Hanwha and LIG Nex1 struggle for control in Iraq missile export negotiations
Since the supply contract for the mid-range surface-to-air missile, Cheongung II (M-SAM II), to Iraq, detailed negotiations between Hanwha Group's defense affiliates and LIG Nex1 have been stalled for several months. While it appears on the surface that the participating companies disagree on price and delivery terms, the defense industry sees the essential issue as a competition for control over air defense systems. There are calls for a swift agreement to facilitate the export of the Korean-style air defense network, starting from Cheongung to L-SAM (Long-range Surface-to-Air Missile).
According to the defense industry and military authorities on the 12th, Hanwha Aerospace, Hanwha Systems, and LIG Nex1 attended a meeting that took place on the 25th of last month, chaired by Administrator Seok Jong-geun at the Defense Acquisition Program Administration (DAPA). It is reported that Hanwha Systems CEO Son Jae-il and LIG Nex1 CEO Shin Ik-hyeon were present. This meeting was arranged at the request of the companies involved in the conflict. A DAPA official noted, "We decided to share more information and strengthen cooperation."
Hanwha and LIG Nex1 have agreed to collaborate, but no visible outcomes have emerged yet. Both Hanwha and LIG Nex1 are seeking to lead the negotiations with Iraq. LIG Nex1 argues that it has traditionally led export negotiations as the system integration company and has developed key technologies for missile targeting. Hanwha emphasized that its participation in the development of Cheongung II adds to their importance in the project. LIG Nex1 was responsible for the missile and system integration of Cheongung II. Hanwha Aerospace developed the launchers, while Hanwha Systems developed the onboard radar.
Practical issues, such as production quantities, are also cited as factors delaying a complete agreement. The contract details with Iraq need to be fully disclosed to determine how many units will be produced, but information sharing between companies has reportedly not gone smoothly. Negotiations over delivery prices have progressed significantly. An industry source stated, "The pricing aspect is almost settled."
The conflict between the two companies escalated last September when LIG Nex1 signed a comprehensive contract with Iraq for Cheongung II without consulting Hanwha Aerospace, among others, over pricing or delivery terms. As the dispute continued, a mediation meeting was arranged by the National Assembly in November of last year. It is reported that this meeting only reached an agreement on the overarching goal of successfully exporting to Iraq.
The leadership of the Iraq negotiations is also related to the long-range surface-to-air missile, L-SAM, which has export potential. In the development process of L-SAM, LIG Nex1 and Hanwha's defense affiliates participated in a structure similar to that of Cheongung II. Concerns arise that similar issues will continue to emerge if the conflict between the companies is not resolved amicably.
Currently, many countries in the Middle East are showing interest in Cheongung II and L-SAM II. The Defense Acquisition Program Administration, which has initiated the development of L-SAM II, hopes to expand exports of the Korean layered air defense network from Cheongung II to L-SAM II. A DAPA official stated, "Both sides have agreed to cooperate closely, and the government will play an appropriate mediating role."