In a significant development for Canada’s naval capabilities, the government has reportedly chosen Germany’s Thyssenkrupp Marine Systems (TKMS) to construct a fleet of submarines. Prime Minister Mark Carney is expected to make the official announcement in Halifax on Monday, concluding a fierce competition with South Korea’s Hanwha Group for the lucrative contract to deliver 12 modern submarines. This procurement marks a pivotal moment for the Royal Canadian Navy, enhancing the country’s ability to conduct undetected patrols in its coastal waters.
A Historic Decision
This decision comes after a protracted evaluation process that underscored the high stakes involved in modernising Canada’s naval fleet. The anticipated contract could be worth between $20 billion and $30 billion for the submarines alone, with total costs—including operations and maintenance—potentially escalating to as much as $50 billion. Although the Prime Minister will announce a preferred bidder, analysts caution that this does not immediately translate into a signed contract; negotiations could extend over several years before finalisation.
Carney’s announcement occurs just ahead of the NATO leaders’ summit in Turkey, highlighting the strategic importance of enhancing Canada’s military capabilities. As David Perry, president of the Canadian Global Affairs Institute, noted, the procurement is vital for enabling Canada to effectively monitor its territorial waters. “It will give us much more of an ability to independently know what’s happening around our own Canadian coastal waters,” Perry explained.
The Competition and Its Implications
The submarine contract has sparked intense competition between TKMS and Hanwha, with both companies presenting aggressive bids that promise substantial economic benefits for Canada. Initially, Ottawa indicated that both bidders could meet the requirements for diesel-electric submarines, yet the decision ultimately hinges on the economic advantages each could offer. Hanwha has committed to over $70 billion in trade and investment, creating approximately 25,000 jobs from 2026 to 2044.
Conversely, the German Defence Minister Boris Pistorius has claimed that TKMS’s proposal could generate an impressive $86 billion for Canada’s GDP over the lifespan of the contract, alongside creating over 650,000 job years. This intense focus on industrial benefits reflects the government’s drive to bolster domestic capabilities and mitigate reliance on foreign industries.
The Shift in Defence Procurement Landscape
This submarine procurement is distinct from previous military contracts, such as the recent fighter jet competition that saw Canada select the U.S.-made F-35. Notably, there are no American contractors vying for this submarine project, as Canada has chosen to forgo nuclear options and the U.S. does not manufacture conventional submarines. This absence of pressure from the United States has allowed Canadian officials the latitude to choose the best option based on economic benefits rather than geopolitical considerations.
Both TKMS and Hanwha have actively engaged in public diplomacy efforts to win favour in Canada. Hanwha has made its campaign particularly visible, even dispatching a submarine to showcase its capabilities. Meanwhile, TKMS has stressed its long-term partnership with Canada through NATO and its proven track record of submarine construction for various international clients.
Strategic Military Enhancements
The anticipated purchase of 12 submarines will mark a transformative shift for the Royal Canadian Navy, which has not acquired new submarines since the Cold War. Currently, Canada operates four second-hand subs, with only one typically operational at any given time. The new fleet will allow for three submarines to be deployed simultaneously, significantly enhancing Canada’s deterrent capabilities against potential threats in the Arctic, Pacific, and Atlantic regions.
As the procurement process unfolds, the focus will shift to the negotiation stages, where the government will seek to secure the best possible outcomes for Canadian industry and military readiness.
Why it Matters
This submarine procurement is not merely about enhancing military capabilities; it represents a crucial element of Canada’s broader defence strategy. As the government aims to raise defence spending to 5% of GDP by 2035 to meet NATO requirements, this contract could act as a catalyst for revitalising Canada’s military-industrial complex. The outcome will shape not only the Royal Canadian Navy’s operational capacity for decades to come but also the economic landscape of Canadian defence manufacturing, positioning the country as a more formidable player on the global stage.
