In a significant move for national defence, Canada has opted for Thyssenkrupp Marine Systems (TKMS) of Germany to construct a fleet of submarines. This decision, to be officially announced by Prime Minister Mark Carney in Halifax on Monday, marks the culmination of a competitive bidding process involving TKMS and South Korea’s Hanwha for a contract potentially worth billions. The procurement aims to enhance Canada’s maritime capabilities, enabling the Royal Canadian Navy to monitor its coastal waters more effectively.
A New Era for Canada’s Naval Defence
The decision comes as Canada seeks to bolster its defence spending to levels not seen since the Cold War, with a commitment to allocate 5% of its gross domestic product towards military expenditure by 2035. This ambitious plan aligns with NATO’s expectations as the country aims to upgrade its maritime assets and operational readiness. The contract encompasses the construction of 12 new diesel-electric submarines, a vital enhancement given that Canada’s current fleet consists of only four second-hand vessels, with limited operational capacity.
Prime Minister Carney’s announcement will precede his participation in a NATO leaders’ summit in Turkey, reflecting the strategic importance of this procurement not just for Canada, but for its role within the NATO alliance.
The Competitive Landscape
The submarine procurement process has been particularly intense, with both TKMS and Hanwha investing considerable resources to secure the contract. While the Prime Minister’s announcement will likely name TKMS as the preferred bidder, it is essential to note that this does not guarantee an immediate contract. Negotiations will follow, and finalising the deal could take years, according to defence policy expert Philippe Lagassé.
The financial implications of this contract are substantial, with projections estimating the submarine procurement itself could amount to between $20 billion and $30 billion. When factoring in operational, maintenance, and upgrade costs, the total investment could rise to between $40 billion and $50 billion over the lifetime of the vessels.
Economic Implications and Industrial Benefits
Both bidders have promised significant economic benefits to Canada, which played a crucial role in the decision-making process. Hanwha has pledged to deliver over $70 billion in trade and investment, alongside the creation of more than 25,000 jobs each year from 2026 to 2044. Conversely, German Defence Minister Boris Pistorius highlighted that TKMS’s proposal, in collaboration with Norway, could contribute an estimated $86 billion to Canada’s GDP, creating over 650,000 job years throughout the duration of the contract.
As the competition unfolded, reports suggested that the Canadian government might consider splitting the contract between the two bidders. However, recent statements from government officials have downplayed this notion, indicating a preference for a singular, decisive outcome.
A Transformative Capability
The implications of this procurement extend beyond mere numbers; it signifies a transformative leap for Canada’s military capabilities. The Royal Canadian Navy has historically maintained a minimal underwater presence, with the last significant submarine acquisition occurring in the 1960s. The planned fleet of 12 submarines will enable Canada to deploy three vessels simultaneously, significantly enhancing its strategic deterrence against potential maritime threats, particularly in the Arctic and along the Pacific and Atlantic coastlines.
David Perry, president of the Canadian Global Affairs Institute, emphasised the strategic benefits, stating, “It will give us much more of an ability to independently know what’s happening around our own Canadian coastal waters.” This new capability is expected to deter unfriendly naval activity and bolster Canada’s sovereignty over its maritime territories.
Why it Matters
The decision to select TKMS for Canada’s submarine fleet marks a pivotal moment in the country’s defence strategy, reflecting an urgent response to evolving global security challenges. As Canada seeks to modernise its military infrastructure, this procurement not only strengthens its naval capabilities but also sets a precedent for future defence contracts. The emphasis on economic benefits and job creation further aligns with Canada’s industrial policy goals, showcasing a commitment to domestic economic growth while enhancing national security. The outcome of this process will undoubtedly shape the Royal Canadian Navy for generations, reinforcing Canada’s role as a key player within NATO and enhancing its ability to navigate the complexities of today’s geopolitical landscape.
