South Korea Could Sweep Up Europe’s Tank Market
FP. South Korea Could Sweep Up Europe’s Tank Market
Germany’s self-inflicted wound has left defense partners looking for alternatives.
By Blake Herzinger, a nonresident fellow at the American Enterprise Institute.
JANUARY 30, 2023, 3:58 PM
Germany remains the fourth-largest donor to Ukraine’s defense, but Chancellor Olaf Scholz’s dithering over the transfer of Leopard 2 tanks, the standard main battle tank for most of Europe, is still dominating headlines even after his government agreed to send them. Relenting after prolonged prevarication has only made the German government look indecisive and unwilling to lead even in matters of European security. While Germany has long been a defense acquisition partner for its European neighbors, this episode has shaken the confidence of its customers, creating the impression that Berlin’s confused defense policy and weak leadership are strategic liabilities and encouraging them to explore other options for defense hardware.
Operators of the Leopard 2, particularly those facing a Russian threat at their doorsteps, are questioning the wisdom of dependence on Berlin for a key element of their ground forces after witnessing the last few weeks of buffoonery. And the Franco-German plan to develop a replacement for both the French Leclerc main battle tank and the Leopard 2 seems destined to be dragged down by stultified bureaucracy, making their planned Main Ground Combat System an unattractive prospect to hang nations’ future force structures upon. But there aren’t any other hot European tank production lines in Europe, making Leopard tank variants the only option in town.
However, there is another planned tank production line in Europe. South Korea’s Hyundai Rotem and Hanwha Defense won immense arms contracts with Poland in 2022, which included a deal for 1,000 K2 main battle tanks and 672 K9 self-propelled howitzers. Of the total number of tanks, 180 will be built in South Korea between 2022 and 2025, with domestic production capability coming online in Poland by 2026 for the remaining 820. These will be built to Polish specification under the designation K2PL, with the first 180 tanks to be later upgraded to the K2PL standard. For Warsaw, the Korean deal meant getting tanks much faster than Germany’s Rheinmetall would be able to supply, and at a competitive price point, but it also delivered on Polish desires for technology transfer to enhance its own domestic defense industry.
The drive for indigenization is familiar to South Korea, which began the XK2 program in 1995 as an effort to distance the Korean tank program from U.S.-derivative platforms. The design reached the prototype stage in 2007, and after completing rigorous trials and evaluations, South Korea signed a contract for its first K2 tanks in 2014. While some have dismissed the K2 as a less sophisticated Leopard 2 imitation, it is still a world-class main battle tank with generally comparable capabilities to European-produced best tanks. In fact, it has performed well in trials competing against the Leopard 2.
But it is not just Poland. Turkey’s Altay main battle tank is a K2 derivative, and states such as Slovakia have engaged with South Korea to discuss options for replacing their vintage T-72 tanks. As many of Eastern Europe’s outdated Soviet-era tanks have already been sent to Ukraine, K2-based designs may be a good fit for several states eager to upgrade as well as diversify their defense relationships.
Norway also had the K2 on its shortlist, evaluating it against the Leopard 2A7, before the Norwegian chief of defense’s recommendation last year to do away with main battle tanks in the Norwegian military. While that question remains unresolved, Norway has joined Poland in ordering 28 K9 self-propelled howitzers from Hanwha Defense as part of a $180 million contract, adding to the ranks of other European states such as Finland and Estonia in adopting the Korean artillery system.
Of course, the entirety of Europe is unlikely to immediately pivot to buying tanks from South Korea, and there are potential pitfalls. One of the most important is South Korea’s own sensitivities regarding Russia. Seoul has been criticized for its own explicit refusal to send lethal assistance to the embattled Ukrainians—but has also reportedly been flexible with respect to its explicit policy by apparently agreeing to export munitions to the United States, which would then quietly find their way to Ukraine. And South Korea is geographically distant from Europe, which might be a deterrent for states that prefer to shop with their neighbors.
But in terms of equipment sales, Korean willingness to transfer technology and localize production is a considerable advantage. As mentioned, Poland’s arms deals with Hyundai Rotem and Hanwa Defense include domestic production lines that will begin producing Polish K2PL tanks and K9 self-propelled howitzers by 2026, as well as an advanced K9 maintenance, repair, and overhaul facility capable of servicing Polish equipment as well as other European forces. With domestic production and maintenance ensured, there is less vulnerability to potential future policy shifts in foreign capitals and an assured flow of spares and repairs. While Korean designs could still be beholden to export controls, South Korea has allowed clients to market its designs in the past with little to no restriction.
While the defense industries of many advanced states, including the United States, are facing severe production shortfalls in their defense industrial bases, South Korea’s retains robust and has scalable capacity for mass industrial production. This production capability, combined with Seoul’s willingness to localize production in Europe, is a considerable selling point compared with reliance on German national champion Rheinmetall, which may or may not retain sufficient capacity to meet demand in a timely manner.
The critical mass generated by Poland’s considerable orders may also work in Korea’s favor. In the midst of a pivotal defense modernization and expansion program, Poland is set to have one of the most formidable militaries in Europe, with more modern tanks than any member of NATO save the United States and Turkey. In fact, its tank fleet will outnumber the combined strength of the United Kingdom, Germany, France, the Netherlands, Belgium, and Italy. While estimates place the number of Leopard 2s in service in Europe at around 2,000, in c
oming years there will be nearly 1,000 K2s in service in Poland alone. States that are now sending their own Leopard 2 stocks to Ukraine may view acquiring the K2 as an avenue to promoting interoperability with a state that has shown itself ready to confront Russian aggression with fewer caveats than the traditional leaders of Europe.
The United States may also see indirect benefits from encouraging South Korea to aggressively pursue increasing its defense market share in Europe. As a treaty ally, Washington has a very real interest in ensuring a vibrant and robust South Korean defense industry that can produce the kinds of modern weapons needed to confront North Korean aggression.
Tying South Korea’s heavy industry to Europe’s security develops a useful linkage between U.S. allies and interests in both theaters. Polish troops, for instance, will train with South Korean forces in both countries. And, as the intensity of the Russia-Ukraine war forces the United States and its allies to remember the shocking rate at which industrial-scale warfare depletes equipment and ammunition, it makes sense to develop commercial relationships now that can rapidly address shortfalls in key areas.
A glance at the signatories of last week’s Tallinn Pledge—Estonia, the U.K., Poland, Latvia, Lithuania, Denmark, the Czech Republic, the Netherlands, and Slovakia—reveals an uncomfortable truth about states previously assumed to be leaders in Europe, such as France and Germany. They are absent. The stark difference in threat perceptions and urgency between Europe’s center and its Russia-facing periphery has been made very clear.
Rather than allowing Europe’s security to be held hostage to Berlin’s wariness of offending Moscow, more states may elect to follow Poland’s example in forging new extra-regional defense relationships with states that offer the operational flexibility they need as well as reinforce their own domestic economies. With successive South Korean presidents making clear their desire for the country to become a power player in defense exports—including current President Yoon Suk-yeol’s announcement of his aim to make South Korea the fourth-largest defense exporter by 2027—South Korea may be well positioned to seize more of Europe’s business.
Germany's Tank Blunder Creates South Korean Market in Europe (foreignpolicy.com)
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Egypt keen to bolster structural reforms, maximise role of private sector in economy: Sisi to IMF
Egypt is keen to continue enhancing its structural fiscal and monetary policy reforms and maximising the role of the private sector in the economy, President Abdel-Fattah El-Sisi told the Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva.
The president's comments came during a meeting with Georgieva which was held on the sidelines of the World Government Summit (WGS) 2023 that kicked off in Dubai on Monday.
El-Sisi affirmed to Georgieva that enhancing fiscal and monetary policy reforms and maximising the role of the private sector should help secure a positive climate for all investors and global financial markets involved with the Egyptian economy, Presidential Spokesman Ahmed Fahmy said in a statement.
The president hailed the fruitful and constructive cooperation between the Egyptian government and the IMF to continue the implementation of the Egyptian comprehensive economic reform programme.
From her side, Georgieva praised the performance of the Egyptian economy and its resilience in the face of the negative impacts of the coronavirus pandemic and the Russia-Ukraine crisis.
This came as a result of the Egyptian state’s development vision under El-Sisi’s leadership that is improving the overall indicators of the Egyptian economy, Georgieva added.
She also stressed the IMF’s aspiration to maintain the special cooperation with Egypt and to support the country’s economic reforms.
The meeting reviewed the relations between Egypt and the IMF in light of the ongoing cooperation programme between the two sides to continue the path of Egyptian economic reforms, the spokesman added.
Egypt is currently engaged in an Extended Fund Facility programme that extends over 46 months, through which Egypt is to receive a total loan of $3 billion.
Egypt has already received one tranche and is expected to receive the second tranche in the deal by the end of March following the completion of the first review scheduled in mid-March.
Under the programme, Egypt has pledged to the IMF to unleash the potential of the private sector to play a greater role in the national economy and decrease the government footprint in the investment scene.
The country is also set to apply structural reforms that address the imbalances of the macroeconomic indices in order to bridge an expected $17 billion financing gap over the coming four years.
Meanwhile, in a separate meeting on Monday, Minister of Finance Mohamed Maait told Georgieva that Egypt is adopting an economic reform trajectory that contributes to supporting its financial discipline and decreasing debt to GDP ratio and budget deficit.
On Sunday, during the Seventh Arab Fiscal Forum in Dubai, Georgieva said Egypt is taking critical steps towards managing fiscal risks.
She added Egypt’s government is helping manage the many fiscal risks it is experiencing, including from public guarantees and losses by state-owned enterprises.
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Energean exports first hydrocarbon liquids from Israeli gas fields
The first cargo has been transferred from the company's Karish field platform and sold as part of a multi-cargo marketing agreement with Vitol.
About Vitol: Vitol - Wikipedia
For the first time in the history of Israeli oil and gas production, hydrocarbon liquids will be exported to global markets, Energean confirmed on Tuesday. The first cargo has been transferred from the company's Karish field platform and sold as part of a multi-cargo marketing agreement with Vitol.
“We are happy and proud that Energean has facilitated Israel joining the club of international oil exporters," said Mathios Rigas, Energean's CEO "This is another milestone for us, enhancing Energean’s growth as a significant player in the local and regional markets.”
According to Energean, the hydrocarbon liquids are to be offloaded in a controlled manner via the Energean Power FPSO vessel and subsequently sold into various global markets, creating a significantly differentiated income stream that is fundamentally separate to the company's gas-derived revenues.
What is the significance of having an alternative revenue stream in the current market?
Nick Witney, Energean Group Commercial Director, noted the significance of the alternative revenue stream given the current state of the energy resource market.
"While we remain a gas-focused company — with our Israeli gas production central to our role in enabling the energy transition — light, sweet crude oil responsibly produced from modern, low carbon intensity facilities is very much in demand, globally."
Nick Witney
"While we remain a gas-focused company — with our Israeli gas production central to our role in enabling the energy transition — light, sweet crude oil responsibly produced from modern, low carbon intensity facilities is very much in demand, globally," he said.
Not all their eggs in one basket
Despite the new development of a hydrocarbon liquid revenue stream, Energean is still very much dedicated to its production of gas for the Israeli market.
In an interview with The Jerusalem Post, Non-Executive Chair at Energean Karen Simon noted the extreme demand for natural gas in Israel and around the world.
“There’s a lot of demand: people use a lot of power. Even if you have an electric car, you have to plug that car in to power it, and the electric plants that supply that power are gas fueled. The world continues to see a lot of demand, and Israel is included in that,” she said.
Simon added that she expects the price of gas to rise in the near future. “There are all sorts of dynamics that would indicate the continued growth of demand for energy, and gas is a very good source of fuel to provide that. Manufacturing plants — particularly fertilizer plants — home heating… as well, if China starts opening back up because lockdowns have been lifted, economic activity will come up. Everyone expects the demand for energy to continue to be robust.”
Nevertheless, it is a wise strategic move to begin cultivating alternative revenue streams early, before natural gas demand inevitably tapers in favor of even cleaner resources (such as hydrocarbon liquids, perhaps).
“I think at some point the Israeli market is going to be totally saturated and the gas is going to have to go somewhere else,” Simon said. “Right now, we're in the position where that's clearly not happening in the next few years, but that is down the road.”
Energean exports first hydrocarbon liquids from Israeli gas fields - The Jerusalem Post (jpost.com)
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More than 7 mn children affected by Turkey-Syria quake: UN
More than seven million children have been affected by the massive earthquake and a major aftershock that devastated Turkey and Syria last week, the United Nations said Tuesday, voicing fear that "many thousands" more had died.
"In Turkey, the total number of children living in the 10 provinces hit by the two earthquakes was 4.6 million children. In Syria, 2.5 million children are affected," James Elder, spokesman for the UN children's agency Unicef, told reporters in Geneva.
He spoke as rescue teams began winding down the search for survivors from the disastrous quake that has left more than 35,000 dead in the two countries.
"Unicef fears many thousands of children have been killed," Elder said, warning that "even without verified numbers, it is tragically clear that numbers will continue grow."
He said he feared the final toll would be "mind-boggling."
Given the catastrophic, and ever-increasing, death toll, he said it was obvious that "many, many children will have lost parents in these devastating earthquakes."
"It will be a terrifying figure," he warned.
Among the rubble, hundreds of thousands of homeless people face cold and hunger.
Families with children were "sleeping in the streets, malls, schools, mosques, bus stations and under bridges, staying with their children in open areas for fear of going home," he said.
"Tens of thousands of families are exposed to the elements at a time of year when temperatures are bitingly cold, and snow and freezing rain are common," he said, pointing to reports of rising numbers of children suffering from hypothermia and respiratory infections.
More than 7 mn children affected by Turkey-Syria quake: UN - Region - World - Ahram Online
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