– It has been revealed that LIG Nex1, the prime contractor of the M-SAM deal, signed the $2.6 billion deal without agreements with domestic suppliers including Hanwha
– Without the supply of vertical launchers, vehicles and radars produced by Hanwha, LIG Nex1 can’t deliver the surface-to-air interceptor to Iraq on time.
The latest defense deal between South Korea and Iraq over the supply of surface-to-air interceptors has suffered a setback following the prime contractor LIG Nex1’s announcement of the $2.6 billion contract on September 20.
According to Korean media reports and industry sources, however, LIG Nex1 inked the deal on the M-SAM II (Cheongung-II), a medium-range surface-to-air missile interceptor, without agreements with its domestic suppliers, including Hanwha Aerospace and Hanwha Systems.
Often called the Korean version of the U.S. Patriot missile system, the M-SAM is designed to counter both ballistic missiles and aerial threats. A prime contractor, LIG Nex1 is responsible for integrating the systems, which include the vertical launch pad, launcher vehicle developed by Hanwha Aerospace; and the multi-functional radar developed by Hanwha Systems.
Iraq is the third country placing an order of the M-SAM missile interceptor following the United Arab Emirates and Saudi for the past years, but the latest deal may be difficult to be executed properly due to the procedural problems.
“Without the core systems of launchers and radars, the M-SAM is impossible to be operated and sold,” a Korean industry source said. “This is an unprecedented case that a prime contractor signed a deal without supply agreements, which could cause problems with the contract with the customer nation.”
The Defense Acquisition Program Administration, South Korea’s arms procurement agency, held an emergency meeting on September 24 to resolve the issue but failed to find a breakthrough, according to sources.
“In July, we responded to LIG Nex1’s request for the quote but didn’t hear back from the counterpart on whether to accept it or not,” a Hanwha official was quoted by Yonhap News Agency as saying. “After that, LIG Nex1 was pushing ahead with signing the contract without our knowledge.”
The official added his company had to review the changing security environment in Iraq and the country’s financial capacity before agreeing on the price for exports, which is a normal process ahead of making a deal.
During a press conference on September 23, Lee Hyun-soo, an executive of LIG Nex1, said his company discussed the status of negotiations with Iraq but didn’t confirm whether his company had reached a final agreement with Hanwha before signing.
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