Seoul and Washington have finalized a new defense cost-sharing agreement for 2026 to 2030.

The deal comes just one month ahead of the US presidential election, in which former President Donald Trump -- who previously demanded a significant increase in South Korea's defense contributions -- is running as the Republican candidate.

Over five months of intensive negotiations, the allies engaged in eight rounds of talks, culminating in a final agreement for the 12th Special Measures Agreement during the last session in Seoul from Sept. 25-27, which extended into Tuesday and Wednesday, the South Korean Foreign Ministry announced Friday.

Representatives from Seoul and Washington initialed the agreement Thursday at South Korea's Foreign Ministry building. However, the agreement will only take full effect once both countries complete their respective domestic procedures, including ratification by South Korea's National Assembly.

"South Korea and the US made concerted efforts with a constructive stance to achieve a mutually acceptable and reasonable outcome, culminating in a final agreement on the text of the main agreement and the implementation arrangements on Wednesday, Oct. 2," the South Korean Foreign Ministry said in a statement.

The 12th SMA establishes a five-year framework, with the first year's defense contribution set at 1.5192 trillion won ($1.14 billion), representing an 8.3 percent increase from the 2025 total of 1.4028 trillion won, according to the ministry.

South Korea's 2026 defense contribution has been calculated based on multiple factors. These include a 6.2 percent average annual increase in defense cost-sharing over the past five years, the need to expand the Korean workforce supporting US forces stationed in Korea, and rising construction management expenses related to military infrastructure projects overseen by South Korea's Defense Ministry.

South Korea has financially supported the stationing of approximately 28,500 US Forces Korea personnel by covering labor expenses for USFK Korean workers, construction costs for military facilities, and logistical support for military operations under the framework of the SMA. This agreement, which governs the cost-sharing arrangement, is subject to periodic renewal based on mutual consent between the two countries.

Return to inflation rate

Under the 12th SMA, South Korea and the US notably have reverted to using South Korea's inflation rate to adjust annual defense contributions, replacing the previous method, which tied increases to South Korea's defense budget under the 11th SMA, belatedly agreed upon in 2021 for the period from 2020 to 2025.

The earlier approach led to an average annual rise of 4.3 percent. The total annual amounts for 2022 to 2025 were determined by applying the previous year's defense budget growth rate.

The new formula will now be tied to South Korea's consumer price index or CPI, which is projected to hover around 2 percent. From 2027 to 2030, each year’s defense contribution will be determined by applying the CPI increase from two years prior to the previous year’s total defense contribution.

For example, South Korea’s defense contribution in 2027 will be calculated by adjusting the total amount from 2026 based on the CPI increase recorded in 2025.

The allies also agreed to impose an upper limit, capping the annual growth of South Korea's defense contribution at 5 percent.

The Foreign Ministry clarified that the use of South Korea's defense budget increase rate in the 11th SMA was an exceptional measure, and also lacked a cap on annual contribution growth.

The 12th SMA therefore reverts to the traditional cost-sharing formula from the eighth and ninth agreements, with the 10th SMA being an exception as a one-year deal without an increase formula.

"The logic behind applying South Korea's defense budget increase rate to the annual rise in its defense contributions was seen as weak, particularly due to concerns that it led to significant increases in South Korea's burden each year," a senior Foreign Minsitry official said Friday during a briefing.

"The focus of the recent negotiations was on replacing the defense budget increase rate with a more reasonable indicator which is the inflation rate and the cap system with the US, ultimately reaching such agreement."

The Foreign Ministry also emphasized that the South Korean government has introduced several measures to improve defense cost-sharing management this time, specifically targeting issues previously deemed unfair by the National Assembly and other stakeholders.

One key outcome of the 12th SMA negotiations is the clarification that defense contributions allocated for repair and maintenance services of the US assets must be "exclusively used for assets stationed on the Korean Peninsula," according to a statement from the Foreign Ministry.

The reform ends the long-standing "practice of using funds for the maintenance of US assets located outside of South Korea," including those operated by US Forces in Japan, ensuring that the core objective of the SMA -- "securing conditions for the stable presence of US Forces Korea" -- is fully upheld, according to the ministry.

Sustainability

The government plans to officially sign the 12th SMA once the necessary domestic procedures have been completed. These procedures include a review by the Ministry of Government Legislation, deliberation by the Cabinet, and final approval by the President. Following the signing, the government will submit the ratification bill to the National Assembly for approval.

In the US, the SMA is treated as an executive agreement, which means it does not require formal ratification by Congress. Instead, it only needs approval from the executive branch. As a result, a new US president technically has the authority to revoke the 12th SMA and order a renegotiation, since it falls under executive jurisdiction rather than being a treaty that would require legislative consent.

However, the unnamed senior Foreign Ministry official explained, "Once the agreement is enacted, although it is treated as an executive agreement in the United States, it effectively holds the status of a binding international treaty."

"This means it carries legal force both internationally and domestically. In the US, treaties have the force of domestic law, and similarly, in South Korea, such agreements are treated with the same legal authority as domestic legislation," the official said. "As a result, legal stability is ensured once the agreement is enacted."

Seoul and Washington began negotiations in April, starting considerably earlier than usual -- nearly 20 months ahead of the expiration of the current 11th SMA, which remains in effect until 2025.

The timing of the 12th SMA negotiations was of great interest to the Yoon Suk Yeol administration, as the previous Moon Jae-in government had struggled with defense cost-sharing talks under the Trump administration from 2017 to 2021.

Talks for the 11th SMA began in 2019 but stalled due to disagreements over the extent of South Korea’s increased contribution. Negotiations stretched over 18 months and concluded in March 2021, two months after President Biden took office, finalizing a five-year deal.