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Reprinted with permission from AMI HOT NEWS; an internet publication of AMI International. PO Box 40, Bremerton, Washington, 98337.

From the March 2010 Issue

SWEDEN – Contract in Place for Next Generation Submarine

On 26 February 2010, the Swedish Defence Materie Administration (FMV) signed a contract with Kockums AB (part
of ThyssenKrupp Marine Systems) concerning the overall design phase for the next generation submarine (A 26) for the Royal Swedish Navy (RSN). This follows information reported in AMl’s January 20 I 0 Hot News that the Swedish government was in negotiations with Kockums concerning the design contract.

These actions confirm Sweden intends to stay in the submarine business, which has been in question for the better part of a decade. A new class of at least four submarines will in fact replace the remaining GOTLAND (Al9) and SODERMANLAND (A 17) classes that were commissioned in the late 1980s through the mid-l 990s. Although the program has been delayed by several years, AMI believes that a construction contract could be in place as early as 2013 in order to have the first unit in service by 2018 to replace the SODERMANLAND. The submarines will be built at
Kockum’s Malmo Shipyard.

The new submarines are being designed for littoral operations but will also possess ocean-going capabilities and will have the Kockums Stirling Air Independent Propulsion (AIP) system for increased on station time. As noted in AMI’s January Hot News, this program could also be linked to Norway’s Future Submarine program, if the Royal Norwegian navy (RNoN) decides to replace the six units of its Ula class. Norway began conceptual studies for a replacement of the Ulas under the Ny Ubat Project 6346 program. However, a final decision on whether to stay in the
submarine business has yet to be made. If Norway decides to continue operating submarines, it would be very expensive to go it alone and could benefit by joining with Sweden similar to the Viking Program of the 1990s prior to cancellation. Norway has no submarine building capability and it would be economically beneficial to join a program in progress in order to reduce overall costs.

UNITED KINGDOM – Go Ahead for 5th and 6th Astute Submarines In late March 2010, AMI received information that the UK Government had signed a contract with BAE Systems Submarine Solutions concerning units 5 and 6 of the Astute class submarine program. The contract covers the full funding of unit 5 and the initial funding for Jong lead items for unit 6. These two units, that will more than likely be followed by a seventh unit in 20 J I; will allow for the continuance of the class and the eventual transition (following unit 7) to the Future Nuclear-Powered Ballistic Missile Submarine (SSBN) program that will begin around 2017.

The commitment to units 5 and 6 and a 2011 commitment to unit 7 ensures a consistent workload for the UK’s submarine building industry and maintains the skilled workforce that is vital for the Future SSBN program.

Currently, the first unit of the class, HMS ASTUTE, is conducting sea trials, unit two (HMS AMBUSH) is under construction and will be launched in late 2010 and unit three and four (HMS ARTFUL and HMS AUDACIOUS) are in advanced stages of construction.


PORTUGAL: On 23 February 2010, the Portuguese Navy’s last Daphne class submarine, NRP BARRACUDA (S 164), was decommissioned.

From the April 2010 Issue
Submarine Design Still Undecided In early April 2010, the Pakistani Navy (PN) Media Affairs Director (Captain Mobin Ashraf Bajwa) confirmed that a final decision on the design for up to five new submarines to be procured by Pakistan has not yet been made. Earlier reporting in November 2008 indicated the PN was close to completing a deal with ThyssenKrupp Marine Systems (TKMS) to acquire Type 214 Air Independent Propulsion (AIP) submarine to meet the Navy’s requirement. The contract with TKMS was expected to be for three submarines and options for two additional units with all the vessels being built at Pakistan’s Karachi Shipbuilding & Engineering Works (KSEW). The first three units were estimated to cost around US$ I B, which also included technology transfer agreements. The Type 214 design was apparently recommended by the PN (as they believed it was technologically superior) to the Pakistani Government, however, contract negotiations were never completed. Earlier reports also indicated the German solution bested the offer by DCNS of France, which included the new Marlin design (AIP Scorpene). DCNS previously provided three Agosta 908 class submarines, technology transfer agreements, logistics support, and upgrades to KSEW for submarine construction and appeared to be in the strongest position to win the next PN submarine program prior to the November 2008 reporting on TKMS’s inside track for the deal.

With the latest announcement by PN Media Affairs, Pakistan’s sea service is still considering both offers as they work toward the most favorable deal with Pakistan. It appears that the PN is attempting to leverage its existing relationship with China for new naval ships by announcing that it was also considering the Chinese Type 041 A Yuan class design for the submarine requirement. AMI believes that the PN is using the Chinese submarine option as a negotiating tactic to wrest the best deal from either DCNS or TKMS. The PN likely knows that both European designs offer better performance compared to the Yuan, although the Chinese solution will undoubtedly be considerably less
expensive. Another issue that will affect the submarine design decision is the logistics and operational integration challenges of incorporating new designs into Pakistan’s existing force of Frenchsupplied Agostas (buying German would also be an integration issue, though not as much as China … on the other hand, the PN successfully integrated the China sourced Sword class frigates … so
maybe the Pakistani’s do not see integration of the Yuan as such a
major problem).
Even though the submarine competition remains alive and well, the timeline is not open ended. The PN will need to move forward as soon as possible since it will only have two active submarines given the need to keep one unit of the three Khalid class in overhaul/upkeep at any given time. A decision on the final design can be made at any time with the only question being who will make the best and final offer. AMI believes that this decision can be made by the end of the year.

ISRAEL – Dolphin Submarine Program Growing

In mid-April 2010, AMI received infonnation that the Israeli Government was continuing to negotiate with the Gennan
Government and ThyssenKrupp Marine Systems (TKMS) for additional Dolphin II submarines. This infonnation supports and updates earlier reporting received in September 2009 and January 2010 that indicated that the Israelis were in negotiations with ThyssenKrupp for two MEKO class corvettes and a sixth Dolphin Submarine.

HOW built and delivered three Dolphin class submarines for Israel between 1994 and 2002. Under the original program, Israel planned to acquire two additional units (Dolphin II with AIP) that began construction in 2008 and were scheduled to be delivered in 2012.

Information received in April indicates that the Israeli Navy has increased its total submarine requirement to nine units and may already be negotiating four additional units. Now the program appears to envision hulls 6/7 /8 and 9 in addition to the 4th and 5th that were included in the original program. As with the first three units negotiated in 1992 and two units negotiated in 2005, Israel will push for deep discounts from TKMS. As a reference point, the Israelis paid an estimated US$459M (per unit) for units four and five although the actual cost of the Dolphin II is around US$700M. Germany paid the initial US$452.1M of the US$1.37B deal.

INTERNATIONAL-Trends in the Global Submarine Market

Key Points

  • AMI forecasts that the global new construction submarine market will be worth approximately 1948 in 2009 USO
    over the next 20 years. This represents almost 28% of the value of all worldwide new construction naval spending
    projected for 2010-2030.
  • While submarines make up more than a quarter of the global naval market by value, the number of new submarine hulls built, and total spending on new build submarines, are both expected to decline compared to earlier 2008-2028 forecasts.
  • Future submarine market spending is concentrated in the US and the Asia-Pacific region, and to a lesser extent Russia. By contrast, future sub construction spending by NA TO countries has dropped by 27% compared to the 2008 20 year forecast.
  • Submarine spending in the Mid-East/North Africa and Latin American markets is expected to remain steady, with gradual improvements to existing forces rather than any dramatic increase in numbers of types of submarines added to regional navies.

State of the Current Market

The current worldwide submarine inventory includes 277 diesel-electric boats operated by more than 39 nations. An additional I 52 nuclear-powered boats are also in service with China, France, Russia, the United Kingdom and the United States.

Asia-Pacific Region

The Asia-Pacific Region has now passed NA TO as the world’s second largest submarine market, with 104 new submarine
hulls expected to join navies in the region over the next 20 years. In contrast, the forecast for NA TO spending on new submarines over the same period has dropped to US$43B, with 58 new hulls expected to be delivered to NA TO navies through 2030.

Middle East North Africa

Elsewhere, demand for new submarines is expected to remain steady in Middle East and North Africa (MENA) and Latin
American markets over the next 20 years. The majority of the units to be procured in these markets will replace older boats in service that are approaching or already beyond their effective service lives. The exception to this pattern is Iran, where Navy submarine procurements include locally designed and built Qaeem class small conventional submarines as well as the even smaller Ghadir class mini-sub.

Submarine Exports

Of the over 39 nations that operate diesel-electric submarines, only about one-third have the capability to design and build their own vessels. Other countries continue to require foreign assistance for vessel construction or resort to purchasing used submarines on the international market. The major export submarine suppliers include Russia, France and Germany, while South Korea is making a concerted effort to move from indigenous ‘construction
for its own navy to exporting submarines to foreign customers. By far the most widely exported submarine design is the Russian Kilo class, with sales of over 40 hulls to ten nations. Reasons for this success include the Kilo’s relatively low cost (estimated at between US$100-300M per hull) compared to German and French alternatives. Russia’s willingness to sell submarines to a wider variety of customers, and favorable financing to support struggling Russian shipyards have also contributed to Russian submarine export success.


Future Submarine (Kwang Hua 8): For the past decade, the ROCN has continued to took for a supplier to satisfy its requirement for diesel-electric submarines. In April 200 I, US President George W. Bush made the public announcement that the US would sell up to eight submarines to Taiwan. Due to its excessive price; in mid-2007, the Legislative Yuan and US Government agreed to split the submarine program into two parts Phase 1 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) to officially begin the program.
VIETNAM: On 10 March 2010, Russia’s Admiralty Shipyard announced that the first of six Kilo 636 class submarines for the Vietnam People’s Navy (VPN) will begin construction in the Autumn of 2010.

From the May 2010 Issue,/u>

United Kingdom – New Government Coalition Supports

Future Nuclear Deterrence
In late May 2010, AMI received information that the United Kingdom was likely to continue with its nuclear deterrence modernization effort following the 06 May elections in which a new coalition government was formed. It appears that the coalition government led by Conservative Mr. David Cameron (Prime Minister) and Liberal Democrat Mr. Nick Clegg (Deputy Prime Minister) and the general alliance of both parties formed a majority coalition in Parliament favoring the continuance of a nuclear deterrence with a Future Nuclear·Powered Ballistic Missile (SSBN) force.

Assuming that the UK will move forward with the SSBN option, the initial maingate approval is expected by the end of 2010. Design work on the Future SSBN began in April 2007 when the Ministry of Defense (MoD) and industry formed the Future Submarine (FSM) Project Team and consists of the MoD, BAE Systems, Babcock Marine and Rolls Royce. The team is tasked to deliver the first SSBN to the Royal Navy (RN) by 2024 at a cost of no more than US$15.9B-US$20.2B for three or four units. The delivery date of 2024 assumes that only three submarines will be built in the new class essentially allowing the HMS VANGUARD to retire in 2022 without replacement. If four units are built, all units of the Vanguard class will be replaced on a one-for-one basis essentially maintaining the UK’s CASO at current levels.

GREECE – Frigates and Submarine Pushed Past 2010

With Debt problems taking the forefront of the news coming out of Greece and leading the discussion all over the European Union (EU), rumors abound over the proposed budget cuts that are being considered by the Greek Government and , in particular, the Ministry of Defense (MoD).

In late April 2010, AMI received infonnation that the Greek MoD was considering making cuts to the defense budget that could amount to as much as 25 percent. With the continuing rivalry between Greece and Turkey, there are concerns that deep cuts in the defense budget will affect the balance of power between the two nations.

With this said, statements by Greek sources in mid-May indicate that deals are continuing to be worked between the
governments of Gennany, France and Greece with regards to defense procurements, more specifically the FREMM frigates and Type 214 submarines. lnfonnation received seems to indicate that there may be a little tit-for-tat occurring with regards to the procurement of Gennan submarines and French Frigates, helicopters and fighter aircraft; in other words possible paybacks for the austerity package.

The basic fact is that the domestic submarine and frigate programs will provide jobs in Greece, although it is unknown where the actual funding for the programs will come from. It is possible that these programs will indeed move forward, providing job stimulus, the question now becomes when.

ISRAEL – Update on Dolphins

In early May 2010, AMI received additional infonnation concerning the Israeli procurement of Dolphin II class submarines and MEKO A-100 corvettes from Gennany. This infonnation updates AMI’s April 2010 Hot News Article (Dolphin Submarine Program Growing 1 O.html) that indicated Israel was negotiating for additional Dolphin II class submarines and two MEKO corvettes.

AMI’s source indicates that the Gennan Government will pay up to 50% of the costs for the six Dolphin II submarine. Although three additional units (7-9) are still being considered, no decision has been made on how much (if any) payment sharing/financing plan would be offered, although AMI believes it is very probable as ThyssenKrupp Marine Systems (TKMS) needs new orders at its Howaldtswerft Deutsche Werft AG (HOW) yard in order to
maintain workforce stability.

As mentioned in April’s Hot News, it appears that Germany and Israel have both realized that it was an opportune time for both countries to increase cooperation on naval equipment. Israel needs to meet its expanding naval requirements at a time of high budgetary pressures and TKMS and the overall German shipbuilding industry was in need of some type of stimulus measure to keep two of its major naval construction yards fully employed.

VIETNAM – Building its Three Dimensional Fleet

In late April 2010, the Vietnam Ministry of Defense (MoD) finalized a purchase agreement with Viking Air (Victoria, British Columbia) of Canada for six DHC-6 Twin Otter Series 400 aircraft. The acquisition of the aircraft completes the sea services’ desire for a three dimensional naval service consisting of air, surface and subsurface units. In December 2009, press reporting indicated that Vietnam had agreed to a US$1.8B contract with Russia to procure six Kilo (Project 636) class submarines. On I 0 March 2010, Russia’s Admiralty Shipyard announced that the first
of six Kilo class submarines for the VPN would begin construction in the autumn of 2010.

UNITED KINDGOM – New Defense and Security Review by the End of 2010

On 12 May 2010, the United Kingdom’s (UK) new Defense Minister (Secretary of State for Defense) Dr. Liam Fox announced that a new Strategic Defense and Security would begin immediately and be completed by the end of 2010.
The new Defense Minister was appointed following general elections in the UK on
06 May in which a new coalition government was formed with Conservative Mr. David Cameron becoming Prime Minister and Liberal Democrat Mr. Nick Clegg becoming Deputy Prime Minister and a general alliance of both parties forming a majority coalition in Parliament. Dr. Fox stated that the new review would ensure Britain’s defense would be based on a clear definition of the country’s strategic interests, an assessment of its NTO role and other partnerships, threats faced, military capabilities needed to protect the nation’s interests and the programs needed to deliver those capabilities. The Defense Minister also stated that with resources being tight, organizations, structures and policies would be scrutinized as well.

The one general consensus among both the Conservative and liberal parties was for the UK to renew its submarine based strategic nuclear deterrence, in other words replace the Vanguard class nuclear-powered ballistic missile submarine (SSBN). The exact form (hulls, new missiles, number of both, etc.) may be affected by the new defense assessment as well as the severely restricted budget environment.

INTERNATIONAL- World Missile Developments

In an ongoing effort to update AMI Intemational’s World Missile Systems Online, the following information is provided regarding world missile developments that occurred during May 2010.

RUSIA: In a I 0 May 20 I 0 statement from Russian Chief Navy Commander Vladimir Vysotskii, it was announced that the Russian navy would be taking over control of the production of the problem-plagued Bulava submarine launched ballistic missile (SLBM).

Due to many production problems that have been blamed for causing over 50% of test flights to fail, the Navy sees that it has to take control of every stage of production, right down to screws and bolts in order to maintain the quality required to assure successful launches.

It is anticipated that with the Navy now in control of all aspects of the missile’s development and construction, further tests will be much more successful than before. Eventually the Bulava will be loaded into the Borey class SSBNs, but until then, tests will continue from the Dmitry Donskoy, a Typhoon class SSBN that has been outfitted as the test platform for the Bulava. The first Borey class was commissioned in 2009 and is scheduled to enter full service with the Russian navy in 2011 ; however the delay in the Bulava missile could push the date to the right. All, seven units of the Borey class are scheduled to be built through 2020, all will be equipped with the Bulava SLBM, making the success of the program even more vital.


Brazil: On 27 May 20 lO, the first Scorpene class submarine for the Brazilian Navy (BN) began construction at DCNS in France.

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