South Korea Grounds Its Position in the Central and East European Defense Market (Part Two)

*Read Part One here.

The recently established military relationship between South Korea and Poland is a multidimensional phenomenon, reaching beyond security in its traditional meaning. In fact, large-scale arms contracts are almost always politicized and followed or accompanied by intensified economic ties. Certainly, in the current circumstances, this view is shared by Warsaw and Seoul (see Part One).

As a result of the COVID-19 pandemic and growing tensions between the United States and China, South Korean companies are following the global trend of shortening supply chains. In recent years, these entities accounted for the greatest foreign investment flows into the Polish market, ranked fourth in 2019 (Oecd-library.org, accessed on January 25) and rising to first in 2021 (The Korea Herald, May 17, 2022). From South Korea’s perspective, Poland is an attractive and sought-after partner because it grants access to the European market as well as a skilled and still relatively cheap labor force. Not to mention, Warsaw is well-situated within the European Union’s economic and defense architecture. Economically speaking, these factors partly apply to other Central and East European (CEE) markets as well. That is why Seoul is already widely present in countries such as the Czech Republic and Hungary to leverage opportunities for increased foreign direct investment (Stats.koreaexim.go.kr; Nationalatlas.ngii.go.kr, accessed January 25).

The competitive advantage of deepening cooperation with South Korea is rooted in the fact that Korean companies simply have little domestic competition in some sectors of these markets. Nevertheless, Poland is one of the only countries in the region capable of and willing to become a Korean defense production hub due to its objectively strong potential as a regional leader (as demonstrated by Warsaw’s unwavering support of Ukraine) and proper production facilities to be able to absorb the transfer of Korean technology.

Geographically, Poland’s location is also advantageous. Located in the heart of Europe, the country provides alternative trade routes for Korean defense products manufactured by Poland. Nearby Turkey, Finland, Norway and Estonia have already bought K9 howitzers—South Korea’s most popular military export—and it is expected that similar regional contracts will intensify. Indeed, Norway is considering making the Korean-made K2 tank its new main battle tank (Asian Military Review, May 6, 2022). Logistical facilities located in the region also support the notion of increased defense negotiations with Seoul. After the Russian heavy weapon–centered land invasion of Ukraine, upgrades to the land forces of the North Atlantic Treaty Organization’s (NATO) eastern front are now more likely to occur than in the past three decades. Moreover, Poland’s Baltic coastal line make the African and Middle East markets accessible too, which is critical given a potential take-up of Korean arms throughout Africa (The Korea Times, August 5, 2022). Finally, proximity to Germany’s giant motor industry makes Poland its natural economic hinterland. Hence, any investments in related sectors, including the battery industry, seem reasonable.

The Korean military industry has been determined to enter the Polish and CEE markets for some time. Hyundai Rotem had already presented its offer of K2PL battle tanks in 2018 during the International Defense Industry Exhibition in Kielce, Poland (AltairTV, September 10, 2018). Nevertheless, only Russia’s large-scale invasion of Ukraine finally triggered this state-to-state cooperation. Strengthening bonds with a crucial NATO member does not only benefit South Korea’s defense industry in a financial sense, but, perhaps more importantly, it also builds confidence in the quality of Korean equipment and increases the competitiveness of Korean defense companies.

It should be kept in mind that South Korea is a latecomer to the global defense market. Hence, Seoul certainly desires an elevated standing as it hopes to penetrate other markets. “Poland is where our journey for the export of 1,000 FA-50 fighters begins,” Korea Aerospace Industries CEO Ahn Hyun-Ho declared, adding that Poland is a potential buyer of KF-21 “4.5th-generation” fighter aircraft, which is currently under development (Yonhap News Agency, July 28, 2022). Accordingly, the recently signed deals in Central and Eastern Europe might serve as a stepping stone into other industries, including shipbuilding. In December 2022, PKN Orlen, Poland’s leading energy group, co-organized a christening ceremony for two liquefied natural gas carriers at Hyundai Heavy Industries’ facilities in Ulsan, South Korea. The Polish company has chartered these for ten years from Norwegian energy entity Knutsen Group.

Neither China nor Russia—as the two major regional adversaries for Seoul and Warsaw in their respective areas—have commented on the recently intensified Korean-Polish defense relationship. Even so, it is clear that these developments run against Beijing’s and Moscow’s interests, if only from a military perspective. The large purchases of new weaponry and the creation of new logistical facilities in Central and Eastern Europe require both Russia and China to adjust to the new operational framework. If Korean defense production capacities are temporarily disabled—in the worst-case scenario, as the result of a strike or act of sabotage—it might be possible to replace them with elements delivered from Poland, a circumstance that any potential aggressor must reckon with.

The Polish-Korean defense relationship has every potential to become a win-win situation, with Warsaw boosting its military potential and reviving its heavy military industry, on the one hand, and Seoul solidifying its position in the European and global defense markets, on the other. Furthermore, strong political and military ties have already given rise to increased economic cooperation between the two sides, especially in the energy sector. Much will depend, however, on economic and political factors, as Poland is struggling with high inflation and is preparing for parliamentary elections this fall. Nevertheless, this burgeoning bilateral relationship should serve as another stepping stone for South Korea’s deeper economic and military engagement in the CEE region.