The US demand for South Korea to inject $350 billion in cash into a pledged investment fund could plunge Asia’s No. 4 economy into a crisis reminiscent of 1997 unless safeguards are in place, President Lee Jae Myung said in an interview with Reuters.
Lee said Seoul and Washington verbally agreed to a trade deal in July, in which the US would lower tariffs on South Korean goods in exchange for $350 billion in investment, among other measures, according to the report.
But the two sides have yet to put the agreement to paper.
South Korea has proposed an unlimited currency swap with the US to support the investment pledge and cushion its impact on the domestic foreign exchange market. But Washington rejected the offer.
“Without a currency swap, if we were to withdraw $350 billion in the manner that the US is demanding and to invest this all in cash in the US, South Korea would face a situation as it had in the 1997 financial crisis,” Lee said during the interview conducted on Friday.
COMMERCIAL FEASIBILITY
Seoul and Washington have said in writing that any investment projects must be commercially viable, but working out the details is proving difficult, he said.
“Reaching detailed agreements that guarantee commercial reasonableness is now the central task — yet it also remains the biggest obstacle,” Lee said.
Proposals during working level talks provide no assurance of commercial viability, making it hard to bridge the gap, he said during the interview.
Lee, asked if he would walk away from the deal, said: “I believe that between blood allies, we will be able to maintain the minimum amount of rationality.”
“We should end this unstable situation as soon as possible,” he said, when asked whether talks could extend into next year.
DETENTION OF KOREAN WORKERS IN GEORGIA
Lee said South Koreans were naturally angered by the “harsh” treatment of the workers, who were detained for about one week following the US immigration raid on a Hyundai Motor Co.-LG Energy Solution Ltd. joint venture in Georgia early this month.
Lee warned the incident could make companies wary of investing in the US, but added: “I do not believe this was intentional, and the US has apologized for this incident, and we have agreed to seek reasonable measures in this regard and we are working on them.”
NORTH KOREA
Lee said he was not optimistic about the prospect of inter-Korean talks for the time being.
On Sunday, North Korean leader Kim Jong Un said he had no intention of ever resuming dialogue with South Korea.
However, Kim said during a speech to Pyeongyang’s parliament he still had good memories of Trump, who he met during Trump’s first term, according to its state media on Monday.
His remarks came just one day before Lee’s departure from Seoul to attend the United Nations General Assembly in New York, where he is scheduled to deliver a keynote address and chair a Security Council meeting.
During his speech at the UN, Lee is expected to address nuclear tensions on the Korean Peninsula and call on North Korea to return to talks.
The Presidential office said there is no plan for Lee to meet Trump in New York and that the trade talks are not on the visit’s agenda, according to Reuters.
By Yeonhee Kim
yhkim@hankyung.com
Jennifer Nicholson-Breen edited this article.
