South Korean Government Considers Expanding U.S. Gas and Oil Imports

SEATTLE (Oil Monster): To address U.S. President-elect Donald Trump’s commitment to reducing the trade deficit, the South Korean government is considering expanding imports of U.S. energy sources.

According to the Ministry of Economy and Finance (MOEF) and the Ministry of Trade, Industry, and Energy on Nov. 10, the government is exploring options to increase public and private sector imports of American crude oil and gas as the Trump administration prepares for a second term.


Trade authorities anticipate that Trump’s new administration may apply trade pressure, pointing to South Korea’s trade surplus with the U.S. and have thus expressed the need for proactive measures to ensure a balanced trade relationship. Industry insiders believe Korea Gas Corp. (KOGAS) could diversify its gas sources, potentially expanding U.S. gas purchases. By the end of this year, KOGAS’s long-term contracts with Qatar and Oman, which began in the 1990s and cover 8.98 million tons annually, will expire. From next year, long-term contracted volume will decrease to 3.53 million tons, a reduction of 5.45 million tons. Of the reduced volume, around 4 million tons are expected to be covered through flexible short- and mid-term contracts spanning three to fifteen years in order to secure gas supply and demand flexibility. The industry is closely watching to see if KOGAS will decide to procure additional U.S. gas in its upcoming long-term bids for deliveries after 2028, given the potential for diversified sources. KOGAS plans to select suppliers as early as early next year. The government is also reportedly examining options to increase U.S. crude oil imports as part of a broader strategy to diversify its oil import sources, despite the relatively limited potential for increasing U.S. crude imports compared to gas.

Trade experts believe that former President Trump is likely to exert trade pressure on South Korea due to the trade deficit. Yoo Myung-hee, former head of trade negotiations at the Ministry of Trade, Industry and Energy and currently a visiting professor at Seoul National University’s Graduate School of International Studies, has shed light on the potential trade dynamics between South Korea and the United States under a possible second term of former President Donald Trump. Yoo emphasized that Trump places significant importance on the U.S. trade deficit, a factor that could shape future trade negotiations.

"President Trump evaluated whether bilateral relations were truly equal based on the trade deficit during every summit," Yoo stated, reflecting on her experience overseeing the renegotiation of the Korea-U.S. Free Trade Agreement (KORUS FTA) during the Moon Jae-in administration in 2017. This perspective is crucial as trade experts predict that Trump, if re-elected, would likely exert pressure on South Korea to address the trade imbalance.

Bloomberg reported on Nov. 4 that the U.S. government is expected to demand improvements in trade balances from its trading partners if the Trump administration enters its second term. In response, it reported, the South Korean government is considering increasing its purchases of U.S. oil and gas as a potential measure to balance trade. "If South Korea has to import energy from other countries anyway, expanding imports from the U.S. within the possible range is also an option," Yoo suggested, though she noted the uncertainty of whether the government has actively considered this approach.

The historical context of U.S.-South Korea trade relations provides a backdrop to these developments. The two nations have been significant trading partners for decades, formalized through agreements like the KORUS FTA, initially signed in 2007 and renegotiated in 2018. The concept of a trade deficit, where a country imports more than it exports, has been a key economic indicator for Trump, who often cited it to justify imposing tariffs and renegotiating trade agreements to favor U.S. interests.

During his presidency, Trump adopted a protectionist trade policy under the "America First" banner, renegotiating trade deals, imposing tariffs, and pressuring trading partners to reduce their trade surpluses with the U.S. This context explains why experts believe Trump would continue to exert trade pressure on South Korea if he were to return to office.

Meanwhile, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok stated on Nov. 11, “While it is difficult to predict the uniform impact of U.S. policies under the new administration, these will likely influence the broader economic conditions as well as external economic factors, including industry, trade, diplomacy, security, supply chains, and financial markets.”

Choi presided over the 7th Foreign Economic Advisory Meeting at the Export-Import Bank of Korea building in the morning on the same day. He reviewed strategies with trade, foreign exchange, and financial experts to address Trump’s incoming administration.

The advisory meeting, a non-permanent body, serves as a platform to gather insights from external experts by sector on global uncertainties.

During the meeting, Choi emphasized, “We will remain vigilant to any shifts in conditions and keep all possibilities open to preserve the economic cooperation between South Korea and the U.S. as firmly as possible.”He added, “It is essential to respond swiftly to various scenarios while maintaining close cooperation with the United States.”

The MOEF reported that experts advised, “In terms of diplomacy, security, economy, and trade, the U.S. is likely to take a more unilateral, pressure-based approach, so it is necessary to protect our core interests while establishing a politically and strategically sound negotiation approach.”

Experts noted, “The launch of a new U.S. administration could present some downside risks to South Korea’s economic growth from a macro and foreign exchange perspective. However, positive factors, such as declining energy prices leading to lower inflation and increased domestic investment resulting from the inclusion of South Korean bonds in the World Government Bond Index (WGBI), will be present as well.”

Courtesy: www.businesskorea.co.kr