In a significant move for Canadian defence, Prime Minister Mark Carney is set to announce that the government has selected Thyssenkrupp Marine Systems (TKMS) of Germany to construct a new fleet of submarines. The decision, which follows intense competition from South Korea’s Hanwha, marks a pivotal moment for the Royal Canadian Navy and is expected to enhance Canada’s naval capabilities considerably. Carney will unveil the decision in Halifax on Monday, just prior to attending a NATO leaders’ summit in Turkey.
A Game-Changing Defence Contract
The procurement process has been closely monitored, with sources indicating that the contract will encompass the construction of 12 submarines, a move that will empower Canada to patrol its coastal waters with unprecedented stealth. Although Carney had initially suggested a decision would be made by the end of June, he did not confirm a specific date until now.
While the announcement will likely name TKMS as the preferred bidder, it is essential to note that this does not guarantee an immediate contract; negotiations are expected to extend for years before a final agreement is reached. Philippe Lagassé, a defence policy expert at Carleton University, cautioned that such major procurements often involve complex negotiations even after a preferred contractor is chosen.
Expected to be valued between CAD 20 billion and CAD 30 billion for the submarines alone, the overall cost—including operations, maintenance, and upgrades—could soar to between CAD 40 billion and CAD 50 billion.
Economic Implications and Job Creation
The submarine procurement is part of a broader strategy by the federal government to ramp up defence spending, aiming for levels not seen since the Cold War. Canada has pledged to elevate defence expenditure to 5 per cent of its gross domestic product by 2035, aligning with NATO’s target.
Both competitors—TKMS and Hanwha—have presented compelling economic benefits to sweeten their bids. Hanwha has committed to over CAD 70 billion in trade and investment in Canada, promising the creation of more than 25,000 jobs annually from 2026 to 2044. In contrast, the German bid, in collaboration with Norway, projects an injection of CAD 86 billion into Canada’s economy, alongside the creation of over 650,000 job years.
The competitive nature of this procurement has sparked intense discussions regarding industrial benefits, with Ottawa keen on ensuring that any contract translates into tangible economic advantages for Canadian industries. For instance, Hanwha has proposed a CAD 200 million investment to assist Algoma Steel in establishing a steel-beam mill in Ontario if awarded the contract.
The High Stakes of Military Procurement
The battle for the submarine contract has seen both nations engage in a high-profile campaign to win favour with Canadian officials. Politicians and diplomats from South Korea, Germany, and Norway have actively promoted their bids, with notable gestures including the dispatch of a South Korean submarine to showcase technology in Canada.
This competition diverges from previous arms procurement battles, such as Canada’s recent fighter jet selection, where the United States played a dominant role. Unlike the F-35 contract, which faced less scrutiny due to the U.S.’s substantial influence, the submarine bids are unique as they involve no American contractors. Canada has opted to exclude nuclear submarines from consideration, further narrowing the field to conventional diesel-electric options.
As a result, the competition has drawn considerable attention from Hanwha, which sees this contract as vital to establishing a foothold in the global arms market. The South Korean government seeks to elevate its military industry to the fourth largest in the world, while TKMS boasts an extensive track record, having supplied submarines to 20 navies globally.
The Future of Canada’s Naval Power
Should the deal materialise, it would represent a transformative shift for the Royal Canadian Navy, which has historically maintained a limited underwater presence. Canada’s current fleet consists of only four second-hand submarines, with only one typically operational at any given time. The proposed addition of 12 submarines is expected to bolster Canada’s defence capabilities, allowing for a more robust maritime presence.
Military experts assert that the Royal Canadian Navy requires a fleet of 12 submarines to ensure effective national defence, considering that only one out of every four vessels is expected to be operational at peak readiness. This procurement would enable Canada to deploy three submarines simultaneously, enhancing the nation’s deterrence against potential threats in the Arctic and along its Pacific and Atlantic coastlines.
David Perry, president of the Canadian Global Affairs Institute, emphasised that the new submarines would significantly enhance Canada’s situational awareness in its coastal waters, providing the country with a powerful tool for national security.
Why it Matters
The decision to move forward with TKMS for submarine construction represents a critical step in revitalising Canada’s naval capabilities and enhancing its defence posture. As the landscape of global security evolves, the ability to patrol and protect national waters is more crucial than ever. This procurement not only underscores Canada’s commitment to its NATO obligations but also reflects a strategic pivot towards strengthening domestic industrial capacity amidst growing geopolitical uncertainties. The ripple effects of this announcement will be felt across Canada’s economy and military for decades to come, shaping the future of national defence and international partnerships.
