Via Financial Times

US pressure on South Korea to contribute more to the cost of its defence has dented British hopes of winning an $800m deal to sell helicopters to the South Korean navy.

Harry Harris, the US ambassador in Seoul, said weapons procurement was being “taken into consideration” by Washington as part of fraught negotiations over raising Seoul’s contribution to the cost of keeping 28,500 US troops stationed in South Korea.

“Clearly, we are happy when South Korea buys American weapons,” Mr Harris said last month.

Italian defence group Leonardo, which makes AgustaWestland Wildcat helicopters at Yeovil in south-west England, was tipped to win the contract. But it is now battling a rival bid from US-based Lockheed Martin to supply 12 anti-submarine helicopters, their associated communication and weapons systems, and support services.

Leonardo, the incumbent supplier to the South Korean navy and one of the leading aerospace and defence companies in the UK, was the only company to submit a proposal following an initial round of bidding in 2018.

Leonardo said it was best placed to meet the Korean navy’s requirements, adding: “The company always welcomes a fair and transparent competition across all geographies.”

Seoul balked at the original US demand to massively increase its contribution to hosting US troops from $870m a year to around $5bn. Moon Jae-in, South Korea’s president, signalled during a meeting with Donald Trump at the UN last September that Seoul would increase American weapons purchases. Last month Mr Harris said that while the two sides remained “apart” on a deal, Washington had softened its position.

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Shin In-kyun, the head of Korea Defense Network, a Seoul think-tank, said it appeared highly likely that South Korea was under pressure to select the US-made helicopter.

“Purchasing US arms will definitely play a positive role in the defence cost-sharing negotiations and the MH-60R Seahawk will probably be selected,” Mr Shin said, referring to the Lockheed Martin helicopter commonly referred to as the “Romeo”.

US allies in Asia and Europe are watching closely because Mr Trump has fired frequent broadsides at allies over their reliance on the US for defence, prompting accusations from critics that Washington is trying to monetise alliances.

The Financial Times reported in December that the Trump administration had lobbied Japan to choose a US defence company to develop jointly a replacement for its F-2 fighter jets, rather than use a British alternative developed by BAE Systems, the UK defence contractor.

Both the Defense Acquisition Program Administration, the agency handling the tender, and South Korea’s defence ministry declined to comment.

Concerns over the transparency and fairness of the bidding process have been raised directly with DAPA by diplomats and South Korean lawmakers, according to a person familiar with the matter.

The Leonardo Wildcat helicopter is a cheaper option for the South Korean navy than the Lockheed Martin alternative, experts say. However, Lockheed Martin said the company was “confident” its MH-60R was “the right aircraft for the Korean Navy”.

“As the threat environment continually evolves, the US Navy will continue to invest in capability upgrades, thereby making those capability upgrades more affordable,” the company said.

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The broader cost-sharing Special Measures Agreement between the US and South Korea — which has been restricted to covering labour, logistics and construction costs — has been renegotiated every five years since it started in 1991. However, last year only a single-year understanding was reached after the two sides failed to agree on Mr Trump’s demand for the sharp increase in Seoul’s contribution.

On Wednesday, United States Forces Korea issued a 60-day notice of potential “administrative furlough” from April 1, meaning that around 9,000 South Koreans working for US armed forces face not being paid if a new SMA deal is not secured.

South Korea’s defence budget is among the top 10, at around $42bn, making the country an important market for the global defence industry. According to US data, American weapons sales account for roughly 80 per cent of South Korean defence imports, reflecting the close military ties between the two allies and the dominant position US companies enjoy in the market.