Reprinted with permission from the October 2003 issue of AMI Hot News, a monthly publication of AMI International Inc., PO Box 30, Bremerton, Washington, 98337
Editor’s Note: items of news concerning modern submarine acquisition are becoming of increasing interest. In addition to the fact of modernization by navies not known for submarines, it has been noted that submarine proliferation will be encouraged by the advent of near Air Independent Propulsion for diesel-electric submarines. AM I International has graciously consented to our reprinting several of those items.
DENMARK/SWEDEN VIKING PROJECT MOVES FORWARD
On 06 October 2003, Kockums Naval Systems signed a contract with the Swedish Defense Material Administration (FMV) for the next phase of the Viking Submarine Project. The US$16.8M (SEKl30M) contract covers part two of the Project Definition Phase, which will run through the end of 2004. Part two involves the development of a balanced technical and economical basis for a decision on all follow-on phases of the program.
Kockums’ (owned by HDW) share of the part two contract is worth USS 13 .8M, and the company has also signed a subcontract with Odense Steel of Denmark for the remaining US$3M. Both companies are sharing the majority of the work in which six submarines arc expected to be procured for the Danish and Swedish navies. Sweden will procure two submarines beginning in 2006 (commissioning 2010 and 2011) and Denmark will procure the remaining four beginning in 2007 (commissioning 201 I through 2014).
The Viking project is an interesting case study in the environment of competition in today’s naval defense exports, in that a government policy of protecting one’s defense industrial base continues to override the issue of competition and EU consolidation. Denmark and Sweden are prime examples. Even though both nations are two of the smallest in Europe and are cooperating in the Viking project, there is still a competition between themselves and the larger industrial bases such as Germany. Although Sweden’s Kockums is owned by Germany’s HOW, Sweden is determined to maintain its own industrial base at Kockums as well as the long-term employment benefits that accompany it. The same can be said with Odense Steel in Denmark, a country with a small defense industrial base, where is it considered critical for the nation to maintain a naval shipbuilding capability. It must also be reasoned that other Swedish and Danish companies such as Saab Tech and Tenna will play major roles in outfitting the future submarines as well.
That being said, with the Viking project now down to only six submarines, Denmark and Sweden are investing a lot of funding for what is currently a total class of six units between both nations. It has become apparent that both nations are aiming higher than the planned six hulls. Sweden and Denmark are actively pursuing future clients for the program, specifically Finland and Poland and of course there is always the remote chance that Norway may return. Although Kockums is owned by HOW with its Type 212 and 214 designs, the Viking design may still be attractive to other future players in the submarine market. Viking along with the Type 2 I 2 and Type 214 could be a very powerful combination in a future submarine market where the potential exists for up to US$32B over the next 15 years, and could include up to 95 hulls. Industrial base protection for Germany, Sweden and Denmark may be well worthwhile.
PORTUGAL EVALUATING PROPOSALS FOR ITS SUBMARINE PROGRAM
On 25 September, the Portuguese Defense Minister Paulo Portas, announced that the German Submarine Consortium (GSC) was the preferred bidder for the Portuguese Navy’s Diesel-Electric Submarine Program. The Defense Minister stated that the GSC, with its Type 209 was selected over the Armaris bid with its Scorpene design due to a lower bid by the GSC. A ! though this announcement was made public, it may not be the final word in the Portuguese submarine procurement.
Due to very limited funding by the Portuguese Navy, cost must be considered a primary factor in this procurement. If one would quickly compare the bids, the GSC with its bid of US$980M (EUR845.6M) for two Type 209 submarines would beat the Armaris bid of US$ l. l B (EUR949.9M) for two Scorpene submarines. However, in the offsets arena, Armaris proposed up to 200% of contract value with the GSC only offering 100%. It must be noted that the final details of the offset agreement are still being worked out and will not be final until around mid-2004 and could change the preferred supplier decision.
The press release in September follows the 27 February 2003 Portuguese Government announcement that it was seeking new proposals from GSC and Armaris for its submarine program in order to realize additional savings and benefits due to the country’s financial and economic situation.
GSC and Armaris responded to the initial RfP in 1998 and after being down selected, submitted their revised bids in summer 2000. Since that time, the Portuguese Navy has been faced with an insufficient budget for the program as well as uncertainties due a new government in 2000. In April 2002, the government took the project back to the financial drawing board, and reduced the requirement from three to two units in order to move forward with the program.
However, as this project continues the alternatives are appearing stronger.
- The first is that government may decide that Portugal really doesn’t need to maintain a submarine fleet. During the past months, you have read in HOT NEWS how one NATO country after another is reducing their fleet size and in some cases completely closing down a capability. Maintaining only two submarines is really a questionable expense. Further, the construction would not take place in Portugal and therefore would not benefit jobs in the defense sector.
- If the government wishes to keep a submarine fleet, perhaps three used submarines would meet the requirement. In fact, when Portugal started this project the original budget was for the purchase of three used Royal Navy Upholders (now in Canada). Further, the Navy is already looking at used ships to replace its older frigates, why not submarines too.
In the interim the Portuguese Navy continues to operate its Albacora (Daphne) class, at least until 2006 when they are tentatively scheduled for decommissioning.
From the November 2003 issue of AMI Hot News is the following late breaking item co11cerning Portuguese submarine intentions:
PORTUGAL DOWN-SELECT FOR DIESEL-ELECTRIC SUBMARINE PROGRAM
On 06 November 2003 the Portuguese Navy officially made their final down-selection in its Diesel-electric Submarine Program. The German Submarine Consortium (GSC) was selected to provide two Type 209s to the Portuguese Navy with an option for a third. This information confirms the 25 September announcement by the Portuguese Minister of Defense that the GSC was the preferred bidder in this program.
However, it must be noted that even though the GSC is the preferred supplier in this program, AMI considers that an actual signed construction contract may still be a while off. The budget for this program, commencing back in 1998, has always been too little. Therefore, AM 1 considers that there still exists a significant difference between what has been offered and the Portuguese Navy’s target budget. A properly equipped Type 209 costs a minimum of US$250 and the number rumored to be sought by the Portuguese is significantly less.
Http://www .amiinter.com/wnpr/portugal/P0220 I.htm
INDONESIA -RDM Search for a Sale
In mid-October 2003, AM I received information from industry sources that RDMS submarines are also being offered to Indonesia to fulfill its submarine requirement. This information follows Indonesian press reporting on 19 September that the sea service was continuing to discuss modernization plans. One aspect of the modernization plan was for the acquisition of at least two submarines from South Korea by 2008.
However, sources indicate that there may be an alternative plan on the table. Information received suggests that the Indonesian Navy is also being offered two new-construction Moray submarines by ROMS, the second time that the Moray has been offered to Indonesia, with the first being in 1994. As an interim measure until the Moray class can be delivered, the Indonesian Navy would lake possession of the two Zwaardvis class submarines (formerly of the Royal Netherlands Navy) that have been stranded in Malaysia since 2000. The two Zwaardvis class submarines were shipped to Lumut Naval Base in Malaysia under a private venture between PSC-Naval Dockyard and ROMS, apparently under the same circumstances that Indonesia is being offered the submarines, as an interim measure until new-construction Moray class submarines could be delivered.
The entire Malaysian Zwaardvis/Moray deal was subsequently canceled in January 2002, when the Malaysian Navy selected the French Scorpene design. The cancellation of the Zwaardvis/Moray deal puts even more pressure on ROM as it has still not been able to sell the Moray design. What was once hoped to be a success on the foreign market, has turned up empty handed. Failures in Indonesia in 1994, Egypt in 2000, and Malaysia in 2002 does not bode well for the Moray design as most foreign navies are putting forth the requirement of a proven hull before purchase, and the Moray still has not been sold, not even to the Royal Netherlands Navy (RNLN).
With the Moray design still being unsold, ROM is finally hoping to make a sale to the Indonesians the second time around. If accepted by Indonesia, there arc two Zwaardvis class submarines in Lumut waiting for a new home until the Morays can be delivered. It must also be noted that the Indonesian Navy has already publicly announced their desire to procure the South Korean Type 209s, when they are replaced by the Type 214s in 2007 and 2008. The Indonesian Navy currently operates Type 209 (Type 1300) class submarines and it would be easier to integrate the South Korean Type 209s rather than the Zwaardvis and Moray design.
However, nowhere have we seen any budget figures for the Navy that would support any acquisition of this magnitude. Further, the Navy isn’t only speaking about acquiring submarines, it is also speaking about acquisition of new corvettes. Without a government-to-government agreement that covers the costs, these programs will only take place in the distant future when the economy is stronge.