The Impact of the Russia-Ukraine War on Korean Defense Exports

On February 24, Russia launched an all-out invasion of Ukraine. Contrary to initial expectations that the war would end early, strong resistance by the Ukrainian army and the incompetence of the Russian army overlapped, and the war is showing signs of prolongation. Western countries have also shifted from doling out passive support or seeking diplomatic solutions to providing military equipment, training, and personnel, and countries such as Germany have started to directly selling weapons to Ukraine. A prolonged war seems inevitable as Ukraine’s resistance, backed by Western military support, intensifies and the armistice agreement faces difficulties. As the geopolitical crisis escalated due to the Russia-Ukraine war, global defense spending is expected to steadily increase despite the ongoing COVID-19 pandemic and the economic downturn. In 2021, total global defense spending reached USD 2.77 trillion, the highest level recorded over the past decade, and this upward trend is expected to continue on for some time. In particular, defense spending is expected to increase sharply in Europe, where a regional security crisis is emerging following the Russian invasion. Germany, has already decided to invest EUR 100 billion into a special defense fund to modernize and expand its armed forces, and the defense spending of the Baltic States and Eastern European countries adjacent to Russia is also expected to increase sharply. By 2024, the share of defense spending as a percentage of GDP in Eastern Europe and the Baltic States is expected to exceed the two percent level required by NATO. As the Russia-Ukraine war drags on, a protracted confrontation between China-Russia and the West — which here refers to the United States and NATO — looms. This confrontation has already produced a freeze on Russian assets, a ban on Russian banks from participation in the SWIFT system, and the temporary suspension of the Nordstream-2 gas pipeline between Russia and Germany. Europe and Australia are also strengthening their unity through multilateral security organizations such as NATO, QUAD, and AUKUS. Accordingly, the Russia-Ukraine war is expected to signal an inflection point in the international order.With the strengthening of multilateral security cooperation, there is an increasing tendency for countries in the same camp to cooperate with one another, for both security and economic reasons. As formerly neutral countries such as Sweden and Finland have now applied for membership in NATO, the concept of neutrality is declining and many countries are being forced to choose one side. South Korea has also retreated from its erstwhile diplomatic stance, in which it sought to cooperate with the United States on security and with China on the economy, and declared its intent to join the Indo-Pacific Framework (IPEF).Defense exports are no exception. In recent years, the importance of security cooperation and political influence in defense exports has been growing more than ever. Major advanced countries in the defense industry such as the United States and Germany are actively exporting defense products based on their political and economic influence. The United States decided to support the development of nuclear submarines in Australia by launching AUKUS, and in the process, Australia canceled its USD 90 billion nuclear submarine purchase agreement with France. As a result, the United States has secured an opportunity to enter the Australian nuclear submarine market despite the resistance of France. In addition, it looks as if political decision-making has played an important role in the recent export of US M1A2 tanks to Poland. One reason for Poland to acquire US tanks is to secure deterrence against Russia, but another is to strengthen security cooperation with the United States.Germany is actively promoting defense exports based on its political influence as well. Instead of direct support for defense exports, the government is engaging in sales diplomacy with countries in close diplomatic and security cooperation, which include NATO member states. The main targets are Eastern European countries, which face growing security threats amid the ongoing Russia-Ukraine war. In addition, Germany is actively promoting joint R&D and procurement of weapon systems with EU countries to counter the Russian threat. As the Russia-Ukraine war continues and multilateral security cooperation increases, the proportion of defense exports based on security and political considerations is expected to increase as well.