South Korea faces export-readiness trade-off amid Gulf defense push

South Korean soldiers prepare to launch a Cheongung-II surface-to-air missile during a drill, Nov. 6, 2024. Courtesy of Joint Chiefs of Staff

South Korea’s presidential chief of staff Kang Hoon-sik said this week that Seoul has secured priority crude oil and naphtha supplies from Gulf producers through the end of the year, a development that highlights a growing constraint on the country’s defense export ambitions as rising demand from the same partners collides with limits in industrial capacity and domestic military requirements.

Requests from Saudi Arabia and the United Arab Emirates to accelerate deliveries of South Korean air defense systems are emerging at a time of heightened regional demand following sustained exchanges with Iran.

On April 12, The Wall Street Journal reported that Riyadh had approached firms including Hanwha Aerospace and LIG Defense & Aerospace (D&A) about expediting deliveries for Cheongung-II medium range surface-to-air missiles, while Abu Dhabi sought additional interceptor missile supplies.

The urgency reflects the depletion of air defense inventories across parts of the Gulf after weeks of retaliatory strikes. Systems that are already in production and have demonstrated operational effectiveness are drawing particular interest, placing South Korean suppliers in a position to respond to near-term demand.

South Korea’s defense exports to the Middle East have expanded steadily in recent years, with the UAE accounting for 9.5 percent of shipments between 2021 and 2025, according to SIPRI data. Saudi Arabia has also emerged as a major buyer, including a $3.2 billion contract signed in Feb. 2024 for 10 Cheongung-II batteries.

This concentration among a small number of high-value clients increases pressure to respond quickly to delivery requests during periods of elevated threat.

LIG Defense & Aerospace’s booth at the WDS 2026 / Courtesy of LIG Defense & Aerospace

Capacity limits

The main constraint South Korean defense firms face is the ability to produce at speed.

LIG D&A and its partners, including Hanwha Systems and Hanwha Aerospace, are expanding production facilities in Gimcheon and Gumi, both in North Gyeongsang Province, with a new guided-weapons research and manufacturing site scheduled for completion in September.

The company plans further investment through 2029 to build an integrated complex for missile, aerospace and space systems, targeting annual sales of about $6.8 billion by 2030.

These expansions point to long-term scaling, but they do not resolve short-term limits. The company’s 2025 business report shows factories operating at a combined 78.1 percent utilization rate, indicating that much of the existing capacity is already in use.

In defense manufacturing, where production involves specialized components, testing cycles and integration processes, utilization rates at this level leave limited room for rapid increases in output.

The lag between new investment and usable capacity introduces a timing problem. Demand from Gulf clients is immediate, while supply expansion is measured in years. This gap is where pressure builds, particularly when production lines must serve both export contracts and domestic force requirements.

Presidential chief of staff Kang Hoon-sik, third from left, speaks with Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud, right, during their meeting in Riyadh, April 15. Courtesy of Kang's office

Export trade-off

The Cheongung-II system is not a purely export-oriented platform. It is a core component of South Korea’s Korea Air and Missile Defense (KAMD) architecture, deployed by the Air Force’s Missile Defense Command and intended to operate alongside the longer-range L-SAM interceptor. Production decisions therefore carry direct implications for domestic readiness.

Ju Hyung Kim, president of the Security Management Institute, told Korea Pro that the central issue is “whether accelerated exports could disrupt construction of South Korea’s own missile shield.”

“The current government has pledged to make South Korea one of the world’s top four defense exporters, so both companies and agencies like the Defense Acquisition Program Administration (DAPA) are under pressure,” he said. “That has fueled concerns that exports could be prioritized at the expense of domestic defense requirements.”

Earlier force-planning assumptions may no longer fully reflect the threat environment. Advances in North Korea’s missile capabilities, including hypersonic systems and 600mm nuclear-capable multiple launch rocket systems, have increased the demands placed on layered missile defense.

Kim said that “to maintain deterrence, we [South Korea] may actually need more assets than originally planned,” highlighting the possibility that domestic requirements could expand at the same time as export demand rises.

He also added that reports of U.S. systems such as THAAD and Patriot being redeployed from the Korean Peninsula to the Middle East had further heightened public concerns about readiness.

This creates a structural trade-off. Production allocated to external clients reduces the pace at which domestic systems can be fielded unless overall output increases. While the trade-off does not imply an immediate shortfall, it introduces a constraint that becomes more binding as demand accelerates.

UAE fighter jets escort Korea's presidential jet, Nov. 19, 2025. Courtesy of presidential office

Energy linkages

The pressure on defense production is unfolding alongside a parallel effort to secure energy supplies from many of the same partners.

Kang said South Korea has secured 273 million barrels of crude oil and 2.1 million tons of naphtha through the end of the year following high-level engagements with producers including Saudi Arabia and the UAE. Both countries have signaled preferential treatment.

Saudi Arabia pledged to prioritize South Korea in supplying crude and naphtha, while the UAE agreed to provide 24 million barrels of emergency crude and indicated that no other country would receive oil ahead of Seoul.

These assurances reinforce South Korea’s position as a preferred customer during a period of disruption in global energy flows, particularly as shipping through the Strait of Hormuz remains constrained. They also deepen reliance on a small group of suppliers at a time when energy security is under strain.

The overlap between energy dependence and defense demand has drawn attention to the broader relationship. Kang rejected suggestions of a transactional link, saying that tying crude imports to defense exports would be “inappropriate” and that such “transactions should not occur, particularly when partner countries were facing wartime threats.”

Even without a formal exchange, the alignment is clear. Energy suppliers that extend preferential access during a crisis are also among the most significant buyers of South Korean defense systems. This convergence shapes expectations on both sides, particularly when demand for those systems becomes urgent.

Scaling path

Whether South Korea can sustain export growth without affecting domestic readiness depends on how quickly production capacity can expand.

Shin Seung-ki, a research fellow at the Korea Institute for Defense Analyses, said the current situation reflects limits on reallocation rather than a structural shortage.

“It is not possible to divert all domestic allocations,” Shin said. “Reallocating too much to countries like the UAE or Saudi Arabia could disrupt our own military planning timelines.”

He added that production decisions are likely to involve coordination across the presidential National Security Office, the Air Force, the Ministry of National Defense and industry, using updated forecasts to determine how much output can be redirected without undermining readiness.

Shin argued that the longer-term solution lies in expanding capacity rather than restraining exports.

“Going forward, we need to continue expanding exports,” he said. “Increasing exports further will help strengthen our defense industrial capacity. That, in turn, enhances our ability to produce multiple volumes simultaneously and meet delivery schedules more quickly.”

This view assumes that sustained demand will justify investment in additional facilities and supply chains, allowing production to scale over time. It does not eliminate short-term constraints, but it suggests that current pressures can be managed through coordination and gradual expansion.

President Lee Jae Myung shakes hands with a member of the Akh Unit, a South Korean military contingent to the UAE, Nov. 19, 2025. Courtesy of presidential office

Execution risks

Scaling production under pressure introduces additional risks beyond volume constraints.

Kim said the most immediate concern is that accelerated delivery schedules could weaken testing and quality assurance processes. Defense manufacturing requires strict validation at each stage of production, and compressing timelines increases the risk of technical issues emerging after deployment.

Past programs illustrate the challenge. The domestic K2 tank program faced delays and technical problems, including transmission issues that postponed deliveries and led to disputes. Export negotiations for the tank, including follow-on contracts with Poland, have also encountered complications related to production schedules and localization requirements.

These examples point to a broader pattern. As output increases, maintaining quality and meeting contractual obligations becomes more complex, particularly when production systems are already operating at high utilization. The risk is not only delayed delivery, but also reputational damage that could affect future export opportunities.

Institutional coordination adds another layer of complexity. Procurement decisions involve multiple agencies with different priorities, and accelerating exports requires alignment across government and industry. Delays or misalignment at any point in this process can affect both domestic deployment and overseas deliveries.

Outlook

South Korea’s position as both a major energy customer and a growing defense supplier to the Gulf has strengthened its relevance during the current crisis. The same relationships that secure fuel supplies also generate demand for military systems, placing Seoul at the intersection of two critical flows.

The constraint lies in the production base that underpins both. If capacity expands in line with demand, South Korea can sustain export growth while maintaining domestic force development, reinforcing its role as a reliable supplier.

If expansion lags, each new request will require a choice between external commitments and internal requirements, turning production decisions into strategic ones.

The outcome will depend on how quickly industrial capacity can adapt.

Read the article at Korea Pro.