Contracts with Korea at risk? Seoul uncertain after the elections in Poland

Seoul fears that political changes and lack of funds may thwart Warsaw’s plans to purchase tanks, howitzers and rockets. According to the Financial Times, South Korean defense companies fear that the expected change of government in Warsaw will threaten a series of multi-billion arms transactions for Poland.

Weapons contracts

After agreeing binding contracts with Korean companies worth a total of $13.7 billion for missile launchers, tanks, self-propelled howitzers and fighter jets, Warsaw is negotiating a second round of contracts to strengthen its defense and replace military equipment sent to neighboring Ukraine.

The Law and Justice government used a special fund for extraordinary expenses to finance the purchases. But he was accused by the coalition of opposition parties, which won a combined majority in last month’s elections, of hiding excessive spending in the regular budget books.

Previous changes of government in Poland led to the cancellation of large defense contracts. “We are concerned about the transactions due to increasing uncertainty in Poland,” a Korean defense procurement official told the Financial Times.

Billions of dollars in loans

The first round of deals exhausted Kexim’s legally required credit limits for single-borrower loans and guarantees, meaning the Korean parliament will have to significantly raise the cap if the state-owned export credit agency is to participate in future deals.

On Friday, Reuters reported that the Korean government is encouraging local banks to offer Warsaw a syndicated loan to finance the next round of construction contracts. Hanwha Aerospace confirmed to the Financial Times that it is participating in the discussions. Even if financing can be arranged, some Korean legislators are worried about Poland’s ability to repay.