Thailand’s troubled Chinese submarine deal seems to be edging away from the brink of collapse, with the Thai government signaling that it is willing to accept a Chinese-made substitute for the German engine specified in the original contract.
Adm. Choengchai Chomchoengpaet, the commander of the Royal Thai Navy (RTN), said Tuesday that the Thai government will accept the alternative propulsion system, provided that it is safe and that China compensates Thailand for the delay in the delivery of the boat.
“We have three conditions to consider – the engine must be safe. Second, the Chinese navy must guarantee this engine for the Thai navy. And third, there must be compensation for the delay due to the engine change,” he said at an event in Chonburi province, according to a report by BenarNews. “These are the important conditions in a decision on whether the contract would go on or be cancelled.”
In 2017, Thailand agreed to pay 13.5 billion baht (currently around $395 million) for the procurement of an S26T Yuan-class submarine from the state-owned China Shipbuilding & Offshore International Co (CSOC), with delivery initially expected this year. But the deal has been held up since Germany’s Motor and Turbine Union company announced that it could not supply its cutting-edge MTU396 diesel engines to CSOC for installation in the Thai submarine due to a European Union arms embargo on China. As a result, construction on the submarine has been suspended since early 2022, and Choengchai said that it will take more than three years to finish the submarine if and when the question of its propulsion system is settled.
Initially, Thailand rebuffed CSOC’s offer to install a Chinese-made CHD620 engine in the submarine, insisting that it fulfill the original terms of the contract. Back in November, the Thai government stated that it was ready to pull out of the deal if the conditions of the procurement could not be met.
However, recognizing that the only other viable option is probably the cancelation of the agreement, it has demonstrated its willingness to reach a compromise – an outcome that Choengchai’s remarks suggest is now likely.
As I noted late last year, there are good reasons for the two nations to reach a face-saving resolution to the dispute. For one thing, the agreement is an important part of Beijing’s drive to build up security relations with Bangkok, giving it a strong incentive to deliver a quality engine to the RTN.
The deal is also important for Thailand, despite the various controversies that have attached to it. During the COVID-19 pandemic, the agreement was widely criticized as an unnecessary extravagance, and the government was eventually forced to postpone its planned purchase of two more Yuan-class boats, for 22.5 billion baht ($659 million).
There is also the rather important question of whether Thailand even needs a submarine capability, given its relatively shallow littoral waters and the constraints imposed by Thailand’s geography. However little sense it makes from a military or financial point of view, the RTN has invested a lot of its prestige in the acquisition of the submarine and will probably be loathe to abandon it.
Given the costs of canceling the procurement, which would likely come with some wider fall-out for China-Thailand relations, it would not be surprising to see an agreement finalized in the coming months.