South Korea’s resource diplomacy: Derisking and diversifying

In the middle of the US-China rivalry, the race for critical minerals has made states examine their vulnerabilities to safeguard national security. South Korea, too, finds itself at a critical crossroads: It is a resource-deficient state with an export-driven economy and high dependence on China for minerals. The increasing economic nationalism in the United States (US) is also having a direct impact on it. Despite realising these serious structural challenges, South Korea has chosen to align with the US. However, due to its continued reliance on the Chinese supply chain, the tilt towards the US has not resulted in increased trade and has also disrupted China-South Korea ties. Therefore, to address these structural issues and achieve economic security, South Korea has adopted a two-pronged resource diplomacy strategy: 1) mitigating the risks associated with relying on the Chinese supply chain and 2) investing in building an alternate supply chain to bolster its economic security in the long term.   

Critical minerals and South Korean economic security

A sustainable and secure critical minerals supply chain is essential for South Korea as it aims to leverage the economic potential of the sunrise sector, which includes semiconductors, secondary batteries, and EVs. To implement this vision, the South Korean Ministry of Science and ICT has announced 12 critical and emerging technologies, encompassing 50 key technologies in 12 fields, and advanced mobility and secondary batteries, which are crucial to excel amidst the global technological competition. 

A sustainable and secure critical minerals supply chain is essential for South Korea as it aims to leverage the economic potential of the sunrise sector, which includes semiconductors, secondary batteries, and EVs.

President Yoon's administration has released an ambitious economic plan, betting on critical and emerging technology sectors such as green technology, EVs, secondary batteries, and semiconductors. While presiding over the National Strategy meeting, Yoon stressed the importance of diversifying supply chains to address volatility and instability in the minerals and materials of batteries. To implement this strategy, South Korea plans to cut its critical minerals dependence on China from 80 percent in 2023 to 50 percent by 2030 for 10 strategic minerals among its 33 designated key minerals. Currently, its dependence on China remains high, for instance, in 2023, it imported 95 percent of its minerals from China, among which lithium hydroxide accounted for 84 percent and cobalt hydroxide 69 percent. Nationally, self-reliance policies are implemented to support domestic production capacities that offer low economic benefits, increase R&D, and ‘strategic foreign investment and reshoring companies’, facilitating de-risking. The Yoon administration has also increased the R&D budget for key supply chain items to 73.9 billion won in 2024 from 17.6 billion won in 2023. 

However, despite the decision to reduce its dependence on China, foreign policy challenges impede Seoul’s current economic security approach. South Korea's trajectory to manoeuvre the US-China trade relations has been a success and a failure. Starting with the Trump administration's trade policies, South Korea suffered as it was forced to choose between its ally and security provider, the US, and China, its primary export market. Understanding this challenge, former president Moon Jae-in made two decisions for economic derisking: Enacting the New Southern Policy (NSP), an economic policy targeted at diversifying its economic relations with ASEAN and India and de-hyphenating Seoul’s security and economic interests. However, under President Yoon, Seoul changed its policy and tilted towards the US, prioritising its security alliance over its economic partner, China. However,  the economic partnership with the US did not pan out as Seoul expected due to the US’s increasing mercantilist policies such as the Inflation Reduction Act (IRA) and tariffs. Such policies placed restrictions on the South Korean EV Industry, as it worked closely with the Chinese battery supply chain, making it difficult to take advantage of subsidies under IRA. With Trump coming to power, the South Korean EV Industry prospects look even more grim. Trump has promised that he ‘will work to stop the flow of American tax dollars subsidising Chinese electric vehicle battery companies.’ Despite the economic challenges in the short term, South Korea has adopted a two-pronged strategy to achieve mineral security.

South Korea’s resource diplomacy pillars: De-risking and diversifying 

Amidst rising supply chain uncertainties, South Korea has undertaken one of the most extensive exercises of critical mineral diplomacy. What makes Seoul’s resource diplomacy different is its calculated and rational policies in the face of mounting pressure from both sides, the US and China. Driven by a robust Critical Minerals strategy, its resource diplomacy has so far been able to de-risk from China and diversify without angering Beijing. Seoul’s objective is to shift away from total dependence on China to partial dependence, considering the reality of the supply chain in the short to middle term. At the same time, Seoul has taken steps to foster cooperation with resource-rich countries across the globe, mainly targeting Africa, Central Asian Republics (CAR), and Latin American countries. While addressing the Africa summit, President Yoon accepted the risks and offered his partnership to establish a resilient supply chain. He said, ‘In the face of the instability of global supply chains, we emphasie the increasing importance of mineral resources needed for the development of future industries such as electric vehicles, batteries, and renewable energy.’ 

Amidst rising supply chain uncertainties, South Korea has undertaken one of the most extensive exercises of critical mineral diplomacy.

Clearly, South Korea’s resource diplomacy rests on two main pillars:de-risking and diversification. Under the de-risking pillar, South Korea has established close cooperation with the US and its partners (see Table 1) and multilateral groups, such as the Mineral Security Partnership and Indo-Pacific Economic Framework’s Critical Mineral Dialogue. Seoul’s aims to align itself with the US, its strongest ally, the technological powerhouse, and other partners from Quad and AUKUS, such as India, Australia, Japan, and the United Kingdom (UK). Seoul sees a developed and developing market with increasing export potential for its electric mobility and green technologies sectors, which are widely adopted in both geographies. With the wider adoption of South Korean products, Seoul is expected to emerge as the main competitor to China in major categories such as EV and green technology. 

Table 1: Agreements with allies and partners

Source: Compiled by Author

Many developments have occurred on the diversification front; the approach emphasises building strategic cooperation with third countries that are not part of US-led initiatives. Seoul has developed strategic collaboration and partnerships with resource-rich mineral countries (see Table 2). For instance, two vital developments took place in the last few months; one was a summit held with the African nations, and the second was a visit by the South Korean President to three Central Asian countries—Kazakhstan, Turkmenistan, and Uzbekistan. 

Many developments have occurred on the diversification front; the approach emphasises building strategic cooperation with third countries that are not part of US-led initiatives.

In June this year, Seoul hosted the 2024 Korea-Africa Summit. Following the summit, the Korea-Africa Critical Mineral Dialogue was established to ‘serve as an important institutional foundation for enhancing cooperation between Korea and Africa.’ Similarly, during his trip to Central Asia, he introduced the K-Silk Road initiative, the third initiative after the Indo-Pacific and Korea-ASEAN Solidarity Initiative (KASI) under his administration, focusing on resources (critical minerals)—one of the four partnership pillars under this initiative. South Korea aims to further institutionalise this initiative by connecting it with all five CARs and organising the first summit with all five countries next year. 

Table 2: Agreements with third countries 

Source: Compiled by Author

By establishing these institutionalised summits and integrating critical minerals into the agenda, South Korea's objective is to protect its economic security via mineral security. To accomplish that, it is strengthening its strategic ties with specific geographies that have a vital role to play. Seoul’s other objective is to build an alternative supply chain free from great power politics and leverage its partnership to penetrate further the downstream segments of these countries' critical mineral supply chain. 

Abhishek Sharma is a Research Assistant at the Observer Research Foundation

The author would like to acknowledge the efforts of Ankitha Brijesh, Research Intern, who helped with data compilation. 

• International Affairs
• East and Southeast Asia
• ASEAN
• critical minerals
• Electric Vehicles (EVs)
• Inflation Reduction Act (IRA)
• K-Silk Road Initiative
• Korea-Africa Summit
• South Korea
• US-China rivalry

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