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In addition to pieces on the North Korean luxury trade and the South Korean economy, the Korea Economic Institute’s On Korea 2014 (.pdf) has three very useful pieces on the Korean defense and nuclear industries (the full table of contents can be found below). A consistent theme: South Korea continues to pursue a quite nuanced industrial policy in these sectors, backed by strong export promotion. Sound familiar?
Richard Weitz provides a detailed look at the South Korean defense industry. The main conclusion: Seoul is actively pursuing both import-substitution and export-promotion in the sector. The United States continues to be South Korea’s primary supplier, but the Ministry of National Defense’s Defense Acquisition Program Administration (DAPA) has been willing to go to other suppliers, most notably in Europe and Israel, when it thought US firms were not offering the best value. The Agency for Defense Development, overseen by the Defense Ministry, has a staff of several thousand. Its R & D efforts are facilitated by Korea’s private sector depth in sectors such as electronics and shipbuilding with dual civilian and military uses. Korea has moved into a number of lucrative export niches, such as its FA-50 light combat aircraft and ammunition. Weitz concludes that Korean capabilities will mean more competition for the US in third markets and concessions to Korean producers and exporters that will move toward greater balance in the two-way arms trade.
Chen Kane and Miles Pomper take a look at the UAE reactor export deal. The Korean reactors—modified versions of a Westinghouse design—are highly efficient and cost-effective. But the financing on offer from the ROK government helped seal the deal, which also included a bundled package of other cooperation agreements, from renewable energy, IT, and education to military training. Kane and Pomper raise the issue of whether Korea overpaid for the deal. KEPCO profits will come out of construction, equipment supply and a possible equity stake. Nonetheless, South Korea has signed over 20 nuclear cooperation agreements with future sales also likely to be concentrated in the Middle East, including Saudi Arabia and Jordan.
Finally, Fred McGoldrick and Duyeon Kim walk through the intricacies of the US-ROK negotiations for a new 123 Agreement; the 1974 agreement, covering cooperation on peaceful uses of nuclear energy, expired in March of this year and was extended for two years when negotiations could not be concluded on schedule. The core issue, which we considered in an earlier post, is the prior consent rights the US enjoys with respect to enrichment, reprocessing and transfers of nuclear technologies to third parties.
McGoldrick and Kim argue that the South Koreans will probably accept continuing restraints on their ability to enrich because they do not need to secure uranium from the US, they can secure enriched fuel supplies for their customers from third parties, and they could in theory go their own way, assuming—a big “if”—that other NPT members would provide them with enrichment technology.
The real sticking point is South Korean interest in pyroprocessing, which is seen by the government as a solution to its ticking nuclear waste storage problem. Reprocessing is hardly the most efficient way to address this issue, and even if agreement were reached on the issue tomorrow it will not provide a solution for nearly a decade; the ROK government is going to have to find an interim fix. But South Korea is rightly galled by the fact that Europe—through EURATOM—Japan and even India have been granted programmatic consent for their activities in these areas. Why should Korea be treated differently?
The US has tried to move toward the UAE “gold standard” for such agreements in which nuclear partners forego rights to enrich and reprocess altogether. But the strategic environment is also a factor; even though North Korea has hardly kept to its obligations under either the NPT or the North-South agreement on denuclearization, proliferation hawks believe that conceding to South Korea in the 123 Agreement will complicate negotiations with the North Koreans.
What negotiations with the North Koreans? We are more inclined to see South Korea’s requests in a favorable light. The country is in full compliance with its NPT obligations and IAEA safeguards agreements and thus is a model for how North Korea might pursue a nuclear program that was for peaceful purposes only. That is, of course, if it had any interest in doing so.
KEI On Korea 2014 Table of Contents
Korea’s Domestic Economy
- "Building a Creative Economy in South Korea: Analyzing the Plans and Possibilities for New Economic Growth" by Sean Connell
- "The Impact of Household Debt on Korea's Economy and Society" by Jongsung Kim
Korea’s Expanding Nuclear and Defense Ambitions
- "South Korea's Defense Industry: Increasing Domestic Capabilities and Global Opportunities" by Richard Weitz
- "Reactor Race: South Korea's Nuclear Export Successes and Challenges" by Chen Kane and Miles A. Pomper
- "Decision Time: U.S.-South Korea Peaceful Nuclear Cooperation" by Fred McGoldrick and Duyeon Kim
Regional Security Lessons and Issues
- "East Asia at the Crossroads: A Comparative Study on Taiwan's and Korea's Reconciliation with Adversaries" by Yeh-chung Lu, Byung Kwang Park, and Tung-chieh Tsai
- "Luxury Goods in North Korea: Tangible and Symbolic Importance to the Kim Jong-un Regime" by Soo Kim
