Thai-China Submarine Deal Runs Aground on EU Arms Embargo

China has paused construction of an attack submarine earmarked for Thailand’s navy following Germany’s refusal to export the top-end engines the plans call for, a Thai naval official confirmed.

The work stoppage could strain Thailand’s military relations with China, which has replaced the United States as Thailand’s biggest arms supplier.

The Royal Thai Navy and China’s state-owned China Shipbuilding & Offshore International Co., or CSOC, signed the $402 million deal for the Yuan-class S26T submarine in 2017, with delivery originally expected by the end of next year.

Citing an anonymous Thai navy source, though, local media reported in February that construction of what would be the country’s first submarine had stalled.

In confirming the delay and its cause, Rear Admiral Apichai Sompolgrunk, director general of the Thai navy’s acquisitions management office, told VOA that the submarine was unlikely to arrive next year.

“Right now the process of building the submarine is stuck because the engine is not concluded yet,” he said.

“Finish the [engine] process, and building will start again,” he added.

Apichai said the deal specified three MTU396 diesel engines from Germany’s Motor and Turbine Union company to run the submarine’s electric generator set.

Germany’s defense attaché to Thailand, Philipp Doert, confirmed his government’s decision to deny China the engines in an open letter to The Bangkok Post in February.

“The export was refused because of its use for a Chinese military/defense industry item,” he wrote. “China did not ask/coordinate with Germany before signing the Thai-China contract, offering German MTU engines as part of their product.”

Germany is bound by a European Union arms embargo imposed on China in 1989 after the Tiananmen Square massacre, when Chinese security forces opened fire on unarmed protesters in Beijing demanding greater political freedom. China claims that 200 civilians died in the crackdown; some independent estimates put the number of dead in the thousands.

Engine trouble

Despite the embargo, Germany and other EU countries have been supplying China’s military with engines and other equipment for decades, said Jon Grevatt, a Bangkok-based analyst covering the Asia-Pacific region for Janes defense industry publications.

Sweden’s Stockholm International Peace Research Institute, which tracks arms transfers around the globe, says MTU alone has fitted Chinese destroyers and submarines with over 100 of its engines from 1993 through 2020.

Grevatt said they do it by passing off items with the potential for both military and civilian applications, so-called dual-use items not explicitly excluded by the EU embargo, as commercial exports, even when destined for military hardware. He said China’s sale of the Yuan-class submarine to Thailand, however, made the ruse harder to pull off.

“If this submarine wasn’t being exported to Thailand, no one would know about it and therefore it would go ahead. But the fact that it is being exported, it’s in the news, is cause for the German government to say, oh, no, no, no, we’re not allowing that,” he said. “You can’t deny that that system is a defense system.”

A spokesperson for MTU, a brand of Rolls-Royce Power Systems, confirmed that the company has supplied Chinese shipyards with engines but said they were not considered dual use items.

“The engines supplied to China under the product brand mtu are not controlled as dual-use goods and are, therefore, not subject to a licensing requirement. Rolls-Royce complies with all relevant national and European export control regulations and maintains a regular dialogue with the German government on our business with China,” Christoph Ringwald told VOA by email.

He refused to comment on why Germany would block the export of MTU engines for the submarine CSOC is building for Thailand after not intervening in past exports for Chinese navy vessels.

The German embassies in Thailand did not reply to VOA’s requests for comment. The Chinese embassy did not reply either.

Reporting on the submarine deal earlier in March, The Wall Street Journal said China’s Foreign Affairs Ministry told the paper the EU embargo was “inconsistent” with the current international order and that it hoped the bloc would make the “correct” decision regarding the engines.

If Germany holds firm, Grevatt said CSOC will have a hard time replacing the MTU396.

Should CSOC manage to find another willing foreign supplier, there’s the matter of compatibility.

“If you take out one of those German engines from that submarine and say, ‘OK, let’s fit another one in there,’ it’s not like a car, you can’t just do that — it has to be integrated into the whole system; that is just not possible,” Grevatt said.

Thailand, he said, “either manages to get the [MTU] engine or sees if China can produce one on its own.”

That poses its own problem. For all the gains China’s military-industrial complex has made in recent years, Grevatt said it still cannot match the propulsion systems of the United States and Europe, and Germany especially, for power and reliability.

Deal or no deal

Apichai said CSOC has offered to build another engine for the submarine but the Thai navy was not yet convinced the proposed replacement would do the job.

“This engine is not well proven yet, so the Royal Thai Navy is still waiting for the answer from the shipyard [CSOC] to ensure that this engine is as good as the MTU,” he said.

Apichai would not confirm or deny reports that China has also offered to transfer two decommissioned submarines to Thailand as another possible alternative, but he insisted the Thai navy would accept nothing short of the Yuan-class model it ordered. He said there was also far to go before any talk of scrapping the deal altogether.

But the embarrassment of the deal’s engine troubles seems to be straining Thailand’s military relations with China already, said Paul Chambers, a lecturer and international affairs adviser at Thailand’s Naresuan University who studies the country’s armed forces.

He said the submarine is one of the most expensive purchases the Thai navy has ever made. It also underscores Thailand’s growing penchant for Chinese arms. According to SIPRI, China has been the country’s top weapons supplier over the past few years, replacing the United States.

Chambers said a series of arms embargoes the United States placed on Thailand after military-led coups in 2006 and 2014 helped drive the shift away from U.S. suppliers. But China could start to lose some of its new-found sheen should Thailand ultimately fail to get what it wants out of the submarine deal, he added.

“Such a strain will likely make Thailand take another look at other countries for weapons purchases. But China is too important to Thailand, at least economically, for the sub incident to irreparably harm Thai-Chinese relations,” Chambers said. “This incident, however, represents a definite glitch in the two countries’ ties.”