Thailand’s government has again stated that it is prepared to pull out of a controversial Chinese submarine deal if the conditions of the procurement cannot be met. In 2017, Thailand agreed to pay 13.5 billion baht (currently around $373.9 million) for the procurement of an S26T Yuan-class submarine from the state-owned China Shipbuilding & Offshore International Co (CSOC), with delivery expected in 2023.
But earlier this year, construction on the submarine ground to a halt when Germany’s Motor and Turbine Union company said that it would not supply its cutting-edge MTU396 diesel engines to CSOC for installation in the Thai submarine. The German company said it was barred from making the sale due to a European Union government embargo on the sale of military items to China, imposed in the aftermath of the 1989 Tiananmen Square massacres.
In response, CSOS has offered to install a Chinese-made engine in the submarine or to offer Thailand two decommissioned boats from the People’s Liberation Army Navy.
At first, the Thai government refused, insisting that the German engines be installed as per the letter of the contract. Prime Minister Prayut Chan-o-cha even raised the possibility that the deal could face the axe. “What do we do with a submarine with no engines? Why should we purchase it?” he told reporters in March.
But perhaps realizing that it faces a choice between canceling the procurement, with potential fallout for its broader relationship with China, and coming to some sort of compromise, the Thai government appears to have softened its demand. According to a report yesterday in the Bangkok Post, Adm Choengchai Chomchoengpaet, the commander-in-chief of the Royal Thai Navy told reporters that the Thai navy now wants the Chinese navy to guarantee the Chinese-made CHD620 engine that CSOC has proposed using in lieu of the German propulsion system.
“There is a delay in clarification about the engine,” he said. “The first-stage test of the engine was completed. The second stage concerns spare parts. He said the navy will discuss the submarine procurement project with CSOC early next month, during which Thai officials will ask for a clear timeframe for the boat’s construction.
When asked whether the navy could terminate the procurement project if its conditions were turned down, the Post reported that Choengchai said, “Yes. At this stage, it can be terminated anytime.”
As I noted in March, it is difficult to understand why neither side anticipated the possible complications in procuring a German propulsion system, given that the EU embargo has been in place for more than three decades. In a letter to the Bangkok Post published in February, Germany’s defense attaché to Thailand, Philipp Doert, wrote that the Chinese government “did not ask/coordinate with Germany before signing the Thai-China contract, offering German MTU engines as part of their product.”
Observers have long questioned the wisdom or necessity of Thailand acquiring submarines, a goal of the RTN since the 1960s, and the specific Chinese deal was criticized as a costly extravagance during the COVID-19 pandemic, when many Thais were struggling to get by. Indeed, the pandemic forced the government to postpone its planned purchase of two more Yuan-class subs, at a cost of 22.5 billion baht ($621 million).
Whether the growing frustration on the Thai side results in the cancellation of the submarine contract remains to be seen. Any decision to back out of the project would have to be weighed against the possible impacts on relations with China, and the additional cost of procuring equivalent submarines from elsewhere. As such, the two sides will likely reach some sort of face-saving compromise that allows the RTN finally to achieve its dream of obtaining a submarine fleet – albeit a fleet of just one boat.