Invest1 publisher3 min readPublished
Korea's trade minister gives himself a week to close the U.S. investment package
Kim Jung-kwan came back from Washington saying the targets, scale and structure of the projects were still being worked, that several issues are unresolved, and that he intends to try for a final deal inside the week.
The Investor · Invest desk
What happened
- Trade Minister Kim Jung-kwan said Seoul is aiming to conclude follow-up negotiations with Washington on its investment package within the week, with several issues still unresolved and no final agreement.
- Projects under consideration include up to eight large nuclear reactors in the United States, the Texas gas plant and the Alaska LNG project.
- Concern has emerged in recent weeks, as candidate projects were floated one after another, that actual investment could exceed the $200 billion strategic investment cap agreed by Seoul and Washington.
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Why it matters
- constraint With the annual draw fixed at $20 billion, every project admitted to the package competes with the others for one year's allowance, so adding a reactor pushes something else into a later year.
- decision Korean builders and equipment suppliers cannot size orders or book slots for the Texas plant or the nuclear follow-up while the minister will not confirm that either is settled.
- contradiction The candidate list has been growing while the ceiling has not moved, and Kim's assurance that the cap holds is an assertion.
- precedent Kim framed the week as an attempt rather than a commitment, so a missed date sets no penalty.
The week is Kim's own, and he hedged it in the sentence that set it. He said at Incheon International Airport on the 13th: "I intend to make an attempt within this week, and if a final deal is struck, we are thinking of announcing it within that time as well" [2][3]. He also said, "In a negotiation, nothing is over until the last signature" [14].
Targets, scale and structure are the three items he worked through with Commerce Secretary Howard Lutnick and others, according to sources cited by Seoul Economic Daily [4]. They cover which projects are counted toward the package, how much each one draws, and on what terms the money leaves. Asked whether the Texas combined-cycle gas plant cited as the package's first project and a follow-up nuclear build had been settled, Kim said, "It is difficult to go into specifics at this point" [6][7][8]. He gave the same answer on Alaska LNG. The trip was partly relationship work: the paper reported that Kim appears to have attended a memorial event for victims of the Sept. 11 attacks, including Lutnick's brother [15].
The ceilings are the fixed part. "Our investment cap of $200 billion and $20 billion a year was set when we originally reached agreement with the United States," Kim said. He added, "I do not think there will be any case of exceeding that cap" [11][12]. One year at the ceiling is a tenth of the headline number [1], and drawing the full $200 billion at $20 billion a year takes ten years [2].
Fitting a candidate list that runs to eight large U.S. reactors plus the Texas gas plant plus Alaska LNG into $20 billion a year is a sequencing problem [10][11]. Selecting a project into the package therefore also decides which year it draws in. And whether the annual figure counts signed commitments or cash actually disbursed changes how many projects fit inside one of those years.
The package is signed this week with projects and years attached, and Korean builders and equipment suppliers can size orders against it. The week passes without a signature, at almost no political cost given how Kim framed the attempt [2]. Or it is signed with the cap restated and the project list left indicative. The selection contest then moves past the announcement and into the years that follow. I would expect the third, because the unresolved items are the ones that determine who draws first [1]. An announcement that attaches dollar figures to individual projects would put that reading wrong. For now Kim's summary of the trip is that "It is true that we have made significant progress on many issues" [13].
What to watch
- An announcement that attaches dollar figures and start years to the Texas gas plant, the nuclear follow-up or Alaska LNG.
- Whether all eight candidate reactors survive once the $20 billion annual draw is applied to the project list.
- Any clarification of whether the $20 billion a year counts signed commitments or disbursed cash.