In a significant move for Canada’s naval capabilities, Prime Minister Mark Carney is set to announce on Monday in Halifax the winner of a lucrative contract for the construction of 12 submarines. The decision, which comes ahead of the NATO leaders’ summit in Turkey, pits Germany’s TKMS against South Korea’s Hanwha, both vying to secure a deal that could reshape the Royal Canadian Navy for generations to come.
The Stakes of the Submarine Contract
The impending announcement marks the culmination of a fiercely competitive bidding process that has seen both contenders promise substantial economic benefits alongside their submarine offerings. The procurement is anticipated to be worth between $20 billion and $30 billion for the submarines alone, with overall expenditures—including operations and maintenance—potentially reaching up to $50 billion.
Sources familiar with the decision-making process, speaking on condition of anonymity, indicated that while a preferred bidder will be announced, the contract will not be immediately signed. Negotiations could extend for several years, according to Philippe Lagassé, a defence policy expert at Carleton University.
This procurement effort is part of the Carney government’s broader initiative to boost defence expenditure to levels not seen since the Cold War, aiming for a target of 5 per cent of GDP by 2035, in line with NATO commitments.
Economic Promises from Bidders
Both Hanwha and TKMS have crafted robust packages of industrial benefits to sway Ottawa. Hanwha’s proposal includes a staggering commitment of over $70 billion in trade and investment, projected to generate upwards of 25,000 jobs annually between 2026 and 2044. Meanwhile, Germany’s TKMS argues that its bid, developed in collaboration with Norway, could contribute as much as $86 billion to Canada’s GDP over the life of the contract, along with creating more than 650,000 job years.
The competition has spurred a flurry of public relations activity from both nations. Hanwha’s campaign has been particularly aggressive, featuring high-profile visits and showcasing their KSS-III submarine technology in Canada. In contrast, TKMS has focused on leveraging its long-standing relationship with Canada, emphasising shared values and historical ties within NATO.
Transforming Canada’s Naval Capabilities
If awarded, this contract would fundamentally alter Canada’s maritime defence strategy. Currently, the Royal Canadian Navy operates a fleet of four aging submarines, all of which were procured second-hand, with only one typically available for deployment. The new submarines are intended to ensure a more robust naval presence, allowing Canada to maintain three operational vessels simultaneously.
David Perry, president of the Canadian Global Affairs Institute, highlighted the strategic advantage this acquisition would provide, enabling Canada to better monitor its coastal waters and deter potential threats, particularly in the Arctic region.
A Unique Bidding Landscape
What sets this procurement apart from previous military contracts is the absence of American defence contractors. The Canadian government has explicitly ruled out nuclear submarines, and the U.S. no longer manufactures conventional diesel-electric submarines, leading to a unique situation devoid of pressure from its most powerful ally.
Furthermore, South Korea’s aggressive campaign reflects its ambitions to expand its military industry and establish itself as a formidable player in the global defence market. The potential contract with Canada would represent a monumental achievement for Seoul, marking the first occasion a major weapons platform has been purchased from a non-Western supplier.
Why it Matters
The outcome of this procurement process will resonate beyond the immediate implications for the Royal Canadian Navy. It represents a crucial moment in Canada’s defence policy, potentially redefining its military relationships and industrial partnerships. As the country seeks to enhance its sovereignty and operational capabilities amid evolving global threats, this decision will not only bolster naval strength but also signal Canada’s commitment to diversifying its defence procurement strategies. The choice between Germany and South Korea will set a precedent for future contracts and could significantly influence the dynamics of international defence collaborations.
