South Korea Owed 560 Billion Won: What Is Behind Iraq's Audacious Demands?

South Korean defense and construction companies are owed at least 565 billion won that has gone unpaid by the Iraqi government and related entities for more than a year.

Although the South Korean government dispatched a ministerial special envoy to recover the outstanding payments, little tangible progress has been made.

According to the office of Representative Lee Jae-gang of the Democratic Party of Korea, a member of the National Assembly's Foreign Affairs and Unification Committee, long-term receivables owed to domestic companies in Iraq for more than a year totaled at least 565 billion won, including about 378 billion won in construction and about 187 billion won in defense.

Company A in the construction sector has been unable to collect 275.44 million dollars—approximately 378 billion won—in construction payments while carrying out a new city development project in Iraq.

The unpaid bills have been accumulating since 2020, and Company A reportedly faced severe business difficulties, including laying off local staff, to the point where the possibility of withdrawing from the country was once raised.

The South Korean government also stepped in to resolve the matter directly.

In May, the government sent Moon Byung-jun, former charge d'affaires to Saudi Arabia with diplomatic experience in the Middle East, to Iraq as a special envoy of the foreign minister to discuss the overdue payments with the local deputy oil minister.

However, about four months later, the Iraqi Ministry of Oil reportedly responded to the effect that the Korean company should complete the remaining construction work at its own expense.

The conditions for negotiations have also become more complicated.

Amid Iraq's general elections and cabinet reshuffle, the former deputy oil minister who had discussed the payment issue with the South Korean side was reportedly arrested under government orders.

Large-scale unpaid amounts also occurred in the defense sector, where Company B is owed 136 million dollars, or about 187 billion won, from Iraq for base construction, logistical support, and helicopter-related projects.

Under these circumstances, the Iraqi side has also floated the idea of paying the overdue sums in crude oil rather than cash.

From the companies' perspective, receiving crude oil does not immediately solve the issue of unpaid receivables.

This is because they would need to arrange transportation to ship the crude oil, process it through storage and refining, and then monetize it.

If international oil prices decline, losses could occur, and companies might also have to bear the costs of transportation and stockpiling.

However, with no clear breakthrough in sight for collecting the unpaid debts, the companies involved have reportedly begun internal reviews to prepare for the possibility of actually receiving payment in crude oil.

(Reported by Kim Minjeong | Video by Kim Min-ji | Design by Lee Soo-min | Produced by SBS Digital News)
※ Please note: This article was translated by AI and may contain errors.