While tensions between the United States and the European Union (EU) over Greenland appear to be easing on the surface, skepticism about the U.S. security umbrella is growing within Europe, accelerating efforts to bolster independent defense capabilities. This shift in the geopolitical landscape could present new opportunities for South Korea’s defense industry (K-defense).
U.S.-EU Conflict Averts Crisis, but EU Pushes for Defense Autonomy
According to international media reports on January 25, President Donald Trump emphasized the strategic importance of securing Greenland for U.S. national security during his recent speech at the Davos Forum in Switzerland and on social media platforms. He assured that force would not be necessary or used in this pursuit.
This stance has helped avoid a direct confrontation with Denmark, averting a potential diplomatic crisis. However, European attitudes toward the U.S. remain frosty in the wake of the Greenland controversy. The Wall Street Journal reported a growing sense of distrust towards the U.S. among EU member states.
Serbian President Aleksandar Vučić remarked that the relationship between Europe and the U.S. would not recover quickly. Norwegian Foreign Minister Espen Barth Eide stated that an ally attempted to attack another ally. This will leave a lasting trauma for Europeans.
As a result, calls for reducing dependence on the U.S. and enhancing independent defense capabilities are gaining momentum across major European nations. U.S. Treasury officials’ assertions that Europe will ultimately recognize the importance of the American security umbrella have been interpreted as provocative, further fueling European wariness.
Developing autonomous defense capabilities has become a top priority for Europe. Since the Trump administration took office, the North Atlantic Treaty Organization (NATO) member countries have increased their defense budgets under U.S. pressure. Now, they’re moving beyond compliance with U.S. demands to actively reduce their reliance on American military support.
K-Defense: Rapid Delivery and Cost-Effectiveness Make It an Ideal Partner for EU
This shift in European defense strategy could create significant opportunities for K-defense. Following a landmark 12.4 billion USD export deal with Poland in 2022, South Korean defense firms have secured contracts with other European nations, including Romania, solidifying their presence in the market. These countries have reportedly praised South Korean defense products for their competitive delivery times and cost-effectiveness.
The recent surge in defense stock prices reflects this trend. Since the beginning of this year, the combined market capitalization of South Korea’s top four defense companies—Hanwha Aerospace, Korea Aerospace Industries, Hyundai Rotem, and LIG Nex1—has increased by over 30%.
However, challenges remain. The EU is establishing a fund of up to 150 billion EUR (about 178 billion USD) to achieve regional defense autonomy and has proposed that over 65% of components be sourced locally through its European Security Action (SAFE) initiative. This effectively institutionalizes a Buy European policy. Additionally, the carbon border adjustment mechanism (CBAM), set for full implementation this year, could increase costs for essential defense materials like high-strength steel.
Canada’s diplomatic tensions with the U.S. and its potential impact on NATO cooperation add another layer of complexity. Some analysts worry that Canada’s pursuit of submarine projects amid recent shifts in the security landscape could disadvantage South Korean bids.
Despite these challenges, industry experts believe Europe cannot afford to overlook K-defense, given the urgent need to bolster military capabilities. If geopolitical uncertainties stabilize, projections suggest that the combined operating profit of South Korea’s defense giants could surpass last year’s record of 5.2 trillion KRW (about 3.6 billion USD), potentially reaching 6 trillion KRW (about 4.1 billion USD) this year.
An industry insider commented that while the U.S.-EU conflict may seem like a short-term issue, K-defense could play an increasingly significant role in the broader context of Europe’s evolving security landscape.