The international arms trade has largely flowed West to East, with North American and European countries accounting for a whopping 87% of weapons exports from 2017 to 2021.
This year South Korea has shown it’s ready to change that.
Poland agreed this summer to purchase tanks, self-propelled howitzers and light attack planes from South Korea in deals worth $8.8 billion. The two countries topped it off last week with a $3.6 billion agreement for rocket launchers. It’s the first time that a NATO member other than Turkey has turned to defense contractors outside the alliance for major weapons systems.
South Korea has quietly become a favorite of arms buyers around the world, in the culmination of a decades-long effort to protect itself from North Korea by building an indigenous arms industry with economies of scale gained from big export sales. Among international weapons suppliers, the country climbed from 31st place in 2000 to become No. 8 in the period from 2017 to 2021, according to the Stockholm International Peace Research Institute (SIPRI). So far this year, it’s inked $17 billion in export contracts, up from a previous record of $7 billion in 2021, which was the first year South Korea’s export deals topped imports.
President Yoon Suk-yeol, who took office in May, set the goal last month of becoming one of the top four weapons sellers in the world. With Russia’s unprovoked invasion of Ukraine combined with China pushing its territorial claims in the South China Sea and continuing conflicts in the Middle East, South Korea will have every opportunity.
“It’s a gold rush period for arms producers,” SIPRI’s Simeon Wezeman tells Forbes. “The Koreans definitely are at the right time with the right technology.”
As European countries hike defense spending to counter the Russian threat and replace weapons they’ve sent to Ukraine, U.S. officials fret that American arms makers won’t be able to meet the demand due to supply chain snags and labor shortages. South Korean weapons makers stand ready to fill the gap with systems designed for joint operations with U.S. forces, making them easy to integrate with NATO.
Among South Korea’s prime selling points are affordability and the speed with which leading arms companies such as Hanwha Defense, Korea Aerospace Industries and Hyundai Rotem can ship orders.
Hyundai Rotem says it can deliver 180 K2 tanks to Poland in three years, five times as many Leopard 2 tanks as Germany’s Krauss-Maffei Wegmann could produce in that span, and at roughly half the cost at 8 billion to 10 billion won ($5.7 million to $7.1 million) apiece.
And the South Korean companies have been able to expedite delivery of a small number of initial weapons systems to Poland out of production diverted from the South Korean military.
South Korea’s sales surge has also been greased by a willingness to manufacture locally and transfer technologies to buyers so they can produce the weapons themselves. It will work with Poland to set up production lines there for tanks and howitzers by 2026, with the aim of exporting to other European countries.
To developing countries, South Korea offers attractive trade finance terms, according to Wezeman. It has good warranties and after-sale service, and it doesn’t attach conditions and usage restrictions to its sales the way the U.S. does. Wezeman thinks that may have played a role in the United Arab Emirates’ decision to sign a $3.5 billion deal in January to buy Cheongung II mid-range air defense systems, South Korea’s largest overseas sale at the time and its first in the Middle East.
The recent sales boom isn’t just about affordability and availability. Poland evaluated Hanwha’s K2 Black Panther tank in a competition against the U.S. M1A2 Abrams (Poland is also buying 250 of those) and Germany’s Leopard 2. “Looking at the performance of the K2 in various tests and its technologies, it’s just as good,” Wezeman says.
South Korea began building up its arms industry in the 1970s out of a fear of abandonment by the U.S. after President Richard Nixon withdrew troops in 1969, followed by the U.S. retreat from Vietnam in 1975.
Arms makers benefited from generous loans and tax breaks and a broader industrial policy aimed at breaking into sectors with dual military-civilian uses like steelmaking, shipbuilding and electronics, says Michael Pinkston, a lecturer at Troy University in Seoul.
Korean companies advanced to producing more complicated weapons systems with designs licensed from U.S. companies and other Western allies or coproduced with them as a condition of major arms purchases. But U.S. restrictions prevented them from exporting many weapons systems with American roots.
Development of its own weapons systems, with higher local content, has coincided with a push since 2010 to tap foreign markets more aggressively.
“In the last ten or 15 years, they’ve reached levels where they’re competitive in technology with what other countries can offer,” Wezeman says.
The South Korean government is keen to expand on the recent success of the defense industry given it’s one of a few sectors where export sales have expanded this year amid an overall decline, says Won-Joon Jang, a defense analyst and research fellow at the Korea Institute for Industrial Economics and Trade.
South Korean weapons systems are in the running in competitions in 10 countries that could total up to $25 billion in contracts, Jang says. Among them, Hanwha Defense is thought to be the favorite to win a contract to provide infantry fighting vehicles to the Australian army for as much as $11.5 billion. Meanwhile, Norway is set to decide between the K2 Panther and Germany’s Leopard 2 to replace its main battle tanks.
One other key way South Korea hopes to expand sales: cracking the giant U.S. market.
Korea Aerospace Industries and Lockheed Martin lost out to Boeing
Meanwhile, Hanwha Defense is teaming with Oshkosh to build a version of the former’s infantry fighting vehicle to compete to replace the Army’s Bradley troop carriers.
Seoul hopes to bring down trade barriers by striking a Reciprocal Defense Procurement Agreement with the U.S., a type of pact Washington has with key allies that allows them to avoid “Buy American” provisions and cooperate more tightly with U.S. defense contractors.
Jang, who co-authored a paper last month on what it would take for South Korea to become one of the top four global arms merchants, says that it will be helped by the fact that a few countries in the middle of the table ahead of them – Germany, the U.K. and Italy – are expected to prioritize replenishing their arsenals rather than exports in the near term, while Russia is likely to tumble from the second spot in SIPRI’s ranking due to the fallout from its war against Ukraine.
One limiting factor for South Korea is that it’s only selling weapons, whereas a weapons purchase from the U.S. often comes as part of a broader alliance including the promise of military and political support, Wezeman says. “The Koreans won’t come to the rescue if something happens in the South China Sea or help you push your claims there. You can get that when you buy from the Americans.”