South Korea's $350b US investment pledge faces mounting hurdles

US President Donald Trump's unilateral push for South Korea to join the Alaska LNG project is deepening the dilemma facing the Lee Jae Myung administration.

A protracted tug-of-war between Seoul and Washington is expected, with contentious issues — including the construction of nuclear power plants in the United States — scattered across the negotiating table. Signs of escalating friction have already emerged in some areas.

South Korea and the United States agreed in writing to "commence working" on the Alaska LNG project as part of Seoul's broader US investment package, according to Yonhap.

The joint fact sheet's English text states that the two sides will "commence working on Alaska LNG project, subject to commercial viability under the strategic investment MOU and compliance with all applicable domestic legal requirements."

The Lee administration said the agreement does not constitute a final commitment to join the Alaska LNG project, and that negotiations on whether to proceed will continue.

Trump, however, took a different view. On Thursday, he declared it a done deal that South Korea would invest $50 billion in the Alaska project, then raised the pressure further by threatening to charge double if Seoul did not agree to invest.

He did not specify what he would double, though the remark is widely interpreted as referring to the investment amount, tariffs, or both.

Last year, South Korea agreed to a total of $350 billion in US investments — $150 billion in the shipbuilding sector and $200 billion in strategic investments — in exchange for a reduction in US tariffs from 25 percent to 15 percent.

The Ministry of Trade, Industry and Energy said neither the scale of investment nor whether it would proceed had been decided. The government's position is that it cannot commit to the Alaska project unless commercial viability is assured.

The project involves transporting natural gas from oil and gas fields in northern Alaska through roughly 1,300 kilometers of pipeline to the south, where it would be liquefied and shipped to markets in Asia and elsewhere.

Concerns about the project's viability have consistently been raised, given the enormous upfront capital required and uncertainty over whether it can generate adequate returns.

The United States has offered to reduce tariffs on South Korean steel and other materials used in the project and to guarantee South Korea priority access to the LNG produced — but those concessions alone are seen as insufficient to justify the investment decision.

Trade Minister Kim Jung-kwan said the US side had pledged measures to improve the project's commercial viability, and that Seoul planned to review materials from Washington reflecting those commitments.

The US side is expected to scale back the project's estimated cost from an initial $67 billion to the $50 billion range.

Obstacles including permitting delays and labor shortages also need to be addressed before the project can move forward.

"There is only one criterion for this project: it will be judged on commercial viability, and if that cannot be secured, we will not proceed," Kim said. "This is what Korea and the United States agreed to — it is in the joint fact sheet."

The prospect of a difficult negotiation is growing as US pressure on the investment intensifies.

Alongside the LNG dispute, the two countries have agreed on a broad "nuclear framework" to build eight large nuclear reactors in the United States at a cost of $120 billion as part of the investment package — yet that, too, faces a long road ahead.

The government says specific projects have yet to be finalized. Rather than treating the eight reactors as a single package, Seoul says each individual project must be developed separately — with its own site, financing structure and construction schedule — and that each must clear a commercial viability review and a National Assembly reporting process before a final decision is made.

Since the reactors are to be built in pairs, the process is expected to apply to four separate construction projects in total.

Kim said earlier that "the project cost and commercial viability will differ depending on the specific project," adding that a review process — determining whether each proposal is feasible — would be needed once the US side presents individual projects.

A separate issue also remains unresolved: the acquisition of a stake in US nuclear company Westinghouse. The government is in negotiations, together with Korea Electric Power Corporation, Korea Hydro & Nuclear Power and domestic firms, to secure a 5 to 10 percent stake with voting rights.