The Impact of Globalisation on South Korea’s Nuclear Industry and its Strategic Choices

South Korea’s nuclear industry has emerged in recent years to become a significant player in what is a competitive market. Its biggest achievement so far has been the $20 billion contract to construct and operate nuclear reactors for the United Arab Emirates, a project which is currently 65% complete with the first unit expected to come online in 2017. This growing importance in the nuclear energy sector has even been reflected in the recent debacle over the construction of the Hinkley C nuclear power station in the United Kingdom where industry figures have highlighted South Korea’s success in developing its nuclear power. More recently, it has been reported that Seoul is looking to secure involvement in the NuGen consortium designated to construct a new UK nuclear power station at Moorside on the Cumbrian coast.

However there is a flip side to this success story. There have been voices in South Korea making calls for it to pursue nuclear armament in response to North Korea’s continued development of its weapons program. Coupled with a recent opinion poll by Gallup Korea that shows a majority in favour of developing nuclear weapons (58 percent), there is concern about Seoul’s future intentions in this regard. Furthermore, lingering mistrust persists in the United States as a result of several experiments by South Korean nuclear scientists to produce fissile material, the most recent of which was in 2000.

Still, this potential ambition has been restrained and managed despite the evolving nuclear threat from the North. While the ROK-U.S. alliance and extended deterrence has played an important role in this regard, the globalisation of South Korea’s nuclear industry has also had a key effect. Often overlooked, an understanding of this process will help further to consider whether institutions and norms can support non-proliferation efforts around the world alongside strategic approaches. As well as its indirect influence, a globalized nuclear industry also provides the United States with another tool in which it can exert further coercion via its alliance relationship to restrain any potential future quest for South Korea’s own deterrence.

Motivation: South Korea’s Nuclear Card

It may seem a simple question to ask why states develop nuclear weapons, yet there is still ongoing debate and discussion on this point. In general, the threat perception within states has often been considered to have an overwhelming effect on why it may decide to go nuclear. That is, when a state feels that its national security is under threat and cannot be guaranteed by other means. For South Korea this perspective would appear to fit clearly, North Korea’s emerging nuclear threat is certainly endangering its national security. And although the ROK-U.S. alliance guarantees its security “by other means,” North Kora’s growing missile capability creates a complex and evolving challenge for the alliance. Furthermore, the fact that neither China nor the United States is able to reign in or deter North Korea’s nuclear activities creates a difficult and frustrating situation for South Koreans. As a result this leads policymakers in Seoul to consider other options to manage the nuclear problem on the Korean Peninsula. Already South Korea’s National Unification Advisory Council has recommended that the government should lobby for the reintroduction of U.S. tactical nuclear weapons. Beyond this, some may even question, wrongly or rightly, whether Washington would be able to maintain a credible form of extended deterrence if it faced the possibility of a retaliatory strike from North Korea. These are important drivers toward potentially developing a nuclear arsenal.

The threat factor is a very important part in understanding the motivation for going nuclear, however Scott D. Sagan presents other factors that are just as crucial, such as domestic politics and international norms. A key example in this regard is India’s pursuit of nuclear weapons which had much to do with domestic politics and the role of nuclear scientists within the industry itself rather specific security threats. These drivers are more complex to manage and can be sometimes unpredictable in scope. In fact, looking at previous cases where South Korea has flirted with developing a nuclear deterrence, we can see that the first case in the early 1970s fits with the threat model with the political leadership as the driving force. However, the second case in 2000 is more in line with the role of the nuclear industry as the driving force. Thus it would be more accurate to say that countries usually exhibit a hybrid mix of motivations that range from security concerns to aspirational desires within the nuclear industry itself. Sagan also identifies three actors that are crucial in pursuing nuclear weapons. The first is the military particularly those that benefit from such a program (air force or navy), the second is the politicians, and the third is the nuclear scientists themselves.

So far the ROK-U.S. alliance has been able to manage and restrain aspirations within the military, while the alliance at the political level is able to ensure the leadership in Seoul does not make any moves to develop its own deterrence. However, oversight of the nuclear industry and its scientists is limited to the crucial 123 Agreement, originally signed in the late 1970s and renewed again in 2015. Named after the section in the U.S. Atomic Energy Act, it induces countries to commit to non-proliferation norms in exchange for access to American nuclear technology and scientific exchanges. It should be noted that this bilateral treaty does not exclusively control South Korea’s nuclear industry nor does it place specific restrictions. Rather it is a way for the United States to guide South Korea’s nuclear industry away from the areas that present concern for policymakers, specifically reprocessing and enrichment. These two capabilities would provide South Korea with a “break-out” capability to develop the bomb within a relatively short period of time.

The 123 Agreement has helped to direct South Korea away from these areas to focus its capabilities on the middle part of the nuclear fuel-cycle. At the same time, by providing technology transfers in this area, it has helped to facilitate the development of South Korea’s nuclear industry. This effort has not just been about rewarding South Korea for giving up its nuclear weapons aspirations, but also acts as a way to ensure that it can still place pressure and coerce Seoul if it ever decides to go down the nuclear weapons path.

Mitigation: The Effect of a Globalized Nuclear Industry

Although the United States helped to develop South Korea’s nuclear industry, its transition from a nuclear technology importer to a designer, operator, and exporter has much to do with specific business characteristics and crucially the impact of globalisation. These elements highlight crucially its desire to be what some policy officials in South Korea have referred to as “peaceful nuclear sovereignty.” The crowning achievement in this regard was the winning of the contract to supply reactors to the United Arab Emirates in 2009 against rival bids from established nuclear powers France, Japan, and the United States.

With this achievement, South Korea was recognized internationally as an emerging supplier of nuclear technology and its ambitions to sign deals with other countries strengthened. There was even talk about securing deals to export a further 80 reactors by 2030 and thus become one of the top three exporters in the world. This may have been somewhat ambitious given the comments were made pre-Fukushima, however South Korea has still been able to establish its competitive advantage in this industry through three areas: changing market conditions, competitive services, and an efficient business model.

Over the last twenty years the global nuclear industry has been in flux. Commentators have spoken of a renaissance in nuclear energy given the growing appetite among developing countries in Asia seeking a solution for their energy demands. However, as the “renaissance” in nuclear power began to strengthen, the nuclear industry itself underwent change. Since the Fukushima nuclear accident in 2011, many countries have reconsidered the use of nuclear power, notably developed economies like Germany and Switzerland who are phasing it out altogether. Japan’s nuclear industry, one of the leading players, is in limbo as it struggles to re-establish its own domestic nuclear energy supply following the shutdown of all of its reactors. And recently the world’s number one in the industry, France has been suffering from its own problems. Current projects in Flamanville and Olkiluoto are well behind schedule and are severely over-budget. Their difficulties have revealed a number of problems plaguing France’s nuclear industry. Thus, with some of the major players struggling and growing appetite among emerging economies to invest in nuclear power particularly as part of green growth strategies, South Korea will sense that it has an opportunity to extend its position in the industry.

Alongside the changing market conditions, South Korea also enjoys competitive advantage in terms of its own nuclear industry serving as a model for development. In this respect, its real competitiveness is in the efficient way that the nuclear plants are managed domestically and therefore the service it can provide to potential customers. According to data from the International Atomic Energy Agency (IAEA), South Korea has a relatively low unplanned capability loss factor compared to its competitors (countries operating more than ten reactors). Unplanned capability loss is according to the IAEA “defined as the ratio of the unplanned energy losses during a given period of time to the reference energy generation, expressed as a percentage. Unplanned energy loss is energy that was not produced during the period because of unplanned shutdowns, outage extensions, or unplanned load reductions due to causes under plant management control.” Over the last three years combined South Korea’s unplanned capability loss factor has been 0.8 percent, it operates 24 reactors. Contrast that with China which operates 27 reactors and has a loss factor of 1.3 percent or even France which operates 58 reactors and has a loss factor of 6.0 percent. A measure of France’s recent difficulties is to contrast it with the United States which operates 104 plants and has capability loss factor of 1.8 percent.

South Korea’s efforts to develop its domestic nuclear industry and then looking to expand abroad has not only had positive spinoffs for the broader economy, but it has also benefited from the business strategies of its major industrial companies in the industry. By becoming leaders in exporting heavy industrial machinery to developing countries, these companies have enhanced their global brand and reputation. At the same time, they have also secured important contacts for potential future exports of related nuclear technology. An example in this regard is Doosan Heavy Industries which has cultivated important relationships with emerging economies around the world. This energy company that has domestically been involved in developing nuclear reactors also specializes in desalinization plants, a product it has had success in exporting using related technology. It is interesting to note that the year before it won the contract to construct four nuclear plants for the UAE, Doosan had won a $800 million contract to build a desalinization plant.

Overall, these three factors help to explain how South Korea has emerged as a global player and possess a competitive edge in the market, but how does the globalisation of South Korea’s nuclear industry mitigate its aspirations for its own nuclear deterrence? Simply, this strong ambition and desire to become one of the top three nuclear technology exporters integrates South Korea further into the international nuclear industry and its related norms of non-proliferation. As it seeks out contracts with emerging economies around the world from Turkey to South Africa, its reputation in adhering to non-proliferation norms will be under the scope. If it to go down the nuclear path and withdraw from the Non-Proliferation Treaty, it would likely jeopardize the goal of exporting more reactors around the world. Without IAEA oversight on its nuclear activities, potential customers will likely turn to other suppliers.

Another impact of a globalized industry is transparency which is a crucial aspect in mitigating efforts to pursue nuclear weapons. This is more than just a measure to ensure that South Korea is transparent under IAEA safeguards, but one in which the norm of transparency is established within its nuclear industry. A few examples highlight that this norm is evident and reflective of Seoul’s overall intentions. Firstly the revelation that South Korea had conducted illegal experiments in reprocessing in 2000 and then secondly the scandal in 2013 in which the industry revealed that safety certificates for components had been forged. Each case shows the nuclear industry has been willing to expose its mistakes and ensure that its nuclear efforts are fully transparent despite potential costs.

Intentions: Keeping Nuclear Sovereignty Peaceful

Still, it might be possible to argue that the same desire for a “peaceful nuclear sovereignty” could also correlate with an aspiration for its own deterrence. For example the issue of pyro-processing was a very contentious issue between Washington and Seoul during discussions for the renewal of the 123 Agreement. Its controversy evolves from the fact that it is a way of reprocessing of spent fuel, an area that the United States has sought to deter South Korea’s interest. Although largely an unknown and relatively untested technology, the desire in Seoul for pyro-processing is due to two main reasons. The first is to address the problem of spent fuel that is reaching full capacity. Given the strong opposition to the building of new storage sites for spent fuel, pyro-processing would appear as an attractive solution. The second is related to the issue of “sovereignty” and the desire to develop the full nuclear fuel-cycle capacity that industry leaders already enjoy. This would help boost its competitiveness in the market vis-à-vis France and Japan who are able to provide reprocessing services to its customers.

From the U.S. perspective, however, such a capability would bring South Korea potentially closer to a “break-out” capability to develop weapons as well as broader implications in trying to denuclearize North Korea, although this effort seems now in vain. The decision in the end was to postpone the pyro-processing issue and leave it out of the 123 Agreement with the caveat that a joint study group would present findings on the issue by 2021.

This presents a great challenge to U.S. efforts to maintain certain controls on South Korea’s nuclear activities. However, within an alliance relationship there are many tools at the disposal of the patron state that can influence and even change the decisions made by the client state even if it possesses enrichment and reprocessing capabilities. Victor Cha has outlined his “powerplay” theory in which the United States crafted the “hub and spokes” model of alliances in Asia specifically to ensure it has dominance and leverage over the security policies and choices of its alliance partners in order to avoid entanglement in potential regional conflicts. Alliance relationships are rarely equal in any case, Gene Gerzhoy has shown how the United States was able to exert coercion in its alliance with West Germany to avert its quest for nuclear weapons in the 1960s.

In the context of alliance coercion and “powerplay,” the United States as the patron state would be able to exert significant influence over its client state South Korea’s nuclear industry due its globalized nature. By the time it develops a pyro-processing capability, if it is able to do so, its industry will have become even more embedded in the global nuclear industry, providing the United States with more leverage. A nuclear industry that is more globalized can be guided more effectively than one that operates in isolation and is more dependent on the central government for support and growth.

One could argue that with South Korea facing an immense if not impossible security challenge from North Korea it will sacrifice its globalizing nuclear industry and pursue its own armament. It could even be said that Seoul may have the perception that the United States, in the context of the rise of China, will not completely abandon its ally even if it were to build a nuclear arsenal, similar to Pakistan or Israel. However these points overlook the importance of the global non-proliferation regime (neither Israel nor Pakistan were party to the treaty from the start) and that the decision to build nuclear weapons would constitute a fundamental shift in South Korea’s national priorities, away from economic development to an almost military-first policy.

In this respect, one should examine the polling data more closely and within a broader context to ask whether South Koreans actually want the bomb. Gallup Korea conducted its survey with around 1000 respondents to assess how many are in favour of developing nuclear weapons. This survey has been conducted since 2013 in response to each North Korean nuclear test and the results can be seen in Table 1.

Table 1: Percentage in Favour of Developing Nuclear Weapons.

Source: Gallup Korea

On its own the data looks clear, a majority favour developing nuclear weapons. However, it needs to be carefully examined in order to understand accurately the full implications. While a majority may express some interest in each survey, the polling data has always come after a North Korean nuclear test when feelings of frustration and anger would evidently be at a high point. Given that Pyongyang is able to conduct its nuclear activities without any real negative consequences from China or the United States, there is a great feeling of helplessness in this regard and exasperation with the inability of the international community to manage the situation.

A breakdown of the data though reveals some interesting trends. Firstly there is little difference across the political divide, both the majority of those who identify themselves as either conservative or progressive are in favour of nuclear weapons, however the real divide is when the data is examined by age group. This breakdown reveals a significant gap between the younger and older generations. Those in their 50s and 60s express strong support for nuclear weapons, while those in their 20s and 30s are less keen. This reflects the fact that the younger generation are more concerned with immediate domestic social-economic concerns such as youth unemployment. Furthermore, conservatives who are mostly among the older generation tend to be very supportive of the alliance with the United States and always favour strengthening ties, thus it would be fair to view such opinion polls as expressing feelings of frustration at the political situation on the Korean Peninsula rather than popular support for nuclear armament.

South Korea’s efforts to become an exporter of nuclear technology has put its industry onto a path of globalisation. While this has many economic factors, its political/strategic effects are just as important. Firstly, it helps to restrain internal motivations for nuclear weapons, and secondly, it provides the United States with a coercive tool to reign in potential nuclear tendencies within the industry itself. South Korea’s nuclear industry has been a success story and can serve as a positive model for other developing countries that face significant external threats. As long as Seoul averts the desire for its own nuclear deterrence, this can be an important model for other countries and a way to boost the non-proliferation regime.