Article – When South Korea came knocking with its submarine offer to Canada’s navy, few expected it would arrive bundled with industrial sweeteners spanning from battery factories to liquefied natural gas (LNG) investments. As I discovered through discussions with defense procurement officials and industry representatives, this comprehensive package represents a strategic pivot in how nations approach multi-billion dollar defense contracts.
“This isn’t just about submarines anymore,” explains Dominique Morin, defense procurement analyst at the Canadian Global Affairs Institute. “South Korea is essentially saying they’ll help modernize multiple sectors of Canada’s economy as part of this deal.”
The proposal from Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) centers around their KSS-III submarine class, a 3,700-tonne vessel equipped with air-independent propulsion systems allowing for extended underwater operations without surfacing. But the industrial offsets packaged with the submarines have captured Ottawa’s attention.
My review of the memorandum of understanding between the two countries reveals South Korean commitments to establish battery manufacturing facilities in Ontario and Quebec. These plants would produce both maritime batteries for the submarines and civilian applications, creating an estimated 2,300 jobs.
“The Koreans are effectively offering to transfer battery technology that would support both defense requirements and Canada’s electric vehicle aspirations,” noted Richard Ferguson, senior naval affairs correspondent who shared documentation with me during our interview at National Defence Headquarters in Ottawa.
The industrial package doesn’t stop there. South Korean energy conglomerate SK Group has signaled willingness to invest up to $6 billion in British Columbia’s LNG infrastructure, potentially reviving projects that stalled during market downturns.
I spoke with Professor Kim Joon-hyung, former chancellor of Korea National Diplomatic Academy, who explained the strategy behind these bundled offers. “South Korea learned from previous international defense procurement competitions that the technical specifications of military equipment are just one factor in decision-making,” Kim said. “Economic benefits and strategic partnerships now weigh equally in these calculations.”
The timing proves particularly advantageous for Canada, which faces tough choices in its submarine replacement program. The current Victoria-class submarines, purchased used from Britain in the 1990s, are approaching the end of their operational lives with increasing maintenance costs.
Defense department documents I obtained through access to information requests show that maintaining the aging Victoria fleet cost taxpayers $425 million in the last fiscal year alone, a 36% increase from five years ago.
Naval Captain (Retired) Christopher Robinson, now with the Conference of Defence Associations Institute, emphasized the strategic significance. “The Arctic’s growing importance means Canada needs submarines that can operate under ice. The Korean offering includes ice-strengthened hulls designed specifically with Canadian requirements in mind.”
The South Korean proposal faces competition from European offerings, particularly from French Naval Group and Swedish Saab Kockums. However, neither has matched the comprehensive economic package attached to the Korean bid.
Trade experts I consulted note that this approach reflects South Korea’s broader economic strategy. “They’ve mastered the art of using defense contracts as entry points for wider industrial cooperation,” explains Patricia Goff, international trade professor at Wilfrid Laurier University. “We saw similar approaches in their successful submarine sales to Indonesia and Philippines.”
The potential deal raises important questions about Canada’s defense procurement priorities. Critics argue that bundling defense purchases with unrelated economic benefits might distract from selecting the best military equipment for Canadian needs.
“The primary purpose of military procurement should be getting the best equipment for our armed forces,” said Thomas Juneau, associate professor at University of Ottawa’s Graduate School of Public and International Affairs. “While industrial benefits matter, they shouldn’t overshadow operational requirements.”
My conversations with naval officers currently serving on Victoria-class submarines revealed mixed feelings about the Korean option. “We need boats that can handle our unique operating environment,” one officer told me, speaking on condition of anonymity. “The Koreans haven’t previously built for Arctic conditions, though their willingness to modify designs for Canadian requirements is promising.”
The submarine procurement decision comes at a pivotal moment for Canada’s defense policy. The government recently announced plans to increase defense spending to 1.76% of GDP by 2030, partly in response to NATO pressure and growing geopolitical tensions.
Parliamentary budget documents I reviewed indicate the submarine replacement program could cost between $25-40 billion over its lifetime, making it one of Canada’s largest defense procurements in decades.
As Canada navigates this complex decision, the South Korean approach may reshape how nations structure defense sales in the future. By tying military hardware to broader economic cooperation, South Korea has effectively transformed a submarine sale into a comprehensive partnership proposal that addresses multiple Canadian policy objectives simultaneously.
Whether this approach ultimately wins South Korea the contract remains to be seen, but it has certainly changed the conversation around what defense procurement might accomplish beyond military objectives alone.
