Explainer | Thailand’s Chinese submarine deal: why is it stuck in limbo, and will it go ahead?

Prime Minister Prayuth Chan-ocha’s government has struggled to defend the US$1.05 billion deal for three Chinese submarines at a time of economic hardship

Opposition politicians have called for it to be scrapped. But observers say that is unlikely, in the interests of ‘maintaining close neighbourly relations’

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A model of a Yuan class S-26T submarine of the type Thailand ordered from China. Photo: Handout

Published: 10:30am, 5 May 2022Updated: 10:51am, 5 May 2022

China’s 13.5 billion-baht (US$392 million) deal to build a submarine for Thailand was hailed in 2017 as one of the centrepieces of Beijing’s defence export plans. But the deal has appeared increasingly in limbo in recent months because of the manufacturer’s inability to obtain German-made diesel engines as stipulated in the contract.

The reason? Germany is limiting the export of defence technology to China, citing a European Union embargo first imposed in 1989 in the aftermath of the Tiananmen Square crackdown. Certain exports from European nations have been allowed in the past, but it appears the rules are being more strictly enforced this time around.

A German official in the country’s Thai embassy said in February that Beijing had failed to coordinate with Berlin before signing the 2017 contract.

A Chinese Type 039A Yuan class submarine, of which the S26T is variant. Photo: Twitter

The first of three diesel-electric S26T submarines with German-made MTU engines that Thailand ordered from China was set to arrive in 2024. Given the snag related to the supply of engines, that delivery date is likely to be delayed.

Opposition politicians in Thailand have called for the submarine deal to be scrapped, claiming that it would be in the nation’s best interests given the EU embargo.

Prime Minister Prayuth Chan-ocha’s government, meanwhile, has struggled to defend the deal, which continues to be the subject of strident public criticism, with many questioning if such exorbitant defence expenditure was needed following the economic pain caused by the pandemic.