A Foreign Builder for Netherlands Submarines Is Not Such a Bad Idea

commentary

Mar 15, 2024

Dutch submarine HNLMS <em>Walrus</em> in Groton, Connecticut, October 15, 2008, photo by John Narewski/U.S. Navy

Dutch submarine HNLMS Walrus in Groton, Connecticut, October 15, 2008

Photo by John Narewski/U.S. Navy

Last week, media carried the news that French state-owned company Naval will be commissioned by the outgoing cabinet to replace the Royal Navy's Walrus submarines. These submarines are of great strategic importance to the Netherlands and NATO, as they are ideally suited for covert operations in relatively shallow enemy territory.

Building a submarine is among the most complex engineering programmes in existence: a safe, hermetically sealed living space, heavily armed and packed with the most advanced electronics and sensor packages.

Design and construction programmes for submarines are therefore characterised internationally by high barriers to entry, significant costs, and long lead times. They depend on highly skilled technical personnel. On the other hand, the sector makes a significant technological and economic contribution and related industries benefit.

Design and construction programmes for submarines are characterised internationally by high barriers to entry, significant costs, and long lead times.

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The Naval Group would be favoured by the Ministry of Defence because it submitted the most competitive bid. But several MPs, such as parliamentary group chairman Chris Stoffer (SGP) and Zeeland Provincial Council, would have preferred to see the contract go to the Swedish-Dutch combination Damen-Saab so that Dutch industry could benefit. Moreover, critics said the Netherlands would become too strategically dependent on foreign countries over a period of three decades if it went into business with a French yard.

It is indeed important for the Netherlands at the current juncture to protect and promote its own defence industry. But even when a foreign shipyard is awarded the contract, there are safeguards to ensure that the Netherlands benefits.

That it is possible to collaborate with foreign consortia while promoting national industry was recently demonstrated in Australia. There, it was announced that the country will partner with the United States and the United Kingdom to commission a nuclear-powered attack submarine (AUKUS). For Australia, it is especially important to secure its maritime backyard and contribute to regional stability. But in addition, strategic autonomy also plays a role, or in the words of the Australian Ministry of Defence's press release, the ability to “build a future for Australia by Australians.”

A decision like this does not happen overnight. The ministry assessed the designs' technical specifications, procurement and maintenance costs, delivery schedule, and the extent to which they strengthen the Netherlands Defence Technological and Industrial Base (NLDTIB). In line with the Defence Industry Strategy, the Ministries of Defence and Economic Affairs seek a balance between fair competition and strengthening the Netherlands' societal resilience and strategic autonomy. Selecting a foreign bidder in doing so is not necessarily a problem, nor is selecting a Dutch bidder a guarantee of success.

Navigating between best buy and national security is not unique to the Netherlands. In a study carried out by RAND Europe for the UK National Audit Office in 2021, we found that the specialist nature of the work in particular combined with the presence of only a limited number of commercial suppliers makes defence equipment procurement a persistent challenge.

Submarine industries prove easy to pause and notoriously difficult to restart.

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We would therefore like to pass on the lessons that both the United States and the United Kingdom have repeatedly learned in their attempts to sustain their own submarine industries. These industries prove easy to pause and notoriously difficult to restart. Had State Secretary Van der Maat decided to prioritise a Dutch submarine industry, it remains to be seen whether this would have been accompanied by sufficient future demand. After all, this is needed to maintain technical skills and supply chains.

So there is more at play under the surface than just delivering the best boat. Although The Hague is at the helm, the cabinet is definitely looking across the border when making this decision. After all, the European Union is leaning towards a common defence industry and even published its first defence industrial strategy this month. Whether through EU institutions like the European Defence Agency, through NATO, or through multilateral partnerships like OCCAR, the Netherlands has options. There is a growing awareness of the benefits of working together to defend against international threats.

Thus, economic and strategic considerations do play a role in the decision to replace the Walruses, in addition to technical specifications and costs. The cabinet will have to be transparent about the balancing of these interests. But even if the submarines are built in a French shipyard, the Dutch can rest assured that it will have to do its bit to strengthen the Dutch industrial base.


Hans Pung is the president of RAND Europe and Stuart Dee is a research leader in defence and security at RAND Europe.

A version of this commentary originally appeared on nrc.nl on March 14, 2024.

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