In an eagerly anticipated announcement set for Monday in Halifax, Prime Minister Mark Carney is poised to reveal which nation—Germany or South Korea—has secured a coveted contract to construct twelve submarines for Canada. This significant procurement promises to enhance the Royal Canadian Navy’s operational capabilities and bolster the nation’s maritime security like never before, enabling Canada to patrol its extensive coastal waters with greater stealth and efficacy.
A Competitive Landscape
Sources familiar with the matter indicate that the decision follows a protracted bidding war between Germany’s Thyssenkrupp Marine Systems (TKMS) and South Korea’s Hanwha. While the Prime Minister’s announcement will likely highlight a preferred bidder, it does not guarantee an immediate contract signing. Negotiations are expected to extend over several years, according to defence policy expert Philippe Lagassé from Carleton University.
The total value of the programme is projected to be between $20 billion and $30 billion for the submarines themselves, with operational and maintenance costs potentially reaching $40 billion to $50 billion over time. This strategic acquisition is part of the Carney administration’s commitment to elevate defence spending to unprecedented levels, aiming for 5% of gross domestic product by 2035 in line with NATO expectations.
Economic Implications and Job Creation
The competition is not just about military might; it has ignited a fierce battle over industrial benefits that could reshape Canada’s defence landscape. Hanwha has pledged upwards of $70 billion in trade and investment, promising to generate over 25,000 jobs annually from 2026 to 2044. Conversely, Germany’s TKMS asserts that its proposal could contribute an astounding $86 billion to Canada’s GDP, creating more than 650,000 job years throughout the contract’s lifespan.
This focus on economic return is critical as Canada seeks to maximise domestic advantages from its defence procurements. The potential for job creation and investment has led both bidders to forge partnerships with Canadian businesses, with Hanwha notably offering to invest in local steel production if awarded the contract.
Navigating the High Seas of Defence Procurement
Canada’s submarine acquisition represents a watershed moment for the Royal Canadian Navy. Historically, the nation has not commissioned new submarines since the Cold War, relying instead on four second-hand vessels, of which only one is generally operational at any given time. The planned acquisition of twelve submarines will not only enhance Canada’s underwater capabilities but also provide three operational vessels at any one time, a crucial factor given the increasing assertiveness of rival nations in Arctic and Pacific waters.
David Perry, president of the Canadian Global Affairs Institute, emphasised the strategic importance of this procurement: “It will give us much more of an ability to independently know what’s happening around our own Canadian coastal waters.”
The Diplomatic Push
The competition has witnessed a remarkable level of engagement from both South Korean and German representatives, with officials making high-profile visits to Canada to advocate for their respective bids. South Korea, eager to assert itself as a formidable player in the global defence market, has even sent a submarine to Canadian shores to demonstrate its capabilities.
Germany has highlighted its longstanding ties with Canada, reinforced through NATO collaboration, and has positioned its bid as a joint effort with Norway, aiming to create a robust and modern submarine fleet among three NATO allies.
Interestingly, this procurement cycle is unique in that there is no involvement from a U.S. defence contractor, as Canada has explicitly ruled out nuclear submarines and the U.S. no longer manufactures conventional diesel-electric models. This absence may allow Ottawa greater freedom in its decision-making process, free from the pressures typically exerted by its most powerful ally.
Why it Matters
The outcome of this submarine contract decision will not only redefine Canada’s naval capabilities but could also mark a turning point in defence procurement, as it would be the first occasion that Canada has procured a major military asset from a non-Western supplier. For South Korea, winning this contract would not only enhance its standing in the global defence market but also represent a significant step towards achieving its goal of becoming the fourth-largest defence industry worldwide. As this saga unfolds, the implications for Canadian defence policy, economic strategy, and international relations will be profound and long-lasting.
