By Jung Sung-ki
Staff Reporter

South Korea and Russia are engaged in negotiations over the transfer of key arms technologies, the Defense Acquisition Program Administration (DAPA) said Tuesday.

The negotiations are part of the so-called third "Brown Bear" arms-for-debt swap project.

The two countries signed a memorandum of understanding in 2007 on the transfer of Russian military equipment and technology. Under the agreement, Russia promised to transfer technology related to submarine fuel cells and others to South Korea.

Moscow also pledged it would consider transferring technology related to a long-range radar and defense system to protect against an electromagnetic pulse (EMP) attack.

But both sides have failed to reach a final conclusion as they favor different weapons systems for the deal, sources said.

"The two sides have substantially narrowed their differences over the transfer of arms technology and purchase of end products," a government official said on condition of anonymity. "A final deal is expected to be signed by the end of the year."

The official said the envisaged deal would be worth about $700 million. The deal will not be an arms-for-debt swap program this time, and instead Seoul will buy the Russian technology and equipment, while Moscow will pay the remaining debt of some $1.3 billion over the next decade, said the official.

Unlike the previous two sets of arms-for-debt deals, South Korea now wants to receive more state-of-the-art arms technology from Moscow rather than end products.

A DAPA source said earlier that his agency had offered to buy a few weapons systems, including the Kamov Ka-32 utility helicopter and IL-103 trainer aircraft.

Russia, however, wants to provide weapons such as T-80U Tanks, METIS-M anti-tank missiles, BMP infantry fighting vehicles and Murena-E hovercraft as it did under previous deals in 1995 and 2003, the source said.

The Brown Bear project began as part of South Korea's efforts to retrieve loans extended to the former Soviet Union in 1991 to assist Russia's transformation into a market economy.

Following the landmark establishment of diplomatic ties between the two nations in 1990, one year before the Soviet Union collapsed, the Roh Tae-woo administration extended Moscow $1 billion in bank loans and a $470 million commodities loan.

Moscow was required to repay the loans in five years with a three-year grace period. But as the Russian economy fell apart, Moscow fell behind on its payments.

In 1995, Moscow began providing weapons in lieu of cash under the first phase of Brown Bear program. In the first three years of the program, Russia provided South Korea $210 million worth of modern arms such as T-80U tanks, METIS-M anti-tank missiles, Ka-32 transport helicopters, portable anti-aircraft missiles and spare parts.

By 2003, interest had pushed Russia's debt to $2.24 billion. The Roh administration decided to write off $660 million of that in exchange for more arms and a pledge to pay the remaining $1.3 billion in cash over 22 years.

From 2003 to 2006, Seoul received arms worth $534 million, including three Murena-E hovercraft and seven Ka-32s.

gallantjung@koreatimes.co.kr