The spotlight on Thailand’s submarine deal with China is also linked to the altered geopolitical environment after the Russian invasion of Ukraine with heightened sensitivity in the West, in particular in Germany, concerning the supply of critical engineering products to an expanding Chinese military. Officials with the Royal Thai Navy and representatives of the Chinese state-owned shipbuilding firm involved in the contract are to meet later in April with its potential cancellation threatening a severe blow to Thailand’s shift to China as a defence equipment supplier after the 2006 and 2014 coups in what is now a radically altered world.

The construction of Thailand’s S26T Yuan-class submarine has been halted after authorities in Berlin moved last month to prohibit the supply of German manufactured MTU engines for the project. This is linked to a 1989 embargo imposed by the European Union on China after the 1989 Tiananmen Square massacre which saw an uprising against communist rule in China bloodily suppressed by the military that year. On Monday, the Thai PM admitted that the failure of the Chinese contractors to supply the highly valued engines to the vessel could mean that the contract will be terminated, a development that, contrary to official assurances, will raise a question mark over Thailand’s relationship with China when it comes to the supply of military equipment and resources. The ongoing political controversy over the proposed military vessels in Thailand, linked with virulent political opposition and street protests since the deal was first unveiled in 2015, has also led to concern and increased scrutiny of western firms such as Rolls Royce whose German subsidiary firm confirmed this week that it was involved in the supply engineering products to China ostensibly for civilian use but which are being deployed by the communist regime in its rapid military build-up in contravention of sanctions imposed after the 1989 Tiananmen Square massacre of pro-democracy protesters on June 4th 1989.

On Monday for the first time, Thai Prime Minister Prayut Chan ocha suggested the possibility that the contract to supply the ฿13.5 billion S26T Yuan-class submarine to the Royal Thai Navy signed with a Chinese state-owned shipbuilding firm may have to be cancelled if the submarine cannot be supplied with the specified German MTU engines. These have been blocked by the German government on foot if European Union sanctions which were imposed after the Tiananmen Square massacre on the 4th of June 1989. It comes at a time of a sharpening examination of military procurement activities by Beijing. The submarine deal with China, since its unveiling in 2015, has generated massive public outcry in the kingdom and media coverage which may have contributed to a renewed focus on the supply of military hardware to China, up to now, classified as dual-purpose but which has been used to equip the Chinese Navy with superior western manufactured engines.

In the last week, the Royal Thai Navy has emphasised that the deal to procure the Chinese submarine remains in place with an expected delivery of the vessel sometime in 2023.

On Monday, however, Prime Minister Prayut Chan ocha told reporters that the purchase of the vessel may be cancelled if China cannot provide the German engines that were originally specified.

It came as General Prayut was questioned by reporters intensely on the current situation: ‘What do we do with a submarine with no engines? Why should we purchase it? If the agreement can’t be fulfilled, we have to figure out what to do. Isn’t that how we solve a problem?’

PM and Defence Minister suggests for the first time that the Chinese submarine contract may be scotched

The PM who is also Thailand’s defence minister since 2019, said he had given orders to those involved in the procurement of the submarine at the navy to bring the deal to a conclusion but clearly stated that a failure to supply the submarine as specified could see the contract rescinded.

He underlined however that such a development would not undermine the relationship between Thailand’s government and Beijing.

In July last year, Lieutenant General Koncheep Tantravanich, who also works closely with Deputy Prime Minister Prawit Wongsuwan, who was defence minister when the deal was first floated, told the press that the procurement deal for the Chinese submarines was part of an intergovernmental agreement between Thailand and China which did not involve third parties.

Talks with Chinese defence agencies to continue

At the time, Lieutenant General Koncheep said similar arrangements were also in place with the air force.

Standoff between the Royal Thai Navy and Chinese state-owned shipbuilding firm over German engines

This is despite the standoff between the Royal Thai Navy and Chinese state-owned China Shipbuilding and Offshore International Co (CSOC) over the inability of China to procure German-made MTU396 diesel engines for the S26T Yuan-class submarine ordered by the Thai Royal Thai Navy in 2017 and which has seen the production of the vessel in China halted since February.

This followed an intervention by German authorities who slapped a ban on the engine order as it contravenes an arms embargo imposed on China following the 1989 massacre in Tiananmen Square.

British ambassador to China in 1989 in a cable to London after the event, citing a senior Chinese source, said at least 10,000 people had been killed 

Nearly thirty-three years ago, the Chinese military moved in to quell a major protest against communist rule in the country which had run from April 1989 until the protest was suppressed on June 4th that year when tanks and infantry armed with assault rifles overran the protesters.

This followed an earlier declaration of martial law.

Reporting on the event has long been prohibited in China with its history wiped from the media.

At the time, the Chinese government estimated the death toll from the military operation to be in the hundreds but it was believed the true figure for those who perished lay in the thousands.

In 2017, a secret diplomatic cable sent from Beijing to London by the then UK ambassador to China, Sir Alan Donald, quoted a figure for those killed of at least 10,000 people.

The ambassador cited a friend of his on the Chinese State Council as the source for this report.

German defence attaché, writing to the Bangkok Post, made clear the MTU submarine engines were being embargoed pursuant to European Union sanctions

In February, the German defence attaché in Thailand, Mr Philipp Doert, confirmed the restriction placed on the supply of the engines in an open letter to the Bangkok Post newspaper: ‘The export was refused because of its use for a Chinese military/defence industry item. China did not ask/coordinate with Germany before signing the Thai-China contract, offering German MTU engines as part of their product.’

Indeed, the controversy over the supply of the S26T Yuan-class submarines to Thailand, with an order for a further two vessels stalled by Thai budget constraints because of the COVID-19 crisis, has prompted an examination of the role of Rolls Royce Power Systems which in 2011 took over the famous MTU (Motoren- und Turbinen-Union) manufacturer which has supplied aircraft, marine and military vehicle engines to military and civilian customers since 1909 including Germany’s heavy and medium weight tanks in World War Two.

Rolls Royce owned firm has supplied hundreds of engines to the Chinese navy between 1993 and 2020

This has seen further scrutiny of the firm, based in Friedrichshafen, Germany, and its engagement with the Chinese military at a time of rising international tensions and a strain in relations between Thailand’s increasingly assertive northern neighbour and western countries.

The Stockholm International Peace Research Institute which monitors arms sales and transactions worldwide estimates that hundreds of MTU engines have been supplied to power Chinese naval vessels including destroyers and submarines between 1993 to 2020.

Media coverage of the submarine controversy in Thailand has torpedoed the supply of MTU engines

According to the Head of Asia-Pacific News at Janes, the respected defence intelligence service and publication, Jon Grevatt, the political controversy generated in Thailand over submarines from China and the resultant media coverage has torpedoed the deal at least as regards the MTU engines.

The experienced news journalist and analyst, based in Bangkok, was speaking to Voice of America last week: ‘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,’ Mr Grevatt said. ‘You can’t deny that that system is a defence system.’

Not as easy as changing the engine of a car

Mr Gravatt predicted that Thailand is now left with the choice of either overcoming the sanctions to ensure the supply of the MTU engines for the project or China finding a source for suitable engines to fulfil the contract with the kingdom’s navy to its satisfaction.

‘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,’ he said.

Chinese Foreign Ministry calls on European officials to make the ‘correct’ decision on the 1989 embargo

In response to the controversy over the MTU engines for China, which has shone a spotlight on the earlier European Union embargo, the Chinese Foreign Ministry in Beijing has told the Wall Street Journal that the ban was ‘inconsistent’ with the current international order and called on the European Union to reverse the measure describing it as the ‘correct’ decision in the circumstances.

Earlier this week, Rolls Royce Power Systems in response to Voice of America (VOA) by email issued a statement confirming that they had supplied MTU engines to Chinese shipyards under a widely used exemption allowed by German authorities concerning the arms embargo applied by the European Union in 1989 following the Tiananmen Square massacre.

Statement for Rolls Royce says its engines supplied to China’s military were not controlled as they were ‘dual-use goods’ and claimed official approval

‘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,’ the statement said.

This situation is bound to come under further review and scrutiny in the light of shifting and more urgent dynamics following the Russian invasion of Ukraine and Russia’s close relationship with China.

Expanding Chinese navy seen by US Naval Intelligence officers as a threat to peace and stability in Asia

It comes as China has rapidly expanded its navy in the last two decades rising from a fleet that primarily consisted of coastal defence vessels in 2001 to 355 warships according to the latest report from the US Department of Defence.

This includes two aircraft carriers although it has already embarked on a major new carrier programme which will see larger and more advanced vessels entering the service.

Risk of military conflict between US and China over Taiwan is ‘very high’ says former US Intel officer

The situation has alarmed US naval intelligence officers with some warning of a likely prospect of war with China over Taiwan or its expansionist claims concerning the South China Sea as well as belligerent rhetoric and actions towards Taiwan.

Royal Thai Navy is still insisting on the Yuan class submarine with MTU engines as contracted for

There is scepticism that a replacement engine supplier can be found for the submarine now in production with the Royal Thai Navy insisting, as of now, that the Chinese firm honours its contract to supply the submarine as specified with the renowned German engines.

On Saturday last, the commander of the navy, Admiral Somprasong Nilsamai was adamant that no change to the deal as agreed can be accepted.

The navy argues that it requires submarines to defend the kingdom’s maritime borders and natural resources estimated to be worth trillions of baht.

The service last used Matchanu class Japanese submarines supplied by Mitsubishi Heavy Industries in 1938 which saw active service during the Franco Thai War from October 1940 to January 1941 and throughout World War Two which saw Thailand invaded by Japan in December 1941.

It then allied with the Japanese empire as it overran Southeast Asia before its defeat by Allied forces in September 1945.

These submarines were decommissioned by the service in 1951.

Chinese offer to supply 2 decommissioned Song class submarines or locally manufactured engines instead

This comes amid reports that, in February, the Chinese firm offered the Thai navy two decommissioned Song class Chinese submarines instead.

An alternative offer was to replace the MTU engines with the Chinese equivalent MWM620 engines which China claims meet the same specifications.

However, this has not satisfied the Thai side who, apparently, still believe that Chinese made engines do not meet the highest standards achieved in Germany and the United States when it comes to power propulsion and reliability.

In recent days, Vice Admiral Pokkrong Monthatphalin, a spokesman for the Royal Thai Navy said that its representatives would be meeting the China Shipbuilding and Offshore International Co (CSOC) later in April to see if a solution can be found but emphasised that the navy would be adhering to the terms of the original agreement.

Price of S26T Yuan-class submarine was ฿13.5 billion or $402 million. First instalment of ฿700 million made in 2017. ฿22.5 billion for 2 more stalled

The contract for the submarine under construction was signed between the Royal Thai Navy and the Chinese firm in May 2017 after being confirmed a month earlier by the Thai cabinet, a move that met with a furious outcry from political opponents of the then junta government led by General Prayut. 

The defence minister, at that time, was Deputy Prime Minister Prawit Wongsuwan who is currently the leader of the governing Palang Pracharat Party.

The original proposal to purchase the submarine package from China was unveiled in 2015 by the junta government whose relationship with the United States had become strained because of arms embargoes and sanctions imposed on Thailand following military coups in 2006 and 2014.

A first instalment on the submarine of ฿700 million was made in 2017 with a purchase price of $402 million or ฿13.5 billion but this was later followed up by an expanded contract for three submarines with a total package price of ฿36 billion.

However, the contract for the further two submarines priced at ฿22.5 billion has been stalled with increasing political opposition to the purchase.

Vocal public fury in Thailand over the submarines

Public outcry over the submarines was a central complaint on the streets in 2020 when Bangkok saw violent street protests.

However, the key consideration for postponing the deal was a budgetary one with resources being needed from March 2020 to tackle higher medical costs and provide much-needed income support due to the pandemic.

An expert in international affairs and the Thai military at Naresuan University in northern Thailand, Paul Chambers, sees the potential failure of this deal as significant given the shift in Thailand’s preference over the last few decades towards China for arms and military equipment.

Cancelled submarine contract will damage Thailand’s relationship with China and already raises doubts

He points out that China had replaced the United States in this role since the military coups in 2006 and 2004.

‘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,’ Mr Chambers explained. ‘This incident, however, represents a definite glitch in the two countries’ ties.’

It is now thought that if the deal is torpedoed because of the failure to deliver the German engines, it will cause Thailand’s top brass to have a serious rethink, especially in the radically altered geopolitical world since the outbreak of hostilities in Ukraine when Russia invaded the smaller nation on the 24th of February last.

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