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From the January 2009 Issue

BRAZIL-DCNS Design Chosen for Future

Submarine Programs

In late December 2008, AMI International received information that DCNS of France had been awarded a contract by the Brazilian Navy (BN) to form a joint venture (JV) to build the Scorner submarine design in Brazil. DCNS (prime contractor) with its JV Brazilian partner, Norberto Odebrecht Construction Company, will construct four conventionally powered submarines at the JV, set up by DCNS and Odebrecht. DCNS will produce key advanced-technology equipment in its own plants. The submarines will be designed in cooperation with the Brazilian teams under DCNS design authority to meet the BN’s specific need to protect and defend the country’s coast. The first submarine is scheduled to enter active service in 2015.

As part of this contract, DCNS will also provide design assistance, under the BN’s design authority, for the non-nuclear part of the Navy’s first nuclear submarine which also will be built by the JV. The Brazilian nuclear submarine program, known as SNAC-2, has been progressing at an extremely slow pace since 1979. However, in 2008, the sea service publicly announced that it was rededicating its efforts in order to get the program moving forward. It appears that the design assistance in the non-nuclear portion of the program may be the first step in an attempt to make headway in the stalled program. Additionally, DCNS will provide prime contractor assistance to Odebrecht for the construction of the naval shipyard that will build the five submarines and a naval base for the BN.

The strategic partnership between Brazil and France will result in a high degree of technology transfer, which will increase the level of national content and create jobs as well as advance the country’s shipbuilding infrastructure. With the selection of the DCNS Scorpene design in Brazil as well as in Chile in 1998, it appears that France is beginning to make significant inroads into the South American market that was once dominated by ThyssenKrupp Marine and its Type 209 design.

UNITED STATES-Eight Additional Virginia Submarines Contracted

In late December 2008, AMI received information that General Dynamics Electric Boat Corporation has been awarded a US$14B fixed price incentive multi-year contract for the construction of eight Virginia class submarines. The eight units will begin construction from 2009 through 2013 at Electric Boat in Groton and North Grumman Newport News Shipbuilding Operations in Newport News with delivery of all eight units by 2020. This contract covers units l l through 18 of the planned class of30.

The contract for the third (Block III) variant calls for one unit per year in 2009 and 2010 followed by two units per year in 2011, 2012 and 2013. This schedule follows the US Navy’s latest 30- year shipbuilding plan that calls for two units per year beginning in 2012. The increase to two units in 2012 is a result of the 2005 mandate by then Chief of Naval Operations (CNO) Admiral Mike Mullen and PEO Submarines Rear Admiral William Hilarides to cut up to 20% in acquisition costs by 2012 in order to begin the two per year build rate.

The initial success of cutting acquisition costs wilt allow the US Navy to achieve its two per year build rate in 2012. However, its sustainability through end of class at 30 units will likely be determined by future ship construction costs as well as changes that may be directed by the Obama administration.

The increase in the Virginia program confines that the US is currently committed to maintaining two yards that can build nuclear submarines. It appears that this capability wilt be maintained, and similar to the aircraft carrier, may be protected when considering future budgets regardless of the price per unit for the submarines.

Various Did You Know?
BULGARIA: On 06 January 2009,the Bulgarian Navy Romeo class submarine, NADEZHDA, was decommissioned. The NADEZHDA will become a museum in Varna.

UNITED STATES: On 1 O January 2009, the US Navy (USN) commissioned the last Nimitz class aircraft carrier, USS GEORGE H. W. BUSH at Newport News Shipbuilding in Virginia.

From the March 2009 Issue

AUSTRALIA-AWD and New Submarine Developments

A. Hobart Class Destroyer (AWD): In late March 2009, AMI received information that the 4th unit (option) of the Hobart Class Destroyer Program has not been officially cancelled or terminated as has been reported in many circles. In fact, being an option, the 4th unit was never officially ordered. The 4th Hobart is still officially an option for the Royal Australian Navy (RAN) with the decision now scheduled for June 2009.

AMI’s sources do however indicate that there are several schools of thought concerning the fourth unit. The first is that a new defense whitepaper due out in May 2009 will not justify the fourth A WO as needed for the Defense of Australia. Apparently, the whitepaper suggests a more expeditionary style force that gives added emphasis on submarines, which will be addressed under SEA 1000 program.

However, a major sticking point for the defense industry and more specifically ASC, is that the third Hobart class destroyer will be launched by 2014 and the first SEA 1000 submarine will not start construction until around 2018 or 2019 leaving a four to five year window with ASC having no major new construction programs; only the modernization of the Collins class submarines.

With ASC being the last remaining Australian-owned prime defense contractor, it would make sense for the DoO to authorize and build the fourth A WO soley based on economic and industrial infrastructure reasons. A fourth A WO would ensure a seamless work load at ASC through at least 2030 (considering the option A WO and submarine program) and the suitability of the last remaining Australian-owned defense contractor. A fourth A WO would surely signal the government’s commitment to its shipbuilding infrastructure and its highly skilled work force. Another, although probably not a preferred option of the RAN, would be to slow down the construction of the first three units to close the 4-5 year window without ordering a fourth unit.

B. Future Submarine Program (SEA 1000): On 23 February 2009, the Australian Department of Defense (DoD) announced that Rear Admiral (RADM) Rowan Moffitt would head the Future Submarine Program at the Defence Material Organization (DMO). RADM Moffitt reports to the Chief Executive Officer of OMO and leads the Royal Australian Navy (RAN), OMO and Capability Development Group Future Submarine Project Office.

The Future Submarine Program began in 2008 when the first US$4.67M was authorized for the RAN to begin its initial studies for the project. The studies are currently being conducted by the Defense Science and Technology Organization (DSTO), and other organizations such as ASC, under the Capability Development Group. These studies will be complete by 2009 in order to start the concept design phase in 20 I 0. First pass approval for the design phase by the National Security Committee is scheduled for 2011.

On 29 December 2007, the Australian Defense Ministry gave the go ahead to begin planning for an AUD25B (US$22.9B) program for the acquisition of up to twelve new submarines to replace the six units of the Collins class when they reach the end of their effective service life around 2025. A construction contract can be expected around 2020 in order to have the first unit in service by 2025.

AUSTRALIA-ASC Sale Delayed Due to Financial Crisis

In late February 2009, AMI received information that the Australian Government decided not to proceed with the sale of ASC due to the current economic uncertainties. The government felt that the current state of the global financial markets presented significant risks to the successful sale to a private company at this time.

ASC, wholly owned by the Australian Government since November 2000, has been preparing itself for sale over the past several years. With the sale being temporarily delayed, ASC can now better position itself for the future as it is on the threshold of beginning construction of three Hobart class destroyers and will also be the builder of the next generation submarines to replace the Collins class. ASC is also involved in the through life support and modernization effort for the Collins class that will remain in service until replaced.

ASC, as the last remaining Australian-owned prime defense contractor, is now in the driver’s seat in regards to major surface combatant and submarine construction for the Royal Australian Navy (RAN). The delay in the sale of ASC could very well be a blessing in disguise as the yard now has the commitment for two major naval programs over the long-Tenn while at the same time waiting for the global financial crisis to end. This will equate to a much better scenario in regards to the tenns of agreement and financing with the future buyer as well as increased value of the company itself. The Australian Government, as owner, would also surely like to recoup its original investment when it procured ASC in 2000 for around US$80M.

CHINA-Defense Budget Continues to Soar

On 04 March 2009, AMI International received information that in 2009, China will once again see a double digit increase in defense spending despite the world-wide economic downturn.

In 2008, the Chinese defense budget rose an estimated 17.9% to approximately 418.2B Yuan (US$61.IB). With the projected increase of 14.9%, the 2009 defense budget will rise to 480.7B Yuan (US$70.2B). In comparison, the expected increase for the US defense budget for 2009 will be around 4%. With this increase in the 2009 defense budget, Chinese defense spending will have doubled since 2006.

This increase in defense spending is remarkable because of the extreme slowdown in the Chinese economy due to the world-wide financial crisis. The increase will allow the People’s Liberation Anny – Navy (PLAN) to continue with all of its current programs as well as proceed with its plans for an indigenous produced aircraft carrier.

In addition to continuing planned projects, a defense spokes- man stated that much of the added budget will go to quality of life additions for the PLA’s over two-million service members as well as rebuilding factories and facilities damaged by the May 2008, 8.0 magnitude earthquake in Sichuan.

For many years, it has been wide-spread knowledge that China’s “stated” and “actual” defense budgets vary by as much as l 00 percent (some estimates put it at 400 percent) and contain funding from various sources including international weapon sales and other industries with ties to the defense industry.

GREECE-Hellenic Shipyard for Sale

On 22 March 2009, AMI received information that ThyssenKrupp Marine Systems (TK.MS) still intended to sell Hellenic Shipyards (HS) in Greece once the final Type 214 submarine is delivered to the Hellenic Navy (HN) around 2011 . AMl’s source stated that due to lack of upcoming work at Hellenic, it is in TK.MS’s best interest to sell the company and reduce overall costs for the German company. Once the final Type 214 delivers, the only near-term work that is likely to happen is the upgrade of the existing Type 209s or the possible replacement of them with a new AIP equipped class.

Information received by AMI has stated that there are currently three interested parties for the purchase of HS:

  • Elefsis Shipyards
  • A Greek Banking Group
  • Unnamed French Shipbuilding Company

Sources in Greece have told AMI that it was well known that TK.MS would sell the yard as soon as the 214 program was complete. Additionally, AMI sources indicated that TK.MS is contractually obligated to maintain the yard until the last Type 214 was delivered to the HN, currently scheduled for 2011 or 2012.

One major question that must be answered is when the yard is sold; does Greece have the ability to maintain the HN’s existing force of Type 209 and Type 214 submarines without any outside expertise? This may weigh heavily on who the yard is sold to.

Although there is already a memorandum of understanding (MOU) between DCNS and Elefsis Shipyards, there is the possibility that they may be interested in acquiring HS in order to give them a submarine building capability in Greece as well as helping the HN in maintaining its current Submarine Force. Additionally, if DCNS were to acquire HS, they would be in a position to displace TKMS for the replacement of the Type 209s with Scorpene or a different design if and when the time comes.

As for the Germans, the main consideration now is reputation regarding the Type 214 and their ability to deliver the four units within specification as well as who will provide the through life support for the program. This surely would put a submarine building yard such as DCNS in the driver’s seat if HS has its choice. Various Did You Know? Spain: On 07 March 2009, first steel was cut at Navantia’s Cartagena facility for the third Spanish Navy S-80A submarine. From the April 2009 Issue UNITED STATES- Naval Priorities in 2010 In early April 2009, AMI began receiving early information concerning the Fiscal Year (FY) 2010 defense budget. Additional- ly, some of the highlights of the upcoming defense budget request have been released by the US Secretary of Defense, Robert M. Gates, through various press channels. The 20 I 0 defense budget request is scheduled to be submitted to Congress in mid-May 2009. Proposals by Secretary Gates are just that: proposals that have not been approved by the US Congress.

Press releases indicate that the 2010 defense budget will be around US$533 . 7B with a supplemental budget addition of US$130B for a total of US$663.7B an increase of 1.4% over 2009 levels. The 1.4% increase of 2009 levels includes the 2009 defense budget of US$655B enacted plus President Obama’s proposal for a second US$75.5B supplemental for 2009.

Highlights presented by Secretary Gates appear to be in line with the recommendations of the 2006 Quadrennial Defense Review (QDR), that were in the National Defense Strategy of 2008 and will most assuredly be included in the 20 I 0 QDR, scheduled to be finalized in early 2010.

In regards to the US Navy, the Secretary has taken the following positions on major procurement programs:
1.Shift the CVN-21 aircraft carrier program to a five-year build cycle with the second unit of class, CVN-79, beginning around 2013
2.Delay the CG(X) Future Cruiser program and revisit the requirements and acquisition strategy.
3.Limit the Zumwalt class destroyer (DDG-IOOO) program to just three hulls with all three built at General Dynamics Bath Iron Works (BIW). The agreement to build all three units at BIW (rather than split with Ingalls) was completed on 17 April.
4.Reopen the Arleigh Burke class destroyer (DDG-51) production by adding 12 new units to the class. The initial two units will be built at Northrop Grumman Ship Systems (NGSS) in Pascagoula. the additional ten units could be split between the yards although it has not been deter- mined at this time.
5.Build all 55 Littoral Combat Ships (LCS) increasing the buy in 2010 from 2 to 3 units. No information on which LCS variant (Lockheed Martin or General Dynamics) will be built in 2010.

Delay the 11th San Antonio class LPD and the first Mobile Landing Platform (MLP) until 2011 in order to assess costs and the capabilities that will be provided. Increase the number of Aegis ship modernization for ballis- tic missile defense (BMD) to 6 in 2010. Begin the replacement program for the Ohio class ballistic missile submarines in 20 l 0.Although not mentioned by Secretary Gates, it appears that the Virginia class submarine program will remain on track with one unit in 2010, ramping up to two units per year beginning in 2011.

As mentioned earlier, this plan is far from being finalized as it is not yet official or approved by the US Congress. However, it is evident that Secretary Gates carefully evaluated the industrial shipbuilding base prior to announcing these recommendations. Adding one Zumwalt class destroyer beyond the Navy’s recommendation of two units and building all three units at BIW will stabilize the workload there. Reopening the Arleigh Burke line at NGSS stabilizes their workload while giving the Navy more time to examine the CG(X) cruiser or whatever major combatant succeeds the Zumwalt and Arleigh Burke classes.

Work will remain steady at Newport News with aircraft carrier starts approximately every five years as well as splitting Virginia class SSNs with GDEB. Three LCSs planned for 2010 and a ramp- up beginning in 2011 will stabilize Mariette Marine and/or Austal through around 2020.

WORLD – Economic Downturn – Impact on World Navies

The rise and fall of Naval and Defense budgets closely mirror that of each nation’s Gross Domestic Product (GDP). The world economic downturn that began in late 2007 has created a general downward trend for GDPs worldwide and correspondingly for defense budgets. This downward trend began in mid-2008, has stretched into 2009, and will probably continue well into 2010.

As of this writing, there appear to be two courses of action that are now occurring as procurement budgets continue to subside. One has been for some new construction programs brought forward to serve as an economic stimulus measure and the second has been a cut in procurement monies with a corresponding uptick in modernization efforts. ECONOMIC STIMULUS: Jn an economic decline, governments will reduce their defense spending. Generally this is accomplished in the short term through cuts in new procurement. As in the past two major recession cycles, these defense budget cuts are again appearing in procurement accounts, where the cuts will have an immediate effect. However, because of the scope of the worldwide recession, some nations are actually using major defense procurement as an economic stimulus.

AMI has noticed several cases in which programs have begun to be brought forward to support the shipbuilding industry during the economic downturn. Over the last two years France slowed defense expenditures by reducing the FREMM frigate program by six units and delaying the P A2 aircraft carrier by at least several years. However, due to the economic recession, France has brought forward an order for the second batch of Mistral class LHDs (an order to start unit three immediately) in order to keep the shipbuilding industry employed during the economic slowdown.

Additionally, Italy is now considering moving forward an amphibious ship program in order to fill the order books of Fincantieri’s commercial shipbuilding units that are facing declining orders in the cruise ship and merchant ship businesses. The Ministry of Industry is now considering using its funds to build two 18-20,000 ton LHDs for the Italian Navy in order to shore up the commercial shipbuilding base at Fincantieri. There are also signs that Germany could move up its F125 frigate program in order to shore up jobs at ThyssenKrupp as the shipbuilding sector continues to falter as well.

FLEET MODERNIZATION: As mentioned earlier, in an economic decline, governments will reduce their defense spending and generally this is accomplished in the short term through cuts in new procurement. As new naval ship procurement are being stopped or slowed, modernization of the existing force becomes a priority. AMl’s outlook for the next two years is that navies will look at modernizing their fleets in addition to selling or decommissioning older, more costly to operate vessels.

The long term impact on fleet operations will be a reduction in new vessels over a three year period 5 to 8 years from now. AMI anticipates an increase in modernization funds for naval ships in the next two years to ensure their life expectancy and their ability to pace the changes in anticipated threats over the next 5 years.

BRAZIL – National Strategy Outlines Future

Naval Capabilities- The recent discovery of large oil reserves offshore has increased the need to modernize Brazil’s naval forces. Analysis of the newest Brazilian whitepaper, National Strategv of Defeme, dated 18 December 2008, along with the need to protect the vast oil reserves, has brought to light specifics of the Brazilian Navy’s (BN) recapitalization plans.

The most notable long-term objective is the sea service’s plan to move forward with their Submarine Forces, both conventional and nuclear powered. The BN has signed a contract with DCNS of France for the construction of three units of the Scorpene class that is to begin by the end of 2009 and will be built in Brazil with French assistance at Arsenal de Marinha in Rio de Janeiro. Sources indicate that 700/o of the commercial bank financing by France’s BNP Paribas has already occurred (with guarantees by France’s export credit agency) for the program. Brazil will finance the remaining 30%. The first unit will likely enter service by 2015, followed by the other two submarines in 2016 and 2017.

The BN is also moving forward with its plans for a new class of frigates to follow the single unit of the Barroso class. With financing for the Scorpene submarine program now nearing completion; the frigates will be the next major naval procurement. AMI’s sources indicate that the BN is evaluating several options including a Korean hull (possibly KDX 3) with Lockheed Martin combat systems, and a version of the Northrop Grumman patrol frigate design, similar to the US Coast Guard National Security Cutter. Other designs such as the French FREMM are also in the running. Up to four new frigates could be procured under this program.

Assuming that the Scorpene submarine program stays on schedule with the launching of the final hull in 2014; the first unit of the nuclear powered submarine (SSN) SNAC-2 program will probably begin construction soon thereafter. The hull design is from DCNS and has been called an enlarged Scorpene. AMI believes that the Scorpene design may be too small to be used as a nuclear powered boat so it is likely that the hull is similar to the Rubia-Amethyste class. The BN plans to have the first unit of the class in service by 2020.

In addition to the submarine and frigate programs, the Brazilian Ministry of Defense (MoD) stated that the Navy will pay special attention to the design and manufacturing of multi-purpose vessels that could also serve as aircraft carriers with “preference given to conventional aircraft carriers” probably referring to a full length flight deck capability found in an LHD. AMI believes that multi- purpose ships could possibly be large-deck amphibious vessels such as an LHD that will be able to participate in humanitarian operations. Should the BN want to move along more rapidly with this program, one or both units of the class may be built in a foreign shipyard.

The LHD could indeed be the stepping-off point toward an indigenous built aircraft carrier. Depending on the outcome of the SSN program, it is possible that Brazil would consider a nuclear-powered aircraft carrier (CVN). Brazil fully realizes the impact of the cost of oil over the long-term and undoubtedly consider these costs when considering the nuclear option. The BN also understands the operational benefits of nuclear power such as extended cruising in addition to the international status that comes with having a CVN. If the BN is to proceed this way, the CVN program will likely not begin before 2025 with commissioning occurring around 2033.

Increased funding for the Brazilian anned forces since 2006 has allowed the MoD to move forward with their plans for modernizing. The sea service has been able to finally complete its Barroso class corvette and is currently in the process of building six additional patrol vessels in addition to the planned programs as mentioned above.

TAIWAN – Indigenous Submarines The Only Option Left

As of late April 2009, AMI continues to receive information that Taiwan is still considering its options for the procurement of a new class of submarines to replace the Guppy II class commis- sioned in the 1940s and the Hai Lung class commissioned in the 1980s. Both classes were built in foreign yards: the GUPPY in the US and the Hai Lung in the Netherlands. The latest option appears to be indigenous construction as Taiwan has not been able to move this program forward through an international supplier since 2001.

With the economy in Taiwan (as well as rest the world) slowing, President Ma Ying-jeou is trying to resurrect Project Sea Dragon (Kwang Hua 8) in an effort to create more job opportunistties within the country’s shipbuilding industry. AMI believes that Taiwan is slowly coming to the realization that if it wants new submarines, it will have to build them in Taiwan.

Project Sea Dragon (Kwang Hua 8) officially began in 2001 following then US President George W. Bush’s announcement that the US would sell a large defense package to Taiwan, including eight diesel-electric submarines. The submarines were part of a larger package that includes P-3 maritime patrol aircraft (MPA), anti-mine MH-53 helicopters, Apache Longbow attack helicopters, Harpoon missiles, Patriot missiles and spare parts. Since 2001, most of these programs have moved forward with the exception of the submarine procurement.

With many program and policy changes, and many negative Taiwanese Legislative Yuan funding votes over the past eight years, the ROCN is no closer to a new submarine than it was in 2001 when President Bush made the announcement. In general, the program has not moved forward due to the extreme cost of international construction (if built in the US around US$ l .2B per unit) and the lack of credible design assistance from any foreign submarine designer. The Legislative Yuan since 2001 (even though there have been several elections and various factions have come to power) has argued that the price has been too high and has partially argued for indigenous construction.

In regard to design assistance, the US has not built diesel- electric submarines in decades. Almost certainly, the US Navy does not want to see diesel submarines built in US yards for export, which is consistent with long-standing USN policy of preventing the loss of US submarine technology through exported hulls. In regard to other foreign designers, there have been no legitimate offers for design or construction assistance due to the fear of political backlash from the Chinese mainland.

In regard to negotiations with the US; in mid-2007, the Legislative Yuan and US Government agreed to split the submarine program into two parts, Phase l for concept definition and design and Phase 2 for actual construction. US$375M was authorized to begin Phase 1 in late 2007. However, the US has not responded to Taiwan’s Letter of Request (LoR) (prior to President Ma Ying-jeou taking office) to officially begin the program. With a new administration in Washington since January 2009, it appears less likely that the submarine program will move forward in any shape or form with US assistance.

With that said, AMI believes that Taiwan is pretty much on its own in regard to Project Sea Dragon. An indigenous submarine program in Taiwan would surely help President Ma Ying-jeou in creating jobs at the China Shipbuilding Corporation (CSBC). However, designing and building a submarine from scratch without outside assistance will be very expensive and frought with danger, although CSBS is currently moving forward with its own plan to do just that. CSBC believes that it is fully equipped to build submarines to international standards in the 2000-3000 ton range.

AMI believes that if the ROCN wishes to modernize its Submarine Force in the near term; it will have to rely on CSBC to do it. And realistically, it is probably the only option left if Taiwan wants to invest in a project of this magnitude.

RUSSIA – Naval Force Right Sizing, Two Decades Later

Information received by AMI in April 2009 indicates that as part of the planned Russian military draw-downs, the Russian Navy (Rosiyskiy Voennomorsky Flot – RVF) will be required to reduce the number of vessels to nearly half by 2016, or around 120 units.

With budget constraints, requirements for reducing personnel and a large number of obsolete vessels, the RVF will have a daunting task in the next seven years. Additionally with new construction units entering service albeit extremely slowly, the RVF will have to decommission around 140 units to meet the goal of 123 by 2016.

Many of the vessels in the RVF inventory are already beyond their effective service lives and in need of replacement. These classes of vessels are the most probable candidates for de commissioning immediately without replacement: Six Delta ill class SSBNs One Kashin class DOG One Kara class DOG Four Krivak class FFG Three Grisha III class corvettes Four Alligator class LST One Polnochny class LSM Eleven Natya class MSO Twenty-four Sonya class MHC Over fifty Auxiliary ships

These 105 vessels will likely be the first units to decommission when the reduction in forces begins at the end of 2009. As new construction units of the Borey class SSBN, Yasen class SSN and St. Petersburg class SS are commissioned, the RVF will likely decommission older units of their submarine fleet, possibly on a one-for-two basis. The submarine classes that will probably be decommissioned as newer units enter the fleet over the next decade include the Oscar II, Akula, Sierra I, Victor III and Kilo

Also, as new Steregushchiy and Admiral Gorshkov class frigates commission, older units will probably decommission at the same rate as the submarines until their goal of 123 active vessels is met.

With the global economic crisis in full swing and Russia experiencing double digit inflation each year for the past decade, it is important that the nation continue to look for savings in the military budget in order to fund the recapitalization of its armed services.

In addition, Russia faces an outdated military industrial complex that continues to deal with massive cost overruns, inefficiencies and long delays. AMI believes that if Russia is going to see itself through the economic crisis while rebuilding its shipbuilding infrastructure, it will certainly have to see these force reductions through fruition.

ALGERIA – Admiralty Launches Kilo 636 On 04 April 2009, Admiralty Shipyard in Russia announced that it had launched a Kilo 636 submarine for a foreign customer. AMI believes that this may be the first of two submarines for the Algerian National Navy (ANN) as construction on the hull began in 2007. On 18 May 2006, the ANN finalized a deal with Russia for the procurement of two Kilo 636 new construction submarines and the modernization of two older Kilo 877 units currently in service with Algeria. With launching in April 2009, the first unit will probably enter service by 20 I 0 with unit two in 2011.

Algeria’s latest Kilo now nearing completion is a testament to the success of Russia’s Kilo submarine design, which has a growing list of foreign repeat customers such as China and Algeria as well as potential new customers including Indonesia and Venezuela. Of all Russian naval export programs, the Kilo submarine is without a doubt the most successful and should be considered a direct challenge to the most accomplished western designs such as the French/Spanish Scorpene and the German type 212 and 214 designs. Various Did You Know? Japan: On 08 April 2009, the Japan Maritime Self Defense Force (JMSDF) commissioned its first Sorya class submarine JDS SORYA (SS 501). RUSSIA: On 08 April 2009, Sevmash Shipyard in Severodvinsk announced that construction would begin on the fourth Borey class nuclear-powered ballistic missile submarine (SSBN) by the end of 2009. From the Mav 2009 Issue AUSTRALIA – Naval Priorities Through 2030

In early May 2009, the Minister for Defence released Australia’s latest whitepaper, Defending Australia in the Asia Pacific Century: Force 2030. The whitcpaper is the most comprehensive whitepaper released by the Australian Government and includes capability requirements through 2030. In regard to the Royal Australian Navy (RAN), it appears that there is a firm commitment by the present day government to maintain the current force levels and capabilities over the long term.

Highlights for the maritime forces include the following categories:

Submarine Programs: 12 new construction submarines (SEA 1000) that will be assembled in South Australia. This essentially doubles the submarine fleet from today’s force of six units of the Col- lins class. The new submarines will be built and main- tained through the 2050s. On 23 February 2009, the Aus- tralian Department of Defense (DoD) announced that Rear Admiral (RADM) Rowan Moffitt would head the Future Submarine Program at the Defence Material Organization (OMO). RADM Moffitt reports to the Chief Executive of OMO and leads the Royal Australian Navy (RAN), OMO and Capability Development Group Future Submarine Project Office. A construction contract can be expected around 2020 in order to have the first unit in service by 2025. Continued modernization of the Collins class with fur- ther incremental upgrades (including new sonars) will continue through 2025 when the first Future Submarines begin entering service.

Surface Combatant Programs: Continue forward with the three units of the Hobart class destroyer (SEA 4000). The destroyers will be equipped with the Raytheon Standard Missile (SM-6) Jong range an- ti-air missile. The new vessels will also be equipped with Cooperative Engagement Capability (CEC). The government will continue to assess the capability need for the fourth unit of the Hobart class, which was an option when the original construction contract was signed for the first three units. A requirement for a new fleet of eight Future Frigates to replace the entire ANZAC class. The new class will be larger than the ANZACs and will focus primarily on anti- submarine warfare (ASW). Although no timeline was es- tablished in the whitepaper, the ANZACs will probably begin decommissioning around 2030 requiring a program start in 2020. Continued modernization of the eight units of the ANZAC class until replaced by the Future Frigates begin- ning around 2030. Acquisition of a fleet of 20 modular multi-role offshore combatant vessels (OCS) to replace four existing classes including the fourteen Armidale class patrol boats, six Huon class mine hunters, two Leeuwin class and six Pa- luma class hydro graphic survey vessels (AGSs) . The OCS will be around 2000 tons.

Amphibious Ship Programs: Continuance of the Canberra class amphibious vessels (JP 2048) which will be commissioned in 2011 and 2013. Both LHDs will remain in service until at least 204 I. The replacement will be addressed in the follow-on whitepaper. Acquisition of a new large strategic sea lift ship in the 10,000-15,000 range. The new strategic sealift ship will replace the HMAS MANOORA in 2016. A construction contract can be expected around 2012. Acquisition of six heavy landing craft with ocean going capabilities to supplement the Canberra class LHDs. The new craft will be able to transport annored vehicles, trucks, stores and people in interpenetrate tasks. • Naval Aviation Programs: Acquisition of 24 new naval helicopters to provide ad- vanced ASW and anti-surface (ASuW) warfare capabili- ties. Acquisition of 46 new MRH-90 helicopters that will be split between the RAN and the Army. The naval variant will replace the Sea Kings that are currently in service.

Although not specifically mentioned in this whitepaper, the RAN is still anticipating the order of a new construction fleet replenishment ship (AOR) around 2011 . The new AOR will replace the HMAS SUCCESS in 2015.

As mentioned earlier, this is by far the most comprehensive whitepaper released by the Australian Government. When considering the planning in its entirety, the RAN will continue with a substantial modernization effort, while gradually replacing it over the next three decades with a wholly new force. In order to carry out this ambitious effort, there will be a requirement for a sustained budget over the long-term. The present government is currently committed to 3% annual growth in the defense budget through 2018 and 2.2% growth after 2019.

The biggest question concerning the future planning for the RAN and Armed Forces is whether or not the government can maintain its promise on the 3% actual growth in the defense budget over the next ten years and 2.2% thereafter. The budget for 2009/2010 is expected to grow to AUD$26.6B (US$19.9B) from the 2008/2009 level AUD$23.38 (US$17.4B). Other unknown factors over the long-Tenn that will have direct implications on the future force include:

Inflation Program cost overruns Political changes (new leadership) that will occur Requirement changes that may occur under future whitepapers • Manning requirements for the RAN of which the sea service is currently struggling SOUTH KOREA – Delay in KSS-3 Submarine Program In mid-May 2009, AMI received information that the Republic of Korea Navy (ROKN) is delaying their KSS-3 submarine program by two years, until 2013. This is partially due to the global economic downturn in addition to the ROK Anny having more urgent acquisition needs (although the latter has been denied by ministry officials).

The KSS-3 will be the largest submarine in the ROKN, displacing around 3,000 tons. it will have stowage for up to twenty weapons, including the LIG Nex I White Shark heavyweight torpedoes and Sea Star SSM-700K surface to surface missiles (SSM). Additionally, the class will be equipped with an air independent propulsion (AIP) system to allow for increased under- sea time without the need for resurfacing.

Information from the Agency for Defense Development (ADD) and the Defense Acquisition Program Administration (DAPA) indicates that Samsung Thales is the front-runner for a US$120M contract to supply the combat management system (CMS) for the new submarine after rival LIG Nex 1 withdrew from the competition. Although not the supplier of the CMS system, it is anticipated that LIG Nex 1 will integrate the sonar system under a separate US$80M deal.

The construction contract for the domestically designed and equipped diesel-electric submarine was to be awarded in 2011, with the first unit beginning construction in 2015. Based on the delay from the original refonn package of 2005, the first unit of the three ship class will begin construction in 2017 and enter service in 2020. VIETNAM – Developing a Blue Water Submarine Force? In April and May 2009, AMI began to receive information that Vietnam was in the process of moving forward with a blue water Submarine Force that will consist of up to six Kilo class submarines. Vietnam is undoubtedly considering the replacement of its two Yugo class midget submarines purchased in 1997. However, AMI believes that this sale is more than likely a result of aggressive salesmanship by Russia’s Exportation.

Reporting from various sources indicates that Vietnam is close to completing the US$1.8B deal for the purchase of six units of the Kilo class although AMI believes that six units are far too great an undertaking for the Vietnamese Peoples Navy (VPN). These units, regardless of number, will be built at Russia’s Admiralty Shipyards. With an annual defense budget of only US$3.68, these units could be paid for through barter agreements in combination with forgiveness of debt owed to the Former Soviet Union. Recent Vietnamese equipment purchases from Russia were financed in the same manner and also very similar to Algeria’s recent purchases of submarines from Russia. Various sources indicate that the deal also includes the modernization of Vietnam’s shipbuilding infrastructure, which has been a major detractor in the nation’s ability to modernize its navy. This type of barter/debt forgiveness transaction is beneficial to Vietnam as well as Russia, which is desperately trying to keep its naval shipbuilding industry afloat.

The modernization of the VPN began in the late 1990s with the purchase of two Yugo class midget submarines. The submarine purchase was followed by the procurement of one indigenous BPS 500 class fast attack craft (F AC), four Russian.built Tarantul class FAC and four Svetlyak class FAC. In March 2004, the VPN decided to order the more modem version of the Tarantul class FAC, the Tarantul IV. The first two units were delivered in 2007 with eight additional units planned through 2015.

By 2006, the VPN took its next step and ordered two Gerard class frigates from Russia, making these two vessels the largest to date for the sea service. For the past decade, the Vietnamese sea service has been slowly modernizing itself due to its national interests in the region. The reason for the overall expansion (including a submarine purchase) can be directly attributed to what it perceives as China’s expansionist endeavors through the region, including the contested Spratly Islands. Most recently, Vietnam has protested China’s newest naval installation on Hainan Island. Historically speaking, China and Vietnam have been at odds for over 3000 years. Additionally, Vietnam has watched some of its other neighbors including Indonesia, Malaysia and Singapore procure submarines over the past decade.

It now appears that Vietnam will attempt to take its final step in developing its sea service, the ability to maintain and operate a fleet of blue water submarines. This must be considered a monumental task if it comes to fruition . Without a doubt, through various financing methods and Soviet era debt forgiveness; Vietnam may indeed be able to purchase these submarines if it wishes. The biggest question will be whether the VPN will have the ability to operate, base and maintain a modem blue water submarine fleet. Before the VPN can even consider operating a Submarine Force of this type and sophistication on its own, it will require significant infrastructure improvements to base the submarines as well as many years of Russian training and operational assistance. If Vietnam is genuinely concerned with other nations’ expansionism and naval modernization within the region, this program must be considered a national priority. If this deal in fact comes to fruition, a contract could be in place by 2010, with the first Kilo submarine being delivered by 2013 although its crew will require Russian assistance for years to come.

INDONESIA – Overhaul of 2nd type 209 Submarine in South

Korea On 28 April 2009, Daewoo Shipbuilding & Marine Engineering (DSME) of South Korea was awarded a US$75M contract for the modernization of the Indonesian Navy’s (IN) second Cakra class (NANGGALA) Type 209/1300 submarine. The modernization program will likely be similar to the one CAKRA completed in 2006 that included: Overhaul of the submarine’s four engines •Replacement of batteries Upgrade of the combat management system Upgrade of the sonar system Upgrade of the electronic support measures (ESM) system Replacement of the surface search radar Based on the timeline of CAKRA’s modernization program, should NANGGALA enter the shipyard by the end of 2009, it will likely return to service with the JN by the middle of 2011.

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