Will return of Donald Tusk jeopardize Korea's arms exports to Poland?

K9 self-propelled howitzers, which Korea has exported to Poland through their 2022 arms contract, test fire shells at a firing range in Pocheon, Gyeonggi Province, Nov. 29. Yonhap

The recent change of government in Poland is prompting concerns in Seoul over defense arms exports that increasingly bolster Korea's economy.

Korea’s global arms sales nearly more than doubled – from $7.25 billion to $17.3 billion – between 2021 and 2022, thanks to the country’s major arms deal with Poland signed last year.

The deal, worth 17 trillion won ($12.4 billion), was struck when the right-wing Law and Justice (PiS) party was in power for eight years, before losing its parliamentary majority in a national election, Oct. 15.

Backed by the success of the 2022 deal, Korea has been pursuing additional arms export contract, this time, a deal worth 30 trillion won.

The deal, however, could be jeopardized, according to industry sources, Wednesday, as the centrist coalition led by newly-elected Prime Minister Donald Tusk is calling on invalidating some contracts signed under the PiS-led government.

Tusk was sworn into office, Wednesday (local time), a day after winning a vote of confidence in parliament.

“We are closely monitoring the course of Korea's arms exports in line with the transfer of power in Poland,” a public relations representative from a defense contractor in Seoul said, asking not to be named.

The staff noted Szymon Holownia, a Polish centralist coalition member and parliament speaker, said in a media interview earlier that “Agreements signed by the interim PiS government may be invalidated.”

Holownia also said, “PiS should have limited itself to administering the state and not spending public money” after the Oct. 15 election.

Wladyslaw Kosiniak-Kamysz, who is set to become Poland’s next defense minister, voiced a similar view, saying the deals signed by the government after the Oct. 15 election would be subject to “analysis and evaluation.”

Under the circumstances, a state-run think tank researcher said the new Polish government’s move “can work against the second round of the Korea-Poland arms deal.”

“Given the sensitive nature of the arms exports, we don’t know for sure how far the deal has progressed since Oct. 15, and any relevant discussions may be used as evidence to nullify the possible deal,” said Jang Young-ook, head of Europe Team at the Korea Institute for International Economic Policy.

He said the second round deal, if successful, can pave the way for the supply of arms components in addition to sales of tanks, howitzers and fighter jets as in the previous deal.

“You can see the significance of the ongoing arms sales efforts for Korea to secure a supply chain in the defense sector with Poland, and such efforts may be in vain.”

Korea has been struggling to carry out the second round of the deal, due to upper limits on financial support that the Export-Import Bank of Korea (Eximbank) and the Korea Trade Insurance Corp. can offer to the Polish government in the form of loans and guarantees.

In what is seen as a bid to make a financial breakthrough, Korea’s defense ministry in November held a working-level meeting with the corresponding members of the five major commercial Korean banks – KB Kookmin, Shinhan, Hana, Woori and Nonghyup — in order to help facilitate the second round of the arms deal.