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Polish delegation visits Seoul to push ahead with arms deal

With more deals pending, no agreement made yet on funding scheme

By Choi Ji-won

Published : April 23, 2024 - 17:58

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South Korea's K239 Chunmoo rocket artillery system is displayed during the Seoul International Aerospace and Defense Exhibition held at the Seoul Air Base in Seongnam, south of Seoul. (Getty Images) South Korea's K239 Chunmoo rocket artillery system is displayed during the Seoul International Aerospace and Defense Exhibition held at the Seoul Air Base in Seongnam, south of Seoul. (Getty Images)

South Korea and Poland have come to the table to seek progress in their arms deal, with Korea grappling with funding challenges for a follow-up agreement with Poland.

On Monday, Pawel Bejda, Poland’s deputy defense minister, met with Seok Jong-gun, the head of South Korea’s Defense Acquisition Program Administration, marking the first high-level visit from the Polish government since the administration change there in December 2022.

The Polish government's visit to South Korea comes as the two nations continue discussions to advance an additional arms export deal, which was initially set for last year.

In July 2022, the Polish government and South Korean defense firms signed a comprehensive arms export agreement valued at 30 trillion won ($21.8 billion). Out of this, around 17 trillion won was set to be executed within the same year, with both sides agreeing to finalize a secondary contract within the following year.

The follow-up contract was delayed because the South Korean government couldn't provide additional financial support to Poland. Korea had already granted Poland about 12 trillion won in loans, including 6 trillion from the Export-Import Bank of Korea, to fund the first deal, leaving Eximbank with insufficient funds for further policy financing for the country.

Meanwhile, in December, Hanwha Aerospace signed a second agreement to supply the rest of the K9 howitzers, contingent on Poland securing additional financing from the South Korean government by this June.

To accommodate this deal, Eximbank's legal lending limit was increased through a legislative amendment in February, but the institution is still awaiting extra capital from the Ministry of Strategy and Finance.

Industry sources say the South Korean government should quickly provide additional capital to the state-run lender for the Hanwha contract, along with other pending arms deals with Poland, to move forward.

"The second deal consists of all K9 howitzer export volume, but it depends on Poland securing the necessary financial support," an official from Hanwha Aerospace noted.

In addition, the Hanwha subsidiary has around 2 trillion won worth of K239 Chunmoo multiple rocket launcher exports pending an executive contract. Industry insiders expect the Polish delegation to finalize the deal for the K239 Chunmoo launchers during their visit this week.

The Polish Defense Ministry, in a pre-visit notice, stated its intention to "sign a second executive contract for the supply of more Homar-K rocket launchers" during the Seoul trip. "Homar-K" is the Polish name for K239 Chunmoo.

The delegation also plans to visit DAPA’s Anheung training ground to observe the test firing of Chunmoo launchers adapted for the Polish Armaments Agency.

Meanwhile, Hyundai Rotem is also waiting to sign a secondary executive deal to provide Poland with some 800 K2 tanks.

Despite ongoing concerns regarding the arms deal overall, both the South Korean and Polish governments reaffirmed their commitment to executing the agreement.

"We confirmed the new Polish government's commitment to continuing defense industry cooperation through this meeting," Seok said on Monday, noting that DAPA will work to “maintain the momentum for expanding bilateral cooperation in defense.”

Secretary of State at the Polish Ministry of State Assets Marcin Kulasek, a member of the delegation, stated in a recent X (formerly Twitter) post that the Polish delegation is visiting South Korea to “complete the framework agreement.” He also called the recent Eximbank law revision a “great opportunity for Poland and the Polish arms industry,” while referring to Korea as a “good partner for continued cooperation.”