerhouse of “everything from ships to chips.” As the world’s leading supplier of memory semiconductors, Seoul has leaned to Washington’s side in its tech war with China.
However, the colossal 2022 arms deal with Poland is in jeopardy, hamstrung by funding limits and possible production roadblocks.
The medium-range, “hit-to-kill’ Cheongung can reportedly take down incoming missiles at altitudes of some 24 miles.
Both Saudi Arabia and the UAE face a challenge in the region from Shiite Iran and both sided against Yemen’s Iran-allied Houthi rebels in that country’s civil war, during which they suffered drone and missile attacks.
Seoul has also sold rocket artillery to Saudi and UAE, and sensors and ammunition to Riyadh. President Yoon Suk-yeol made a state visit to Saudi Arabia in October 2023, following up on a visit to South Korea by Saudi Prince and Prime Minister Mohammed bin Salman in 2022. Mr. Yoon’s visit saw deals worth $30 billion signed in multiple sectors.
The precedent, though, was set by the UAE – a state with which South Korea has unusually close defense ties.
A shadowy defense deal was signed alongside a high-profile $20 billion deal to provide the UAE with nuclear reactors in 2009.
It involved the then-semi-secret deployment of Korean special forces to the UAE in 2011. The unit remains in operation, training local troops, and on February 3, it was visited by Defense Minister Shin Won-sik, who was touring UAE and Saudi Arabia.
“Arab Gulf states are looking to diversify their sources of defense procurement and partnerships beyond their traditional Western suppliers,” noted a November 2023 report by the International Institute for Strategic Studies. “And Seoul can offer increasingly advanced equipment alternatives, often at competitive prices and with shorter lead times.”
While the oil-rich Gulf States can afford pricey weapons, other South Korean arms buyers are less fortunate.
Serious questions hover over the huge arms deal with Poland, which has sharply ramped up defense spending as the war in neighboring Ukraine grinds on.
In 2022, South Korean defense firms signed the largest deal in the country’s history to supply tanks, self-propelled artillery, multiple-launch rocket systems, and combat aircraft to Warsaw. However, three sources familiar with Korean-Polish affairs and with the international arms trade tell The Washington Times that the 2022 order, supplemented by further Polish orders, may have hit a wall because of financing and production challenges.
The South Korean media reported that the 2022 Polish order was worth $12.6 billion — though other estimates put it as high as $18 billion.
The news reports from October 2023 state that Seoul state lenders Eximbank and Korea Trade Insurance Corp. together underwrote $9 billion in loans and guarantees to Warsaw to support the 2022 order. But the institutions have legal caps on their lending and, at best, can support slightly over another $1 billion to Poland. Meanwhile, follow-up orders have surged to $22.6 billion — some estimates are even higher — leaving a financial crater at the heart of the deal.
In November, Reuters reported that the South Korean government was working to forge a syndicated loan, though some say Poland would decline such a loan, given the higher interest rates.
In December, Polish President Donald Tusk bluntly told a press conference in Warsaw, “A significant part of the Korean purchases was to be financed by a loan that Korea was to grant. In the end, it turned out that there was some misunderstanding, … it turned out that there was no Korean loan.”
South Korea’s National Assembly, gearing up for an April general election, has failed to pass a motion raising the state lenders’ lending limits. Even though some of the equipment will be built in Poland, the sheer number of ordered items, including tanks and 155mm howitzers, has created production roadblocks, those familiar with the deal say.
“The [Polish] deal was too ambitious,” one source told this newspaper last month. “They don’t have the capacity.”