K1A2 Tanks of the Capital Mechanized Infantry Division and K2 Tanks of the 8th Mechanized Division engage in a simulated combat exercise at the Yangpyeong General Training Center in Yangpyeong, Gyeonggi Province, Oct. 23. Yonhap

The prospects of finalizing a deal for exporting Korean-made K2 tanks to Poland within the year have become uncertain due to the fallout from President Yoon Suk Yeol's martial law declaration and subsequent political chaos, industry sources noted Monday.

According to the sources, the Polish government's contract with Korea to procure 820 units of the K2 tank produced by Hyundai Rotem is unlikely to be finalized within the year.

Industry watchers earlier projected the contract, estimated at 9 trillion won ($6.27 billion), to be finalized before the year's end. The volume being discussed is more than four times the 180 units agreed upon in the countries' inaugural contract.

"Recent remarks from the Polish side suggest they are in no rush, possibly making it difficult to conclude the contract by year-end. It seems Poland is also factoring in Korea's political situation, which is concerning," an industry source said.

Korea's defense industry collectively signed a framework agreement with Poland for arms exports in July 2022.

This was followed in August by the signing of the first round of contracts, valued at $12.4 billion. Since December 2023, individual contracts under the second phase of agreements have been gradually executed, starting with Hanwha Aerospace's delivery of 152 K9 self-propelled howitzer units.

However, political developments within Korea have cast doubts on the year-end contract outlook for the K2 tanks, which is the largest component of the anticipated second round of contracts.

"The defense industry often involves negotiations between companies and governments or between governments themselves. During a power vacuum, we may be unable to respond adequately, which could lead to a loss of trust from our partners," an industry expert said, speaking on condition of anonymity.

Last week's martial law debacle has already had immediate repercussions.

Kyrgyz President Sadyr Japarov, who was visiting Korea last week, canceled his planned tour of a utility helicopter production facility and returned home early.

Swedish Prime Minister Ulf Kristersson, who had shown interest in Korean-made defense systems, also canceled his planned trip to Korea from Dec. 5-7.

"While challenges can arise in all industries, the defense industry is particularly concerning because it heavily relies on government-to-government transactions, making the government's role crucial," said Chang Won-jun, a researcher at the Korea Institute for Industrial Economics & Trade. (Yonhap)