Thailand’ Chinese submarine deal struggling to stay afloat
Political uncertainty and the current economic slowdown could be factors in further delaying Thailand’s acquisition of the controversial Chinese-made S26T Yuan class submarine, as the Srettha Thavisin government was unlikely to take any risks in decision-making, sources close to the matter revealed.
Although the latest round of meetings with Chinese counterparts in mid-May likely made progress towards reaching an agreement to continue the project, Defense Minister Sutin Klungsang told local media that he needed another one or two months to finalize the deal.
The project is not only about purchasing a warship, but the government also needs to consider the Navy’s strategic needs, national interest, relations with China as well as legal technicalities, he said.
As the deal was yet to be concluded, the Navy did not propose a budget for the submarine project for fiscal year 2025. The budget bill would be considered by the House of Representatives in June, a source said.
The Navy finds itself stranded as it also cannot forward its proposal to seek a 17-billion-baht budget for a 4,000-ton frigate in the coming fiscal year, he said. The frigate proposal was rejected by the House of Representatives budget committee last year due to funding constraints.
It would be more difficult to propose a budget for both submarine and frigate in the 2026 fiscal year, according to the source.
With the ongoing political uncertainty, nobody could guarantee that this government would last for that long, he said.
Prime Minister Srettha’s political future hangs in the balance as the Constitutional Court has decided to accept a petition that the appointment of Pichit Chuenban as a minister attached to the Prime Minister’s Office was unethical and unconstitutional. The court verdict could end his government if he is found guilty.
Furthermore, Thailand’s sluggish economic growth makes it difficult to accommodate a huge budget burden for military hardware procurement.
The Thai economy has expanded only 1.5 per cent in the first quarter of this year compared to the same period of last year, according to the National Economic and Social Development Board.
No other option
The 13.9-billion-baht submarine project faced a significant setback when the vessel builder, China Shipbuilding & Offshore International Co Ltd (CSOC), failed to procure a German MTU 396 engine for the submarine as stipulated in the contract.
Since taking office last year, the Thai government has explored several solutions, including a swap for a frigate, termination of the contract with compensation, and going ahead with a Chinese-made CHD 620 engine.
In early February, Defense Minister Sutin set up a task force chaired by his advisor, Somsak Roongsita, to brainstorm with all stakeholders, including senior naval officials, experts, and politicians from both the government and the opposition.
The task force failed to reach a conclusion due to differing views among the panelists, according to a panel member.
The Navy insisted on going ahead with the project with a Chinese engine, supplemented by additional measures, while the government favored swapping the submarine for a frigate.
The opposition suggested terminating the contract with compensation from the submarine manufacturer and proposed new procurement from other suppliers if the Navy needed the submarine as a security strategy.
The panel’s chairman, Somsak, reported all options to Sutin without any specific recommendations, the panelist said on condition of anonymity.
Pushing the sub down the throat
Terminating the contract signed by the Navy and the CSOC in May 2017 was not an option as the Thai side had already accepted a “force majeure’ clause if the Chinese side failed to obtain the German MTU 396 engine, a source close to the issue said, “meaning the Navy relinquished its rights to scrap the contract”.
Swapping the submarine for a frigate as suggested earlier by Srettha would create complicated legal issues as the subject of the contract would require a change, and the Chinese would not be bound to fully return the payment the Navy had made earlier, the source said.
“In other words, unless Thailand accepts the submarine with a Chinese engine, we would never get back the billion baht payment made by the Navy towards the submarine,” he said.
The latest meeting between Somsak and the Chinese delegation headed by Shi Xionning, a deputy director of China’s Bureau of Military Equipment and Technical Cooperation on May 14-15, agreed to accept the Chinese CHD 620 engine plus a compensation of 200 million baht.
The Chinese also offered free training simulators, a discount worth 128 million baht, and training courses worth 70 million baht to the Navy.
The agreement, which still needed official endorsement from the Thai Cabinet and the Chinese Central Military Committee, would require an amendment to the 2017 principal contract and another 1,200-day extension.
Opposition MP Wiroj Lakkhanaadisorn, the House of Representatives chairman of the Military Affairs Committee, said the government had struck a bad deal with China as the 200-million-baht compensation would be too little for the loss and delay.
The compensation should be at least a billion baht as the Navy has already paid nearly 8 billion baht in installments, and the project would be delayed for more than three years, he said in his Facebook post.
A risky proposition
During a meeting with Somsak in the middle of May, the Chinese delegation assured that the CHD 620 engine was certified by certification societies including its own National Military Standard.
China claimed that the CHD 620 electric-powered diesel engines had been used on surface warships of the People’s Liberation Army Navy and a Pakistani O93B submarine.
The Chinese engine has passed a Lloyds laboratory test, but the Thai Navy has not yet seen the real operation of this type of engine in a submarine, according to Wiroj.
Its actual hours of operation were also too short to prove its capabilities, as the Pakistani navy had launched its first submarine with the Chinese engine only in late April this year, he said.
“The German MTU 396 engine, on the contrary, has been operated for more than 310,000 hours in submarines around the world,” he said.
“What would happen if the Chinese engine malfunctioned during an operation in the deep sea like it once did with a Ming Class submarine in 2003? We should not put our naval officers at risk by using such unproven technology,” Wiroj said.
Submarine manufacturer CSOC had allowed representatives of the Thai navy to observe the engine test once in China years ago, but rejected a second request to have Thai experts try the engineering test. The reply to the request was rude and unacceptable, calling it a “waste of time” to conduct another engineering test, according to a source who saw correspondence between the Navy and the CSOC.
Thailand’s Chinese submarine deal struggling to stay afloat - Thai PBS World
