NATO ties trump Korea in Canada's submarine bid

Canada’s Prime Minister Mark Carney announces that Canada has picked Germany’s ThyssenKrupp Marine Systems to build 12 submarines for its navy, at HMC Dockyard in Halifax, Nova Scotia, Monday. Reuters-Yonhap

Interoperability with NATO was a crucial factor in Canada's selection of shipbuilders for its submarine fleet, as a Korean consortium lost to its German-Norwegian rival in the multibillion-dollar submarine procurement project on Tuesday.

Canada’s move is largely seen as influenced by the need to reinforce its NATO ties at a time when the United States’ commitment to the alliance faces growing uncertainty, although the Korean bidder showed enough technical competitiveness to vie with the German bidder.

On Monday (local time), Canada selected Germany's ThyssenKrupp Marine Systems (TKMS) as the preferred bidder, beating a Korean consortium led by Hanwha Ocean and HD Hyundai Heavy Industries.

The Canadian Navy is seeking 12 conventional submarines to replace its aging Victoria-class fleet. Since Canada announced the project in 2024, Korean government and industry officials went all out to win the bid worth 60 trillion won ($39.1 billion).

“The determining factor was interoperability with NATO, specifically the level of cooperation that allows for integrated training, sharing of maintenance parts and even the pooling of submarine crews,” Lee Yong-cheol, minister of the Defense Acquisition Program Administration (DAPA), said during a briefing in Seoul. DAPA was in charge of the project.

He added that Korea showed no significant difference from its rival in terms of submarine performance — including its air-independent propulsion (AIP) and battery systems — and offered earlier delivery timelines and industrial offsets.

“When it comes to the delivery schedule, even considering Norway’s decision to yield its production slot, Korea was one year faster,” he said.

Another DAPA official also said Korea’s status as a non-NATO nation was one of the major hurdles in the bid.

"While our Indo-Pacific cooperation with Canada is something to be built for the future from now, the transatlantic alliance is a 70-year-old one where joint training and crew sharing are already institutionalized ... We assume Canada faced a strategic choice: whether to double down on its existing transatlantic alliance or expand its reach into the Indo-Pacific. They chose the former, a strategic decision Korea must respect.”

The Royal Canadian Navy hosts the Dosan Ahn Chang-ho, a Republic of Korea Navy KSS-III submarine, and the ROKS Daejeon frigate during a welcoming ceremony at Canadian Forces Base Esquimalt in Esquimalt, British Columbia, May 25. AP-Yonhap

Hanwha Ocean also said in a statement, "Despite dedicating our full efforts to winning the contract — backed by full government support, the outstanding performance of our submarines and the Navy’s successful operational track record — we ultimately could not overcome the barrier of the NATO alliance."

Canadian Prime Minister Mark Carney also acknowledged the country chose the German bidder as it is interoperable with NATO and optimized for Arctic missions.

"This was a difficult, close decision between two highly qualified suppliers. Both the TKMS and Hanwha platforms met the capabilities of the Royal Canadian Navy, and both put forward strong proposals to maximize benefits for Canadian workers and businesses," he said when announcing the preferred bidder in Halifax.

"In the end, this decision was about choosing the absolute best platform and partnership to meet Canada's combined strategic, security and economic interests ... The TKMS platform is optimized for Arctic waters and it's fully NATO interoperable, allowing it to communicate seamlessly to share intelligence and to carry out joint missions.”

Carney noted that he gave a courtesy call to Lee before announcing the selection of the submarine bid.

“I had a long, cordial conversation with President Lee on the weekend, a leader I hold in extremely high regard. We had a discussion obviously about this. I understand the disappointment, particularly given the strength of the bid, and these are tough decisions," he said.

The prime minister pledged further cooperation with Korea.

"There are many other areas where Canada and Korea are cooperating. There are many more where we can deepen that," he said, calling Korea "a critical strategic partner" and signaling his intent to move forward with the bilateral relationship.

A security boat patrols Halifax Harbour in Nova Scotia, Canada, Monday, as Canadian Prime Minister Mark Carney announces German shipbuilder ThyssenKrupp Marine Systems (TKMS) will build the Royal Canadian Navy's new fleet of submarines. AP-Yonhap

The Korean president expressed regret after the announcement, but highlighted that it was a chance for Korean products to showcase their excellence to the market.

"Above all, our submarines have proven their excellent performance and technology while competing head-to-head with the world's leading naval powers. Although we did not achieve the desired outcome in this Canadian submarine project, I believe we have once again clearly demonstrated our potential to the international community," the president wrote on Facebook.

DAPA highlighted that Korea will continue to expand its projects with Ottawa.

"One of our key takeaways from this experience is the need to come up with more comprehensive strategies for major defense exports that could integrate both defense and wider industrial cooperation. Beyond this naval project, we plan to continue expanding and strengthening our partnership with Canada across various sectors,” DAPA spokesperson Kim Joo-chul said.