Middle East Urgently Requests Early Deliveries... Korean Air Defense Weapons in Spotlight Amid US-Iran Conflict [Weekend Money]

With tensions rising between Israel and the United States on one side and Iran on the other, air defense weapons such as missile defense systems are drawing attention. The securities industry sees the current situation as an opportunity that could, in the short term, accelerate the delivery schedule for existing contracts and, in the mid- to long-term, lead to an expansion of Korean defense companies’ air defense weapon exports.

Byun Yongjin, a researcher at iM Securities, stated in his recent report, "Iran Crisis: The Age of Air Defense Weapons Has Arrived," that "the increase in demand for air defense weapons is impacting the Korean defense industry, and this will extend to ground weapons as well."

Recently, the importance of air defense systems has come to the fore again in the Middle East, as airstrikes using missiles and drones have continued. While the Russia-Ukraine war was centered around ground battles, the current crisis is characterized by a focus on missiles and air defense. As a result, there are predictions that demand for air defense weapons will further increase amid the overall global trend of rising defense expenditures.

Yonhap News Agency

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Researcher Byun predicted that, in the short term, the delivery schedules for air defense weapon contracts signed with Middle Eastern countries will be advanced. Korea has signed export contracts for the Cheongung-II medium-range surface-to-air missile system with the United Arab Emirates (UAE), Saudi Arabia, and Iraq, each valued at approximately 4 trillion won per country. Although the majority of deliveries, excluding a portion already supplied, were scheduled to begin in earnest this year and continue until 2030-2034, the heightened tensions in the Middle East have raised the possibility of earlier deliveries. In this case, the timing for related companies such as LIG Nex1, Hanwha Aerospace, and Hanwha Systems to recognize their performance could also be advanced.

In the mid-term, there is also the possibility of additional orders. It is estimated that the Cheongung-II systems ordered by the UAE, Saudi Arabia, and Iraq amount to 8 to 10 batteries, which is about half the deployment scale of the Korean military. In particular, analysts say that Saudi Arabia, with its vast territory, will inevitably need to secure additional batteries. Furthermore, demand for expendable munitions such as missiles is also expected to increase. Existing contracts under negotiation, such as Iraq's K2 tanks, Saudi Arabia's K9 self-propelled howitzers and Chunmoo multiple launch rocket systems, and the UAE's KF-21 fighter jets, are also likely to progress more quickly once the situation stabilizes.

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In the long term, there is also discussion about the potential export of the long-range interceptor missile L-SAM. Currently, Saudi Arabia's air defense system is centered around the United States' THAAD and Patriot, as well as Korea's Cheongung-II. However, as demand for American air defense weapons surges due to the need to defend U.S. military bases in the Middle East, there are observations that supply capacity may become limited. As a result, Korea's L-SAM, which enters mass production this year, is being analyzed as a potential alternative.

Researcher Byun sees the current crisis as an opportunity to expand demand for air defense systems not only in the Middle East but also in other regions such as Europe. Whereas the Russia-Ukraine war increased demand for ground weapons, the current conflict is seen as a factor that could broaden export opportunities for Korean air defense weapons-including LIG Nex1’s Shingung and Hanwha Systems’ Cheongwang, as well as Cheongung-II.

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