Saudi Vision 2030, Saudi Arabia’s bid for economic and social transformation, has been quietly gathering renewed interest in South Korea amid the unfolding drama with the nuclear program of its northern brethren. The latest sign of this engagement occurred when minister Khalid al-Falih of Saudi Arabia’s Ministry of Energy, Industry, and Mineral Resources (MOEIMR) met with president Moon Jae-In on May 4 of this year. Their 35-minute private reception was rare for a minister’s meeting, according to a Blue House official, signifying that interest in Saudi Vision 2030 is at the highest possible level.1 During his visit, al-Falih also met with his counterpart, minister Paik Un-gyu of the Ministry of Trade, Industry, and Energy (MOTIE). The two affirmed their shared commitment to Saudi Vision 2030 by strengthening cooperation on energy and industry and exploring business opportunities and economic development. It continues recent efforts to expand, diversify, and institutionalize the two countries’ bilateral economic linkages, following the establishment of the Korea-Saudi Vision 2030 Committee in 2017 and Paik’s visit to Saudi Arabia in early 2018.

South Korea actively seeks engagement opportunities in Saudi Vision 2030. Not only does the plan promise huge business opportunities, but Seoul also believes that its government and business community possess the suitable experience and expertise needed to meet some of Vision 2030’s key objectives. Al-Falih similarly has expressed an intention to expand the scope of its relations with South Korea beyond oil exports. The interests in cooperating appear mutual and the scope of trade promises to be both wide-ranging and sizable.

The stakes and implications of the new initiative raise several basic yet critical questions. Where is Saudi–South Korea cooperation heading? What makes Saudi Arabia and South Korea good partners in pursuing and realizing Saudi Vision 2030? What are the challenges and vulnerabilities? Ultimately, what is the best way forward?

(1)                      “President Moon, Seeking Joint Nuclear Plant Venture with Saudi Arabia,” Chosun Ilbo, May 5, 2018, http://news.chosun. com/site/data/html_dir/2018/05/05/2018050500180.html.

Brief History

Since establishing diplomatic relations in 1962, a central pillar of Saudi Arabia–South Korea relations has been defined by economic needs. Like most economies in Asia, South Korea relied heavily on oil imports to power its economic growth, and Saudi Arabia, as a giant oil producer and also generally close to the United States, was a natural energy-trading partner. The trade began to flourish in the 1970s, fueled by the growing volume of oil exports and South Korea’s participation in large construction projects in the Middle East. The overreliance on oil, however, backfired in the decades of the 1980s and 1990s, during which oil prices remained low. Although Saudi Arabia remained a principal supplier of oil, the low price resulted in a shrinking volume of oil trade and, subsequently, of construction projects. In the same fashion, an oil price increase in the 2000s revitalized the economic linkages. Unlike the 1970s, the economic revival in the 2000s was followed by Seoul’s growing political interest in Saudi Arabia, which culminated in every sitting president undertaking formal visits to Saudi Arabia (starting with Roh Moo-hyun in March 2007, followed by Lee Myung-Bak in February 2012, and then Park Geun-hye in March 2015).2

Initial Setback

In many respects, the 2016 announcement of Saudi Vision 2030 represented a perfect opportunity for South Korea and Saudi Arabia to diversify and to deepen their economic relationship, which had previously been dominated by oil. Captivated by the new opportunities arising from Saudi Vision 2030 along with the rest of the world, South Korea was eager to learn more about the opportunities and how it might secure them.

South Korean government officials quickly moved to demonstrate the state’s willingness  to use its exceptional resources to meet Saudi Arabia’s new push for economic and social transformation. The first of such efforts was seen during the meeting of South Korean prime minister Hwang Kyo-ahn with King Salman in May 2016, during which Hwang emphasized

(2)                      For a general overview, see Alon Levkowitz, “The Republic of Korea and the Middle East: Economics, Diplomacy, and Security,” Korea Economic Institute of America, Academic Paper Series, Vol. 5, No. 6 (August 2010).

that Saudi Vision 2030 was “a perfect-matching project to Korea.” The momentum continued to build up to a September 2016 meeting between then-president Park Geun-Hye and then– deputy crown prince Mohammad bin Salman during the meeting of the G20, when South Korea pledged “to closely cooperate with Saudi Arabia for the Saudi Vision 2030’s success” and “to send an advisory group to design the economic development plan.”

Unfortunately, South Korea’s efforts came to an abrupt halt in October 2016. Although not by design or intention, the misfortune was the side effect of an unexpected development in Korean domestic politics—a corruption scandal involving then-president Park and her long- time confidant, Choi Soon-sil. The scandal soon sent South Korean politics into turmoil, which only subsided with Park’s eventual impeachment on March 10, 2017.

The scandal proved nearly fatal to Saudi–South Korean cooperation on Saudi Vision 2030. By effectively draining South Korea’s entire political capital and most of the governmental resources, the scandal left the state apparatus barely functional and totally unable to handle complex domestic and foreign policy issues, including Saudi Vision 2030.

(3)                     “Not to Blow a Torchlight,” Dong-A Ilbo, March 21, 2017, http://news.donga.com/3/all/20170321/83418725/1#csidxf8c c7e2809a6cbfb8ae7337db94944c.

(4)                     Noh Stone International Press, “Saudi King Skips South Korea,” Chosun Ilbo, March 14, 2017, http://news.chosun.com/ site/data/html_dir/2017/03/13/2017031302951.html.

(5)                      Kim Hyun-ki, “Korea’s Preposterous Diplomacy,” March 21, 2017, JoongAng Ilbo, http://news.joins.com/article/21388637.

opportunity is subjective, it is difficult to escape the conclusion that South Korea’s engagement with Saudi Vision 2030 suffered a significant setback as the result of its unforeseen domestic political developments.

Strong Fundamentals

The initial setback, however, does not, and should not, diminish the strong fundamentals and huge potential present in relations between Saudi Arabia and South Korea. Three factors— economic complementarity, an absence of political conflict, and favorable historical memory— are particularly important, and in combination they form the basis for optimism.

First, the two countries enjoy an unusual level of economic complementarity built on two levels. On the one hand, hardly any overlap exists between their respective areas of comparative advantage or their industrial needs and desires. This originates from the widely different conditions in the two countries, including their industrial structures, timing of the drive for economic development, and regional locations. Saudi Arabia’s comparative advantage has historically laid in its abundance of hydrocarbon resources, whereas South Korea notably lacks natural resources and instead has resorted to a mix of manufacturing and service sectors. As for the timing, South Korea’s big drive for economic development and diversification began in the 1970s, and hence posed very little competitive threat to Saudi Arabia’s most recent efforts under Saudi Vision 2030. The sheer physical distance between the two nations further reinforces their noncompetitive nature.

Saudi Vision 2030 takes this condition of structural complementarity a step further by creating several mutually beneficial areas. According to a report titled “Saudi Korean Vision 2030,” for instance, Saudi Arabia offers energy, capital, strategic location, a large consumer market, and infrastructure market, which meets South Korea’s “desire” for sustainable energy sources, more foreign direct investment (FDI) to revitalize the economy, and an overseas market for its manufacturing companies and infrastructure projects. The reverse relationship is equally robust. South Korea’s technology and manufacturing expertise, pool of skilled engineers and labor, and extensive experience in economic development and trade are extremely relevant to Saudi

Arabia’s core objective of achieving a “Thriving Economy.” The mutual needs are substantial and balanced, and the area of competition and conflict remains minimal, establishing an ideal basis on which to explore opportunities to widen and deepen the two nations’ business and economic partnership.

Second, few conflicts of interest exist in the political arena. The nature of political relations often determines whether and to what extent the economic potential between states can materialize. A comparison with South Korea–Iran trade relations is a case in point. The nature of trade and investment is comparable to South Korea’s trade with, and investment in, Saudi Arabia, but South Korea’s economic interaction has been constantly marred by exogenous political events, including North Korea’s suspected assistance with Iran’s nuclear program and international sanctions on that program. The impact of the sanctions was highly visible and damaging: after sanctions placed on it in 2012, South Korea had to drastically cut its Iranian oil imports, from 250,000 barrels per day (b/d) in 2011 to 123,000 b/d in 2014. As a key ally of the United States, South Korea’s leeway to interact with states that are hostile to that country is often severely limited.

South Korea’s relations with Saudi Arabia are quite the opposite, however. Saudi Arabia is also a close U.S. ally, and its bilateral relations with South Korea have historically been mostly free of third-party disturbances. At the bilateral level, neither country has political aspirations outside its own regions, with the result that there are virtually no areas of conflicting interests. One possible complicating factor has been Israel. South Korea, however, has prioritized its trade with the Persian Gulf states over Israel, with which it had little political interaction during the Cold War and, from that point on, a relatively small volume of trade. Overall, bilateral relations have remained more or less apolitical, and the neutral tone was, and will continue to be, highly facilitative in materializing and expanding economic cooperation.

Third, while politically distant, relations between South Korea and Saudi Arabia have not been simply neutral, but rather consist of a favorable and positive history. The warm mutual perception is formed from the experiences and memories of the 1970s and its largely positive impact on the Korean economy. “A land of opportunity” was how Saudi Arabia was described

by the Korean companies and workers who participated in and benefited from the construction projects that at the time were proliferating in the Persian Gulf. The decade of the 1970s was particularly significant because, with the backdrop of vivid memories of the Korean War (1950– 1953), the Korean economy was just beginning to rebuild, industrialize, and grow. Its industrial competitiveness and potential were, however, yet to be tested outside the peninsula, and South Korea’s rising chaebols, such as Hyundai, Daewoo, and Dong Ah, were eager to prove their international competitiveness. The Korean government also supported the chaebols’ bids for large construction projects in the Middle East with loans and tax reductions. Winning those bids, accordingly, was hailed, not only as a business success, but also as the