Ukraine war offers South Korea’s Hanwha opportunity to break into Nato defence market

One of South Korea’s largest defence contractors is positioning itself as a significant Nato supplier in response to a “surge in demand” as European countries increase military spending during the Ukraine war.

Hanwha Defense, which specialises in artillery systems and armoured vehicles, entered the European defence market in 2014 after Russia’s annexation of Crimea through a licence to a Polish contractor to build its Krab self-propelled howitzer.

Since then, the company has exported variations of its 155mm Nato-compatible K9 self-propelled howitzer to Finland, Norway, Estonia, and Turkey.

“We’ve been able to emerge as a very reliable partner, even though we’re located at a distance [from Europe],” Hanwha Defense chief executive Son Jae-il said in an interview with the Financial Times at his company headquarters in Seoul.

A subsidiary of Hanwha Group, South Korea’s seventh-largest conglomerate, Hanwha Defense expanded its global footprint after its parent acquired Samsung’s defence firm Samsung Techwin in 2015. The company reported an operating profit of Won115.6bn ($89mn) last year on sales of Won1.4tn ($1bn).

EU countries have cumulatively announced more than €200bn in increased defence spending since Russian president Vladimir Putin’s attack on Ukraine in February.

The EU’s European Defence Agency has earmarked replenishing stockpiles depleted by support to Ukraine and replacing obsolete Soviet-era equipment, mainly in eastern member states, as a critical short-term imperative.

“By building our global footprint, especially in Europe, our ultimate goal is to emerge as a reliable partner for Nato itself by establishing lots of partnerships with local businesses in Europe,” said Son.

Diplomats in Seoul described “sales diplomacy” as one of the priorities for conservative president Yoon Suk-yeol when he attended the recent Nato summit in Madrid, a first for a Korean leader.

Demand is particularly strong from ex-Warsaw Pact countries such as Poland, which has a wish list of tanks, self-propelled guns and infantry fighting vehicles, according to a source with knowledge of the situation.

Poland is also seeking to replace fifty 155mm Krab howitzers it exported to Ukraine last month.

A western diplomat said that the Krabs could not have been sent to Ukraine without the Korean government’s consent, describing the transfer as an “important moment”. Analysts and experts said Seoul has in the past been reluctant to upset Moscow or Beijing.

Son said that several countries are particularly interested in Hanwha’s Redback infantry fighting vehicle, which is fitted with new technology designed to evade detection and intercept incoming anti-tank missiles.

“Some countries are trying to build up their [own] defence industry,” said Son. “This will be a challenge for us, but the surge in demand currently is also an opportunity for us.”

In February, South Korea and Egypt signed a $1.66bn deal for Hanwha Defense to sell K9 howitzers to the Egyptian armed forces.

That followed a $3.5bn deal in January between South Korea and the United Arab Emirates for Korean defence firms including Hanwha to export midrange surface-to-air missiles to the Gulf state.

In December, Hanwha signed a $717mn deal to provide 30 self-propelled howitzers and 15 armoured ammunition resupply vehicles to Australia.

Son said that Russia’s recent focus on manufacturing high-end defence equipment was an opportunity for defence companies to supply “mid-level conventional equipment such as howitzers, main battle tanks and other armoured vehicles”.

He singled out India as an example of a country where Hanwha was winning contracts despite the country’s longstanding ties with Russia.

“We are witnessing a movement from the Indian government away from Russian armed capabilities and [away from] using their technologies, so we are expecting that there will be more opportunities for us,” said Son.

In Europe, Son identified the UK — where Hanwha hopes to join British firms including Lockheed Martin to manufacture a customised version of the K9 for the British Army — as a target market.

Ramon Pacheco Pardo, a professor at King’s College London and Korea Chair at the Brussels School of Governance, said that Seoul’s arms sales to countries that regard Russia and China as security threats reflected an emerging and more overt pro-western orientation in Korean policy.

“Arms sales to Australia, but also to south-east Asian countries including Indonesia, the Philippines, Thailand or Vietnam upset China — while arms sales to Estonia, Norway or Poland have a clear Russia component,” said Pacheco Pardo. “But that hasn’t stopped Seoul from going ahead.”

Additional reporting by Henry Foy in Brussels