Exclusive: South Korea Enlists Banks to Finance $22 Billion Arms Sale to Poland, Reports Reuters

By Cynthia Kim and Seunggyu Lim

SEOUL – After reaching the legal limits on import-export lending, South Korea is mobilizing local banks to assist Poland in financing a $22 billion weapons purchase, marking the largest arms sale in the nation’s history, according to five sources familiar with the situation.

"Five local banks are currently evaluating a syndicated loan to support Poland’s acquisition of South Korean rocket artillery systems and fighter jets," a South Korean government official stated, requesting anonymity due to the ongoing discussions.

Confirmations from two officials within a Korean defense company support the existence of the syndicated loan plan. Additionally, two bank officials from South Korea acknowledged that loans would be provided but did not clarify the specific loan type.

This initiative represents the first indication that South Korea is working to eliminate financing challenges for Poland, enabling the two countries to finalize this record-breaking arms deal, estimated at about 30 trillion won ($22.72 billion).

These conversations follow a comprehensive arms agreement signed between South Korea and Poland last year, which involves South Korean firms, including Hyundai Rotem Co. and Hanwha Aerospace Co., supplying tanks, howitzers, and fighter jets. The previous deal was valued at $13.7 billion, making it South Korea’s largest arms deal to date.

Representatives from Hyundai Rotem and Hanwha Aerospace declined to provide comments regarding this development, and the South Korean government did not offer an immediate response when requested for input.

Details regarding the potential size of the syndicated loan remain undisclosed. Such loans are typically provided by a consortium of lenders to a single borrower, primarily to facilitate substantial transactions.

A defense company official mentioned that if the upcoming potential sale’s syndicated loan is insufficient, there may be alternative financing options available.

According to South Korea’s defense ministry, the nation’s defense exports reached approximately $17 billion in 2022, a significant increase from $7.25 billion the previous year, as the conflict in Ukraine has opened new avenues for Seoul’s arms exports.

The 2022 arms agreement with Poland has positioned South Korea as a key player in global weapons exports, a market largely dominated by the United States and Russia.

Furthermore, South Korea is aiming to strengthen security partnerships in Europe, an objective that aligns well with Poland’s current needs, especially as it increases arms imports in response to rising tensions with Russia.