Canada chooses German-Norwegian partnership to supply new submarines

In Halifax, Carney said the government will now begin discussions with TKMS to buy “up to 12” 212CD submarines but refused to disclose the exact cost, citing the need to maintain leverage in the coming negotiations. 

The decision was “difficult,” Carney said, adding that Canada remains committed to its strategy to deepen relations in the Indo-Pacific, and will buy Hanwha subs if negotiations don’t work out with TKMS. 

But through the German company, Carney said Canada expects to buy a “best-in-class” submarine. He said TKMS has sweetened the deal by shifting production for the German and Norwegian navies so that Canada can get its first four submarines earlier than expected, by 2034. 

“Fully 100 per cent” of what Canada spends to buy the subs must also be matched by TKMS investments in “every region of the country,” Carney said, boosting defence sectors from space technology to munitions production and critical minerals. The prime minister said the spending is already accounted for in the long-term “fiscal framework.”

“This means Canada will receive tens of billions of dollars in investment” from TKMS, Carney said, promising this will create “well over” 100,000 jobs.

With TKMS promising the purchase will create $167 billion in activity for the Canadian economy over the coming decades, the new submarine fleet comes as a huge rearmament drive is underway to boost defence budgets to levels not seen since the Cold War, along with a federal plan to use hundreds of billions of dollars in spending to juice the economy and significantly expand the country’s war industries. 

At the German embassy in Ottawa, TKMS officials and the ambassadors from Germany and Norway hailed the agreement and pledged to show they deserve Canada’s trust in a new industrial and military partnership that could last decades. 

Oliver Burkhard, the chief executive officer of TKMS, said they are striving to clinch the final deal with Canada by the end of the year. He also cited examples of economic development from the deal inside Canada, including production of sub components by companies like Quebec-based Marmen, and opportunities to produce maritime simulators and other technology. 

“We won the confidence of Canada, but our job now is to deserve it, and show this every single day from now on,” he said. 

The German ambassador, Tjorven Bellman, also confirmed her country is willing to accept submarines later from TKMS so that Canada can join the partnership and get its boats earlier.

“Together we will build the biggest and most modern conventional submarine fleet … We will produce, maintain, train and operate together,” said Bellman. 

The contest to sell the subs lasted several months, pitting a defence giant from Asia against a European firm as the Canadian government’s new Defence Investment Agency stressed the importance of domestic economic benefits in a choice between two submarines — both of which, the navy concluded, met all of the military’s operational requirements, including the ability to travel under the Arctic sea ice. 

Anticipating the scale of the contract could move markets, some officials involved in negotiations were required to comply with confidentiality agreements in an effort to keep the decision secret, the Star confirmed Monday. 

Mark Norman, a retired top-ranking Royal Canadian Navy officer, said the purchase was a “generational shift” that will give the country a fleet of submarines that finally matches the capabilities of its personnel. 

“Our bench strength will grow, and it will grow significantly,” said Norman, describing how a fleet of 12 submarines will allow Canada to have three or four that are combat-ready at all times, with a presence in the Pacific, Atlantic and Arctic oceans as well as potentially elsewhere in the world at the same time. 

That’s compared with Canada’s current capacity to often have one of four submarines ready for operations at a given time, he said.

Thomas Klassen, a professor of public policy at York University, said the deal could easily be worth up to $100 billion over the coming decades, creating an enduring naval-industrial partnership that would last well into the 21st century. To go with submarines built by NATO partners makes sense, Klassen said. Under Carney, Canada has drawn closer to Europe, including by joining the European Union’s defence industrial push and giving Canadian firms access to military contracts on the continent. 

“The prime minister had to make a call, whether to go to Asia and expand our presence there … or stay with Europe, where we’ve been working closely for a long time,” Klassen said. 

“Canada decided to go with what was safer.”

The South Korean bid to sell Hanwha’s KSS-III submarine came with a prominent publicity push that included pledges to bolster priority economic sectors hit by U.S. President Donald Trump’s trade tariffs. Hanwha inked an accord, which was conditional on Canada choosing its subs, to build heavy military vehicles in Canada with Canadian steel and aluminum. The company also offered to spend up to $345 million to buy steel and finance a new facility with Algoma Steel in Sault Ste. Marie, Ont. 

A Hanwha-commissioned study predicted its submarine package could have brought 22,000 direct jobs to Canada, along with upwards of $60 billion in economic activity.

But TKMS won all the same, promising a partnership with NATO allies in Germany and Norway with submarines that are already in production and offer government-to-government co-operation in Arctic operations, a key theatre that Carney’s government has highlighted for deeper military presence to underscore Canadian sovereignty. 

Norman said the government’s choice likely came down to “judgment” calls on intangible factors like the importance of existing relations with NATO allies over what would have been “a new and different opportunity” with the South Korean option. 

“The government should be commended for getting us to this point in absolute, unprecedented, record-setting time,” Norman said, referring to the speed of the federal decision. 

“The winning bidder now has to make sure that they can actually deliver.”