Analyzing Risks on Three Tracks—Investment, Hormuz, and North Korea—Following the ROK-US Foreign Ministers' Meeting

Executive Summary

The September 18 meeting between Minister Cho Hyun and Secretary of State Rubio failed to finalize any of the three key tracks: U.S. investment, contributions in the Strait of Hormuz, and the North Korea issue. The U.S. side confirmed a lack of progress in dialogue with North Korea, while South Korea’s commitment to Hormuz remained a statement of principle. Only the investment track has a concrete milestone ahead—the signing of a memorandum of understanding (MOU) for eight nuclear power plants—revealing a clear asymmetry in the pace of progress. The Trump administration could use insufficient security contributions as a pretext to worsen investment terms. The South Korean government must therefore avoid being drawn into negotiating tactics that treat the three tracks as a single package. Companies should not mistake the nuclear MOU signing for a finalized project and should proceed in stages until detailed conditions are formalized. The defense industry, meanwhile, needs to prepare for scenarios in which a troop dispatch is either canceled or postponed.

I. Situational Analysis

The ROK-US Foreign Ministers' Meeting: A Situational Analysis of Key Issues in Investment, Hormuz, and North Korea

1. Background and Developments

Since President Lee Jae-myung’s visit to the White House last August, diplomatic issues between South Korea and the United States have proceeded along three parallel tracks: negotiations on U.S. investment, contributions in the Strait of Hormuz, and coordination of North Korea policy. Although these tracks began at different times, by September they had effectively converged at a single negotiating table.

On the investment track, the government has been pursuing a strategic investment plan in the U.S. worth up to $200 billion over 20 years [3]. A $120 billion investment to construct eight nuclear power plants and a gas-fired combined cycle power plant project in Texas were selected as priority projects [3]. The government has stated that its guiding principle for investment decisions is 'commercial viability,' meaning the ability to recoup principal and dividends [3]. However, with reports that the Special Purpose Vehicle (SPV) structure, designed as a safeguard for principal recovery, was altered at the U.S.'s request, it remains uncertain to what extent this principle will be upheld in the actual contract phase [3].

The Hormuz track gained momentum after the U.S. and Israel conducted airstrikes on Iran this past February [6]. The death of Supreme Leader Khamenei did not lead to the regime's collapse, and after the Islamabad Memorandum, signed by the U.S. in June, expired in August, Iran shifted to an offensive posture, re-escalating tensions in the strait [6]. The South Korean government signaled its willingness to contribute by participating in a French- and British-led conference on Hormuz in April, and backlash from domestic civil society began in earnest after the Blue House first officially acknowledged on September 4 that it was reviewing a troop dispatch [6]. The Ministry of National Defense sent a fact-finding team to the region on September 8 [6].

2. Current Situation

Minister of Foreign Affairs Cho Hyun met with Secretary of State Marco Rubio in Washington on September 18 [1][10]. Although the Ministry of Foreign Affairs announced the meeting's agenda as "ROK-U.S. relations, Korean Peninsula issues, and regional and global issues," the actual discussions covered U.S. investment, Hormuz, and North Korea in a single session [10]. After the meeting, Minister Cho briefed correspondents on the outcomes at the South Korean Embassy in Washington [4].

The issue of resuming U.S.-North Korea dialogue was discussed, but the U.S. side reportedly responded that there had been no concrete progress [4]. Minister Cho conveyed South Korea's intention to make a substantive contribution to restoring freedom of navigation in the Strait of Hormuz [4]. This was closer to a statement of principled willingness to cooperate than an explicit comment on whether troops would be dispatched.

On the same day, President Lee Jae-myung reaffirmed his position on Hormuz in South Korea. While mentioning the need to protect South Korean nationals and national interests, he drew a clear line, stating that he would not dispatch troops in a way that could involve the country in a foreign conflict [7]. This is an extension of his previous stance, articulated at a September 4 meeting with civil society groups, where he stated that "talk of a troop dispatch is very difficult" but that he was "looking at it seriously" [6].

Regarding the investment negotiations, the timing for signing the MOU for eight nuclear power plants was discussed as being around the time of the foreign ministers' meeting [3]. However, issues such as securing voting rights in Westinghouse and demands for a stake in the semiconductor industry remain unresolved variables [3].

The situation in the Strait of Hormuz is itself fluid. Iran maintains its position that it will not engage in dialogue until the U.S. meets its conditions [15]. Türkiye's foreign minister assessed that U.S.-Iran negotiations have stalled in the aftermath of attacks by Houthi rebels [13]. Chinese Foreign Minister Wang Yi met with his Iranian counterpart in Beijing, urging a return to the Islamabad Memorandum and the rebuilding of a negotiation mechanism [9][12]. President Trump is scheduled to discuss the Iran issue with Gulf allies such as Saudi Arabia, the UAE, and Qatar on the sidelines of the UN General Assembly [14].

3. Key Actors and Positions

The South Korean Governmentis acting as a defensive balancer across all three tracks. As the point person for negotiations with the U.S., Minister Cho Hyun is in a position where he must simultaneously manage investment, security, and North Korea issues [1][4]. President Lee Jae-myung, while publicly clarifying his principle of no troop deployment, maintains an ambiguous stance of 'conditional review' between domestic opposition and U.S. demands for contributions [6][7]. Internally, the government's approach to risk management appears to be based on three principles: justifying its involvement through participation in a multilateral framework, limiting its scope to non-combat and strait-stabilization missions, and operating an unofficial channel with Iran [6].

The United Statesthrough Secretary of State Rubio, is pressuring South Korea on investment and security issues while simultaneously confirming a lack of progress on North Korea, thereby de-prioritizing it [4]. President Trump has raised the pressure on allies to contribute by stating on social media that countries that did not bear the costs related to passage through Hormuz should pay reparations [10]. Separately, the USTR is also maintaining pressure on the trade front, conducting exercises on managing trade with China and enforcing the ban on imports made with forced labor [2][8].

Iranmaintains a hardline stance, refusing to engage in dialogue with the U.S. on the grounds that its conditions have not been met [15]. Chinais taking a dual approach, reaffirming its support for Iran while remaining wary of the conflict escalating into Yemen [12]. Foreign Minister Wang Yi has positioned himself as a mediator, urging the rebuilding of the U.S.-Iran negotiation mechanism [9].

South Korean Civil Societyhas been organizing opposition since the government officially acknowledged it was reviewing a troop dispatch, which acts as a direct constraint on the government's strategy of delaying a decision [6].

4. Key Issues

The first issue is whether the three tracks are linked. It has not been publicly confirmed whether South Korean concessions in investment negotiations are being treated as a quid pro quo for contributions in Hormuz. However, the very fact that both topics were discussed in the same meeting demonstrates the complexity of the negotiations [1][10].

The second issue is the deadline for a decision on dispatching troops. The government is delaying a decision and maintaining a stance of conditional review, but signs of waning U.S. patience are accumulating, such as President Trump's remarks demanding reparations [10].

The third issue is that the U.S. position—that the prospects for resuming dialogue with North Korea are low—constrains South Korea's room for maneuver in its North Korea policy [4]. The difficulty of achieving diplomatic breakthroughs with North Korea could incentivize the South Korean government to take on a greater burden in the investment and security tracks.

The fourth issue concerns the detailed terms of investment agreements, such as the nuclear plant MOU. The potential for a gap between the announced agreement and the actual contract terms, as seen in the controversy over the altered SPV structure, remains an unverified variable [3].

II. In-Depth Analysis

The ROK-US Foreign Ministers' Meeting: An In-Depth Analysis of Key Issues in Investment, Hormuz, and North Korea

1. Analysis of Root Causes

The fundamental reason this meeting bundled three disparate agenda items is the Trump administration's approach of managing alliances as package deals. This means that U.S. investment, security contributions, and North Korea policy are not negotiated as separate issues. On his social media, President Trump mentioned that "Oil is flowing through the Strait of Hormuz" [10]. He followed up by writing, "The countries of the world that gave us no help whatsoever must pay reparations when this fraudulent war is all over" [10]. This rhetoric is typical of Trump's style, linking the 'security free-riding' argument to investment and trade pressure.

From South Korea's perspective, the fundamental problem is the disparity in negotiating power across the three tracks. On the investment track, it can leverage its financial power of $200 billion, but on the security track, it faces strong domestic political constraints regarding troop deployment. President Lee Jae-myung clearly drew a line, stating he would "not dispatch troops in a way that could involve the country in a foreign conflict," even while mentioning the "need to protect our nationals and national interests" [7]. This statement is a dual signal: it expresses a principled willingness to contribute to security while holding back on the politically costly decision of an actual troop dispatch. From the U.S. perspective, this dual signal serves as negotiating leverage. The more uncertain the security contribution, the stronger the justification for demanding further concessions on the investment track.

2. Structural Context

Political Structure: Domestically, the debate over dispatching troops directly conflicts with the progressive support base that the Lee Jae-myung administration has cultivated since its inauguration. This is evidenced by the fact that civil society backlash began in earnest after the Blue House first officially acknowledged on September 4 that it was reviewing a deployment [6]. The government has pursued a strategy of framing the issue as a non-combat contribution within a multilateral framework, using its participation in the French- and British-led conference on the Strait of Hormuz as justification [6]. This is a political calculation aimed at minimizing domestic public opposition while avoiding the appearance of acceding to a bilateral request from the United States.

Economic Structure: U.S. investment has already entered the implementation phase. The government planned an initial transfer of $2.2 billion, with funds sourced from foreign exchange reserves entrusted by the Bank of Korea and the Foreign Exchange Stabilization Fund [3]. This signifies that the investment deal has moved from negotiation to execution. On the other hand, issues in the nuclear plant MOU, such as securing voting rights in Westinghouse and demands for a stake in the semiconductor industry, remain unresolved variables [3]. The possibility that these unresolved variables could be tacitly linked to the outcome of negotiations on the security track cannot be ruled out.

Security Structure: The situation in the Strait of Hormuz is an external variable determined outside of South Korea's control. Iran maintains its position that it will not engage in dialogue until the U.S. meets its conditions [15]. Türkiye's foreign minister stated that U.S.-Iran negotiations have been deadlocked for several months due to attacks by Houthi rebels [13]. China has taken a dual stance, reaffirming its support for Iran while remaining wary of the conflict escalating into Yemen [12]. Foreign Minister Wang Yi has urged the U.S. and Iran to "swiftly return to the Islamabad Memorandum of Understanding" [9]. Within this multilateral dynamic, South Korea's decision on its contribution is more likely to be dependent on the direction of U.S.-Iran negotiations than on its own independent judgment.

3. Historical Precedents and Comparative Cases

Precedents for South Korea's overseas troop deployment decisions being coordinated between domestic political opposition and U.S. security requests have been seen repeatedly, including the dispatch of troops to Iraq (2003–2004) and the deployment of the Cheonghae Unit to the Gulf of Aden in Somalia. What distinguishes the current case from past examples, however, is that the deployment debate is explicitly intertwined with investment negotiations. Previously, security contributions and economic cooperation were handled on separate tracks. This time, the very agenda for the meeting between Minister Cho and Secretary Rubio was presented as a bundle of "ROK-U.S. relations, Korean Peninsula issues, and regional and global issues" [10]. This is evidence that separating the agenda items has become practically difficult.

The case of the Gulf oil-producing countries also serves as a point of comparison. Saudi Arabia, Qatar, and the UAE pledged nearly $4 trillion in investments under the Trump administration's 'America First' investment initiative [5]. However, as the war with Iran depleted these countries' financial capacity, their ability to fulfill these commitments has been called into question [5]. This case illustrates a structural chain reaction where a deteriorating security situation undermines the ability to execute investment pledges, serving as a reference point for gauging South Korea's own investment implementation risks. Unlike the oil-producing nations, South Korea intends to separate its security contributions from its investments, but it is uncertain whether the United States will accept this approach.

4. Key Variables Shaping Future Developments

The first variable is whether U.S.-Iran negotiations resume. Mohsen Rezaee, Secretary of Iran's Supreme National Security Council, warned not to be "swayed by President Trump's mixed messages" [15]. If the negotiating stalemate drags on, tensions in Hormuz are likely to persist, and U.S. pressure on South Korea to contribute will also continue to build.

The second variable is the timing for finalizing the detailed terms of the nuclear plant MOU. If the MOU is signed before voting rights and principal recovery conditions are codified, it leaves room for disputes during the implementation phase [3]. If the process of finalizing these terms coincides with discussions on contributions in Hormuz, it will serve as a litmus test for determining whether the two tracks are tacitly linked.

The third variable is the direction of domestic public opinion. President Lee Jae-myung's comment that "foreign relations are so sensitive that a paper-thin difference can change the entire story, so please take that into account" [6] reveals the tension the government faces between its external negotiations and its domestic political explanations. The intensity of civil society's opposition will be a key variable determining whether a parliamentary motion on the troop dispatch is passed.