Inside South Korea's race to become one of the world’s biggest arms dealers

South Korea is using a $13.7 billion arms deal with Poland - Seoul's biggest ever - to lay the groundwork for a military-industrial juggernaut that the two nations' defence companies hope will feed Europe's hunger for weapons far into the future.

South Korea's arms sales jumped to more than $17 billion in 2022 from $7.25 billion the year before, according to its defence ministry, as Western countries scrambled to arm Ukraine and tensions rose in other hot spots such as North Korea and the South China Sea, according to Reuters' analysis.

The arms deal with Poland, a key NATO member, last year included hundreds of Chunmoo rocket launchers, K2 tanks, K9 self-propelled howitzers, and FA-50 fighter aircraft. The deal's value and the number of weapons involved made it stand out even among the world's biggest defence players.

South Korean and Polish officials say their partnership will help them conquer the European arms market even beyond the Ukraine war, with Seoul providing high-quality weapons faster than other countries and Poland offering manufacturing capacity and a sales pipeline into Europe.

Reuters spoke to 13 company executives and government officials, including those directly involved in the deal, who said the arrangement provides a blueprint for using international public-private partnerships and consortiums to extend Seoul's reach and achieve its ambition to be one of the world's biggest weapons suppliers.

"The Czech Republic, Romania, Slovakia, Finland, Estonia, Latvia, Lithuania, and others were thinking of buying defence products only in Europe, but now it is more well known that you can buy at a low price and have it delivered quickly from Korean companies," said Oh Kyeahwan, a director at Hanwha Aerospace who was involved in the Poland deal.

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

The deal established consortiums of South Korean and Polish companies that will build the weapons, maintain the fighter jets and provide the framework to eventually supply other European states, said Lukasz Komorek, director of the Export Projects Office at the state-owned Polish Armaments Group (PGZ).

That will include building South Korean arms on license in Poland, officials in Seoul and Warsaw said. Plans call for 500 of 820 tanks and 300 of 672 howitzers to be built in Polish factories starting in 2026.

South Korea’s offer to provide weapons faster than almost anyone was a key consideration, Polish officials say. The first shipment of 10 K2s and 24 K9s arrived in Poland in December, just months after the deals were signed, and at least five more tanks and 12 additional howitzers have been delivered since.

By contrast, Germany, another major arms manufacturer, has yet to deliver any of the 44 new Leopard tanks Hungary ordered in 2018, said Oskar Pietrewicz, senior analyst at the Polish Institute of International Affairs.

"Countries' interest in South Korea's offer may only grow considering the limited production capacity of Germany's defence industry, which is a major arms supplier in the region," he said.

Executives in South Korea's arms industry say that will be a selling point for future clients.

Constant tensions with North Korea mean the South's military production lines are running and its weapons have been developed, tested, and upgraded in high-pressure situations, said Cho Woorae, global business and strategy vice president at Korea Aerospace Industries.

South Korea had promoted its weapons to Poland before the war, but the invasion of Ukraine - which Russia calls a "special operation" - increased Poland's interest, said Kim Hyoung Cheol, deputy director at the Defense Acquisition Program Administration (DAPA).

After the Polish defence minister's visit in May 2022 to observe South Korean weapons, and Yoon Suk Yeol met with Polish President Andrzej Duda on the sidelines of the NATO summit in June that year, the stage was set for the huge deal that was finalised a month later, Kim said.

South Korea's weapons are designed to be compatible with U.S. and NATO systems - another selling point. The country is the third-largest supplier of weapons to NATO and its member states, accounting for 4.9% of arms purchases, according to the Stockholm International Peace Research Institute (SIPRI).

That is far behind the United States, which accounts for 65%, and France at 8.6%.

JOINT PRODUCTION

Officials in Seoul told Reuters that they pitched Poland on producing South Korean weapons there to make it easier to deliver to European customers.

"The Korean government is promoting military diplomacy and defence cooperation so that the relationship with the purchasing country can develop into various partnerships beyond just a seller-buyer relationship," South Korea's Defense Ministry said in a statement.

Poland's Ministry of National Defence did not respond to a written request for comment.

Oh said Hanwha Aerospace operates successful technology-sharing arrangements in India, Egypt, and Turkey.

"Because of that, I don't think there's much to worry about regarding capacity," he said.

South Korea is developing its KFX fighter jet with Indonesia, and Polish leaders have signalled interest in that project. Malaysia this year bought nearly $1 billion in FA-50s, and Seoul is in the running to win a $12 billion deal to supply Australia's next infantry fighting vehicle.

"Asian countries see us as a very attractive partner for defence deals as we all seek to hedge against the rising tensions," a diplomat in Seoul said. "We're a U.S. ally, but not the U.S."