Will Korea Join the AUKUS Military Alliance? [Yang Nak-gyu's Defence Club]

South Korea and Australia Coordinate to Hold Foreign and Defense Ministers' Meeting Next Month
Possibility of Joint Weapon Development Participation... Foothold for Entry into US Market

The foreign and defense ministers (2+2) meeting between South Korea and Australia is expected to be held in Australia early next month. The two countries are likely to discuss strengthening defense and defense industry cooperation, drawing attention to whether it will influence the 'K-Defense Industry tailwind.'

[Image source=Yonhap News]

According to a government official on the 16th, South Korea and Australia are coordinating the '2+2 meeting.' If confirmed, it will be about 2 years and 7 months since the 5th meeting held in Seoul in September 2021. Foreign Minister Cho Tae-yeol and Defense Minister Shin Won-sik are also expected to hold separate foreign minister and defense minister talks with their Australian counterparts during this meeting.

The biggest point of interest is whether South Korea will become a partner in AUKUS, the military alliance between the U.S., the U.K., and Australia aimed at countering China. A senior U.S. official recently mentioned, "We are considering South Korea as a partner for cooperation in advanced military capability joint development."

AUKUS consists of two pillars. Launched in 2021 to counter China in the Indo-Pacific region and beyond, AUKUS includes Pillar 1, which provides conventionally armed nuclear-powered submarines to Australia, and Pillar 2, which involves joint development of advanced military capabilities. Only the U.S., the U.K., and Australia participate in Pillar 1. However, while Pillar 2 has announced plans to expand cooperation with other countries, specific country names have not been disclosed. The South Korean government is also reportedly positive about participating in Pillar 2 due to the strategic significance of advanced technology cooperation from a security perspective.

Domestic defense companies are also moving quickly, aiming to enter the Australian market. Hanwha Ocean is eyeing the acquisition of Australian defense shipbuilder Austal. Austal is a defense company that designs and builds ships for the Australian and U.S. navies. Headquartered in Australia, Austal also operates shipyards in places like Alabama, USA. It builds Independence-class littoral combat ships (LCS) with trimaran hulls and high-speed support vessels operated by the U.S. Navy. If Hanwha Ocean succeeds in acquiring Austal, it will naturally become a foothold to enter the U.S. military shipbuilding and MRO (Maintenance, Repair, and Overhaul) business.

According to foreign media, Austal has received an acquisition offer from Hanwha Ocean worth 1.02 billion Australian dollars (approximately 896 billion Korean won). The price was set at 2.825 Australian dollars per share, a 28.4% premium over Austal’s closing price on the 29th of last month.

Austal currently views Hanwha’s offer as unlikely to receive approval from Australian or overseas regulatory authorities. This is because Austal was designated as a strategic shipbuilding company by the Australian government in November last year. However, there is hope. Given the friendly relations between the South Korean and Australian governments and Hanwha Group’s ongoing defense projects with Australia, such as the K9 self-propelled howitzer and Redback, the possibility of acquisition remains significant. It is also known that among about 4,000 cases of Australian companies being sold overseas in the past three years, only 0.2% were disapproved.

A defense industry official said, "If we participate in AUKUS, we can maximize the 'Lock-In effect,' a characteristic of defense exports," adding, "Providing follow-up services such as maintenance personnel and spare parts can also improve profitability."