WASHINGTON (BLOOMBERG) - The United States is warning that it will send furlough notices within weeks to almost 9,000 South Korean workers at US bases if the two countries don't reach agreement on President Donald Trump's demand for Seoul to increase dramatically what it pays for American troops.
Mr Trump's push for South Korea to contribute much more has put the alliance under strain at a time when North Korean leader Kim Jong Un's regime has said it would no longer be bound by its previous promise to halt testing of nuclear weapons and long-range ballistic missiles.
The two sides remained deadlocked, though US officials have indicated they've backed off Mr Trump's initial demand that President Moon Jae-in's administration pay about US$5 billion (S$6.8 billion) a year for US forces stationed there, more than five times the US$900 million in a stopgap one-year agreement that expired on Dec 31.
The Special Measures Agreement pays for about 28,000 American troops stationed in South Korea - and also for the South Korean civilians who work at the bases. US officials say they are required to give those workers 60 days' advance notice that their pay might be cut off because the last of the funds under the previous deal is running out.
"Cost-sharing negotiations with allies are tough, whether it's Korea, Japan or others," said Mr Rexon Ryu, a partner at the Asia Group and a former White House official and Pentagon chief of staff. "But a penny-pinching approach that is informed by a transactional strategy risks weakening fundamental strength of the alliance."
Mr Trump has repeatedly insisted that the US gets a raw deal from partners that host American troops around the world, and he has focused particular ire on the South Korean agreement. In August, he tweeted that South Korea "is a very wealthy nation that now feels an obligation to contribute to the military defence provided by the United States of America".
People familiar with the discussions say American negotiators have shifted their position as they seek to offer a justification for a far bigger price tag. After initially suggesting South Korea could make more purchases of US defence equipment, the Trump administration is now focused on other elements, such as asking the country to pay more for temporary troop rotations. Another demand is for South Korea to spend more on capabilities that would allow it to take full operational control of joint forces in wartime.
Last week, Secretary of State Michael Pompeo and Secretary of Defence Mark Esper wrote an opinion piece in the Wall Street Journal calling on Seoul to pay more in a tone that one person familiar with its publication said reflected rising frustration in Washington over the impasse.
US ambassador to South Korea Harry Harris told reporters last week that US law would soon require the furlough notifications. About 6,000 workers would be immediately affected, with furloughs extended later to additional "core personnel", according to Mr Son Gi-o, a representative of the US Forces Korea Korean Employees Union.
"If we do go into furlough, the bases will be completely paralysed," Mr Son said, adding that a total of 8,700 employees could be affected.
In October, the chief of staff for US Forces Korea, Major General Stephen Williams, told the union in a letter that furloughs were possible from April 1 if a deal was not reached, adding that the first notices to impacted employees would be issued by Jan 31.
The negotiations in South Korea could affect other US allies hosting troops, such as Japan, with Mr Esper saying the Trump administration wants them to pay more too. Japanese officials are watching the South Korea negotiations closely, with the approach of talks set to begin later this year for a US-Japan cost-sharing deal.
Mr Moon is facing parliamentary elections in April and is wary of the political fallout if he agrees to a hefty increase, which has little support in his camp and among the general public.
South Korea decided on Tuesday to send a naval unit to the Strait of Hormuz, answering a US call for greater international security commitments in the region.
But American officials say that while the gesture is appreciated, it won't count as credit towards South Korean payment.
One of the challenges, according to those familiar with the discussions, is that South Korean officials refused to engage on the initial demand for US$5 billion, which they considered too much to ask and an exaggeration of the cost of stationing US troops there.
"The president came up with it, and US officials have no idea how and now they're scrambling to come up with justifications," said Mr Bruce Klingner, a senior research fellow for North-east Asia at the Heritage Foundation in Washington.
"It's seen as insulting. It transforms alliances based on shared values and objectives into a transactional relationship, it degrades the alliance into a business relationship."
In an interview with South Korean media on Dec 18, Mr James DeHart, the top American negotiator, said his government wants an agreement that lasts longer than one year.
"We have listened in these negotiations probably more than we have spoken, we have adjusted and we have compromised," Mr DeHart said. "That is what happens in discussions between close allies, and when both sides are trying to get to an agreement."