The Chaebol Returns To The Presidency 1967 [EN]: Chapter 103

103. Shall We Buy Some Land?

The oil shock was partly triggered by the United States’ decision to suspend the gold standard [the convertibility of US dollars into gold].

This meant the United States could print dollars freely, no longer limited by its gold reserves.

As the U.S. printed dollars without restraint, the resulting devaluation of the currency caused widespread inflation.

In the Middle East, despite selling oil, many people found themselves becoming increasingly impoverished.

Eventually, in response to the Fourth Middle East War, OPEC [Organization of the Petroleum Exporting Countries] used oil as a political weapon to address the crisis.

By decreasing oil production when demand was surging, crude oil prices skyrocketed.

Oil shock! Now, the era has arrived where we use oil to buy dollars, not the other way around.

*

An emergency cabinet meeting was underway.

The Minister of Economy and Finance reported on the trends of rising oil prices, escalating inflation, and growing trade deficits.

The Minister of the Interior announced various energy conservation measures.

“Your Excellency, we must implement emergency measures to stabilize the people’s livelihoods.”

The President, who had been listening attentively, spoke.

“I will deliver a special address this evening. The content is as follows.”

Among the attendees, only the new Minister of Trade, Industry and Energy knew the content of the address beforehand.

The Minister of Trade, Industry and Energy watched the other ministers’ expressions with a childlike sense of anticipation, like someone planning a surprise birthday party.

“Let’s proceed as planned. We’ll announce emergency measures based on the current conservation efforts.”

“…….”

“Oil has been discovered in the 7th mining zone. It is currently being transported to the Yeosu oil complex via underwater pipelines.”

The audience erupted in murmurs of surprise and excitement.

The new Prime Minister, seemingly in disbelief, confirmed, “Your Excellency, does this finally mean we’ve become an oil-producing country?”

“That’s correct.”

“Wow, hooray, hooray!”

The ministers exchanged delighted smiles.

The Minister of Trade, Industry and Energy reveled in the surprise.

“Your Excellency, what is the estimated oil production volume?”

“The reserves are estimated to be the second largest in the world, after Saudi Arabia. The United States follows us.”

“Wow~ That’s incredible!”

“However, daily oil production is still relatively small. Additional boreholes will soon be connected to the pipeline, so production will gradually increase.”

The Minister of the Interior inquired, “Then, emergency measures are no longer necessary, are they?”

“Absolutely.”

“…….”

“There’s something you all need to understand clearly.”

“…….”

“Domestic supply will not be free. Instead, it will be supplied at 70% of the world average oil price.”

The Prime Minister and ministers exchanged puzzled glances and questioned each other.

“Your Excellency, offering it at 70% only means buying at a discount. It doesn’t exactly feel like we’re an oil-producing country?”

“Are you planning to imitate the Middle Eastern and South American oil-producing countries?”

“…….”

“They are beggars despite having oil!”

“…….”

“We must be cautious of an economy that overly relies on natural resources. The United States is a major oil producer, yet they still import oil from the Middle East. They manage their economy as if they don’t possess oil reserves. That’s why they are a strong country. We will follow the American model.”

“I wasn’t aware you had such profound intentions. We were short-sighted.”

“Thank you for understanding. All the revenue generated from oil will be deposited into the Korea Investment Corporation’s sovereign wealth fund and invested towards new national objectives.”

The ministers stirred at the mention of new national objectives.

The President elaborated, “The new national goal is to shift from quantity to quality. The funds will be used for overseas asset acquisitions, national security, balanced regional development, expansion of social infrastructure, national welfare, and improvements to the structure of industry and academia.”

“Ah, so that’s why you established the sovereign wealth fund! You were preparing for this all along.”

“That’s right.”

“I can’t help but admire Your Excellency’s foresight!”

“Now, please finalize the details of the emergency measures.”

*

Earlier that day, the public had heard the announcement of an upcoming emergency presidential address, and many were watching TV while having dinner.

A couple conversed during their meal.

“I wonder why he’s giving a special address?”

“Maybe he’s been to Pyongyang again?”

“Perhaps. Did the President meet with the leader of the North?”

“They keep talking about exchanging citizens between the South and North, but they’re just going in circles. Will we finally have a real exchange this time?”

“How would I know? We’ll have to listen to the address.”

Finally, the President appeared on screen and began reading from the prepared speech.

“– Fellow citizens, I am very pleased to announce a significant development. Oil has been discovered in the 7th mining zone. The Republic of Korea now declares to the world that it has become an oil-producing country!”

“What, an oil-producing country? Then we don’t have to worry about oil prices anymore?”

The President proceeded to explain the American model, the 70% price supply, the sovereign wealth fund operation, and the emergency measures, as he had outlined in the cabinet meeting.

“– Oil revenue will be invested in the sovereign wealth fund to improve the quality of life and industry. For example, we will support basic research in the humanities and natural sciences to pursue the Nobel Prize, and in industry, we will focus on three goals: increasing the rate of domestic production, promoting low-emission eco-friendliness, and achieving integrated miniaturization.”

“Hooray! Hooray!”

Cheers echoed throughout the neighborhood.

Newspaper extras were distributed on the streets.

“– Korea becomes an oil-producing country!”

“– Oil money roadmap announced! To be used to improve society and industry.”

*

National Assembly.

The opposition party aggressively questioned the Prime Minister.

“How can you sell oil at 70% of the world price when we are an oil-producing country? What kind of terrible government is this? Instead of hoarding oil money in the sovereign wealth fund, shouldn’t we use it to improve the people’s livelihoods and for welfare programs?”

The Prime Minister, who was over sixty, sternly retorted, “We are not providing free oil because we are concerned about such populist welfare policies!”

“What, what did you say?”

“If we provide all the money from oil sales for food, clothing, shelter, education, and medical expenses, who would bother to work hard, conduct research, or study?”

“…….”

“Are you envious of the people in Middle Eastern oil-producing countries? Without oil, those countries are just beggars sitting on sand. We are striving to maintain national competitiveness by implementing an energy policy based on the United States model. When will you stop deceiving the people with populism?”

“…….”

“We are not hoarding money, but investing in a future of qualitative improvement.”

A heated debate ensued, but the Prime Minister remained firm.

The second opposition party member asked, “After listening, I generally agree with the government’s policy. What level of welfare are you considering?”

“There will be no free welfare. We plan to design it in proportion to individual effort. For example, we will implement medical insurance where individuals pay half in proportion to their income, and the state pays the other half.”

“Is that to prevent moral hazard [when someone increases their exposure to risk because they do not bear the full costs of that risk]?”

“That’s right. We will provide unemployment benefits, but we plan to set them only slightly above the minimum cost of living, even during unemployment. The detailed welfare design is still incomplete, so we will report and coordinate with the National Assembly in detail later.”

*

White House.

Kennedy spoke to reporters.

“Due to OPEC’s production cuts and price increases, oil prices are approaching three times higher. Extraction has begun in Korea’s 7th mining zone, and the United States has an 5/11 stake. The daily oil production in Korea will be on par with Saudi Arabia. This will be of considerable help in stabilizing prices in the United States.”

The rate of increase in oil prices slowed down due to the announcement by the United States, the world’s largest oil consumer.

However, the Soviet Union and non-OPEC oil-producing countries, which were antagonistic towards the United States, instead joined the oil price increase, failing to reverse the overall upward trend, and only slightly slowing down the rate of increase.

The 7th mining zone produces 3.3 million barrels per day, and 1.5 million barrels (worth 15 million dollars, or 18 billion won) are allocated to Korea.

This amounts to 1.2 billion barrels per year, but only 150 million barrels are sufficient for domestic consumption.

The remaining 1 billion barrels represent foreign currency earnings.

Crude oil exports alone easily reached 10 billion dollars per year.

During Chairman Wang’s era, in 1977, he endured various hardships and did his best to achieve 10 billion dollars in exports. This was a monumental change from that time.

The President deposited the influx of dollars into the Korea Investment Corporation and invested them, primarily targeting ‘land’.

Neighboring countries began sending oil diplomacy missions in a flurry.

*

President’s reception room.

The President was meeting with Kurada, a special envoy sent by the Japanese Prime Minister.

Japan was experiencing its peak in heavy and chemical industries, resulting in oil consumption three times that of Korea.

The aftermath of the oil shock was therefore much more severe.

Kurada was known for his excessive politeness and deference.

“Your Excellency, Japan provided significant support to Korea during the Japan-Korea Agreement [Treaty on Basic Relations between Japan and the Republic of Korea]. Japan is currently facing difficulties due to the oil shock. The Prime Minister hopes that we can purchase crude oil at a discounted rate as a neighboring country.”

“To be honest, that agreement was a hasty one, made when we were desperate due to pressure from the United States, resulting in significant losses for us, not to mention the political fallout. But a deal is a deal, so let’s negotiate.”

“Yes! How much of a discount….”

“It’s 10 dollars per barrel now, but if it continues to rise steadily over the next few years, the Japanese economy will collapse.”

“Ha~ That’s a truly alarming prospect. Even now, half of Japan’s factories are closed. So, as a security ally, we are requesting Korea’s cooperation, Your Excellency!”

“How about these transaction conditions?”

“What conditions are they?”

“Korea will provide 200 million barrels to Japan annually.”

This was 2/3 of Japan’s consumption, enough to withstand the oil shock.

“What are the payment terms?”

This was the crucial point of the meeting.

The President stated, “Convey the following four conditions to the Prime Minister.”

“Yes!”

“First, return all the cultural assets looted from Korean land.”

“I understand. I will inform the Prime Minister.”

Kurada noted it down in his notebook. This condition was entirely feasible.

“The next three are as follows.”

The President suddenly unfolded a map of East Asia on his desk.

Kurada tilted his head in curiosity.

The President pointed to an island with a pointer.

“Here, hand over Tsushima Island [an island located between the Korean Peninsula and Kyushu] and the Senkaku Islands [a group of uninhabited islands in the East China Sea claimed by Japan, China, and Taiwan] to Korea. And cease provoking Dokdo [a group of small islets in the Sea of Japan, disputed between South Korea and Japan]. Then I will provide 600 million barrels over 3 years.”

“What? Japanese territory?”

“Oh, that’s quite rude! Is Dokdo Japanese land?”

“…….”

“The reason I mentioned Dokdo is to prevent it from becoming a disputed area in the future. This is not selling land, so it’s actually two islands.”

“Yes….”

“The Senkaku Islands are a disputed area between Yuldo, Japan, and China. It’s neither Chinese territory nor Japanese territory, so Japan has nothing to lose.”

“Hmm….”

Kurada nodded.

The Senkaku Islands (Diaoyu Islands) were uninhabited islands that were largely ignored until the United Nations Economic Commission for Asia and the Far East (ECAFE) confirmed the potential for vast oil reserves in the East China Sea in 1968-1969.

During Chairman Wang’s era, Okinawa and Senkaku were placed under Japanese administrative control in 1972, according to the Okinawa Reversion Treaty signed between the US and Japan in 1971.

However, in this era, the Okinawa Reversion Treaty was not signed, Okinawa became independent, and when the marine oil field was discovered in the 7th mining zone, Japan, China, Taiwan, and Yuldo were all claiming the territory, making it a disputed area.

The President continued, “Tsushima was Korean land at times and Japanese land at times, depending on the era, so this time, let’s make it Korean land.”

“I will relay this to the Prime Minister.”