Taiwan Submarine Import and Export Behavior
For two decades, Taiwan has attempted to procure submarines from the United States and numerous European shipyards and navies, but Chinese pressure has prevented any sales since a Dutch submarine deal in the early 1980s.
Wilton Fijenoord Shipyard and Rotterdamsche Droogdok Maatschappij B.V. Submarines (RDM)
Contacts between the Wilton Fijenoord shipyard and Taiwan date back to 1981 when the Dutch company signed a contract for two Hai Lung-class (improved Zwaardvis) boats. In 1983, while these boats were under construction, the Taiwanese government expressed its interest in additional vessels. However, China threatened the Netherlands with economic and diplomatic retaliation, illustrating its resolve through a temporary cessation of diplomatic relations and the downgrading of its embassy in Amsterdam to a representative office for three years.[2,3,4]. In 1984, the Netherlands and mainland China issued a joint communiqué barring any future exports of "strategic" items to Taiwan, while China committed itself to increased imports from the Netherlands.
Nonetheless, believing that a sale of unarmed vessels would still be possible and encouraged by parliamentary support, another Dutch shipyard, RDM, engaged in negotiations on the licensed construction of Walrus-class boats in Taiwan with components to be delivered by RDM.[2,5,6] The shipyard's general optimism concerning the export of submarines was also illustrated by its 1988 agreement to partner with the Wilton Fijenoord shipyard on the construction of Hai Lung-class vessels were Taiwan to order additional vessels. While the latter company owned the design to the boats, it had ceased to built new units, leaving RDM as the only operational Dutch submarine builder.
Despite pressure exerted by local trade unions, members of parliament and Taiwan, in 1992 the Dutch government decided not to grant a license for the export of 10 submarines.[5,8]
In 1996, RDM changed owners and with it came a renewed determination to export submarines. The company acquired two decommissioned Zwaardvis-class vessels from the Dutch Navy, hoping to resell them. In the same year, a planned visit by the Chinese prime minister to the Netherlands was cancelled, reportedly in response to a potential submarine sale to Taiwan. Under pressure to find buyers for both its used Zwaardvis- and new Moray-class boats, RDM continues to be accommodating, offering to transfer blueprints and allow licensed production at U.S. yards for eventual export to Taiwan. The Dutch government has repeatedly expressed its strict adherence to a "one China" policy, excepting however, the export of any submarine related material with Taiwan as the end user.
HDW has been in negotiations concerning submarines for Taiwan since 1986, and a Letter of Intent was signed in 1987. The case was later submitted to Germany's Federal Security Council in 1993 and 1995.[13,14] It was rejected both times by the Helmut Kohl government, which was pursuing aggressive commercial diplomacy toward China at the time, increasing German foreign direct investment and putting an emphasis on the "one-China principle." Pressures by large German companies, which are interested in the Chinese market and fear retribution in the case of a submarine sale, have contributed significantly to the restrictive policy on arms exports to Taiwan.[15,16,17] Former Chancellor Gerhard Schröder pushed for the submarine sale to Taiwan when he was a state premier, but changed his position after becoming chancellor, instead continuing Kohl's pro-China approach.[13,16]
Schröder's policy may not have been entirely clear when President George W. Bush promised eight diesel-electric submarines to Taiwan in 2001 without consulting with the German government, whose submarines were favored by the Taiwanese. Similarly, when acquiring HDW, Chicago-based Bank One seems to have been counting on a more relaxed interpretation of German arms export regulations. It had no previous experience with the defense market and entered the field with the purchase of a controlling stake and later complete ownership of the German submarine maker. It was thus widely assumed that Bank One was acting in the interest of a U.S. defense company, which in turn was interested in the lucrative deal with Taiwan.[19,20]
HDW itself seems to have believed that the submarine sale would be granted a license. It formed a strategic alliance with Northrop Grumman in order to pursue the development and sale of submarines and surface vessels in new markets, such as Taiwan and Egypt. The hulls and propulsion systems were to be produced at HDW in Germany, while weapons systems and electronic parts were to have been provided and installed by Northrop Grumman in the United States. HDW appears to have believed that this would be in compliance with German export regulations.[13,14,21] The German government's eventual explicit prohibition of arms exports to Taiwan led to decreased cooperation between HDW and Northrop Grumman. The collaboration between the two companies has been reduced to the development and sale of surface vessels. Bank One's eventual sale of HDW also appears to indicate that it has given up on a sale to Taiwan.
The merger between HDW and ThyssenKrupp is likely to halt any further pursuits of the deal with Taiwan, as ThyssenKrupp has significant contracts in China.
Since exports by Germany and the Netherlands to Taiwan became increasingly unlikely over the past decade, Taiwan requested help from the United States in 1995. In 2001, President Bush expressed his commitment to help Taipei acquire eight boats. Most options that are currently being pursued thus involve the United States. It has been suggested that one way of delivering on his promise would be for U.S. shipbuilders, which have not constructed diesel-electric submarines for over four decades, to team up with European shipyards that have significant experience in non-nuclear-propelled submarines.
Northrop Grumman (NG) continues to try and collaborate with HDW, while General Dynamics (GD) is in talks with Spain's Izar. Allegedly, GD has also been looking at the Australian Submarine Corporation (ASC), which built the Collins-class boats. According to Australian Navy officers, GD had allegedly been under pressure from the U.S. Navy to purchase a 40% stake in the ASC, thus allowing for sufficient technology transfer to facilitate the domestic construction of boats for Taiwan. In 2003, both NG and GD were expected to submit draft proposals to the U.S. Department of the Navy.[26,27,28] NG, reportedly in partnership with HDW, made an offer of a modernized version of the Barbel-class submarine which would have been based on a Barbel hull form fitted with an HDW pressure hull.  However, given that China has been successful at deterring any further direct submarine exports to Taiwan, it is not apparent why any European country would change its position and grant an export license for blueprints or other similarly sensitive information to allow for an indirect sale via the United States. Not only would likely repercussions be directed at any country involved, but the benefits from the potentially lucrative Taiwanese sale would have to be shared with other companies.
Many in the Taiwanese legislature have supported the idea of domestic construction. In May 2002 Taiwan's legislature passed a resolution requiring that at least six of the vessels be built in Taiwan. The following year, in October 2003, legislators in Taipei proposed that the state-run China Shipbuilding Corporation would build one-third of the third and fourth submarines, and two-thirds of the fifth and sixth ones, building the final pair on its own. However, the Taiwanese National Security Council and legislature have also indicated their concerns over price increases, schedule delays, and problems with quality standards that could potentially result from local construction.[30,31] Such plans may also not be fully supported by the navy and the Ministry of National Defense, due to their concern that they may not receive submarines at all, since the United States promised help with the acquisition of boats and not with the capability to construct them.[32,33,34,35]
The approximate cost for eight boats has been estimated at $8.65-11.8 billion, depending on the supplier, with an additional 20 percent price increase should the China Shipbuilding Corporation (CSBC) be involved. However, Taiwanese officials at the highest levels have repeatedly expressed their continued desire to acquire submarines to deter the threats that the island faces or will likely face in the future. More importantly, they have indicated that their decisions would not be affected by external sources, and have pointed out that plans already call for the recommended weapons systems to be acquired.[36,37,38]
Taiwan may again look into the acquisition of used boats, a possibility Taipei rejected in 2003. These would be significantly cheaper and quicker to obtain. Such units could also cover the period until the resolution of differing interests was achieved, fiscal restraints overcome, and the design and construction of new submarines completed. It was reported that past offers to the Taiwanese Navy included four Indian Navy and eight Italian Navy submarines, as well as Zwaardvis-class vessels. Russian Kilo-class submarines have also allegedly been offered via intermediaries.
Alternatively, Taiwan may further pursue its existing domestic capabilities. CSBC has constructed a "generic" submarine segment, illustrating its capacity. Taiwan also possesses a crude submarine design that is partially based on the Norwegian Ula-class and Argentine Santa Cruz-class (TR 1700). Both were designed by Thyssen-Nordseewerke (TNSW) in Germany. The latter designs may have been obtained via a Dutch intermediary, which bought the material kits that were supplied to Argentina as scrap metal in 1996. It is unclear how the Ula-class designs were obtained or re-created. Taiwan also acquired 80 percent of the blueprints of its Hai Lung-class (Improved Zwaardvis-design) submarines, which it purchased from the Netherlands.
While there is little doubt that the island country could join the ranks of South Korea, Turkey, Greece, India, Pakistan, Australia and other under-license submarine-producing countries, it would run into difficulties over crucial technologies, including command and combat systems. The U.S. Navy delegation that visited Taiwan in November 2003 clearly expressed such concerns. Since it is unlikely that Germany, Sweden, the Netherlands, Spain, and Australia, which ruled out direct and indirect submarine sales to Taiwan, will change their stance, Taiwan would still have to rely on U.S. companies to supply the aforementioned systems.
The Obama Administration has indicated that it is considering a new arms deal for Taiwan which will include the provision of UH-60 Black Hawk helicopters and PAC-3 missiles. However, it appears unlikely that any arms package will include the eight diesel-electric submarines and F-16 aircraft that were agreed by George W. Bush in 2001. As a result, there are suggestions that President Ma Ying-jeou may, again, be considering the possibility of building eight indigenously designed diesel submarines at the CSBC Corporation. Although the original Project Diving Dragon was aborted five years ago, there is reported to have been a number of high-level meetings within the Taiwanese government regarding its resurrection.  Nevertheless, Taiwan will still have to acquire weapons and communications systems from abroad, most likely the United States. There are also widespread safety fears regarding domestically built submarines and the danger that sailors may be killed in test runs. 
 Walter Ellis, "Australia ponders order for Dutch submarines," Financial Times, December 12, 1983; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "Dutch deliberating Taiwanese sub sale," United Press International, February 13, 1992; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 T'ang Sheng, "Mainland strengthens prowess of submarines to deter 'Taiwan Independence' forces," Ching Pao, September 1, 2002; in FBIS Document "Taiwan's efforts to 'counter submarines with submarines' 'wishful thinking'," CPP20020905000021.
 "Groen licht Bush voor Wapenpakket Taiwan," De Telegraaf, April 25, 2001; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "Holland offers to help ROC build submarines," Central News Agency, January 28, 1993; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 Alan Dickey, "RDM locked in Taiwan sub talks," Lloyd's List International, September 12, 1992; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 Alan Dickey, "Special report on the Netherlands: shipbuilding orders down," Lloyd's List International, February 18, 1992; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "RDM in row over Taiwan subs bar," Lloyd's List International, February 19, 1992; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "Nieuwenhuyzen neemt RDM over van Begemann," Het Financieele Dagblad, February 10, 1996; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "Prime Minister detained by internal affairs," NRC Handelsblad, April 9, 1996; in "PRC's Li Peng visit cancelled," FBIS Document FTS19960409000533.
 "Worldwide Naval Projections Report for Taiwan, October 2001," AMI International Website, www.amiinter.com.
 "Dutch foreign minister rules out submarine sales," Central News Agency, May 31, 2001; in Republic of Chine Government Information Office, http://th.gio.gov.tw.
 Lien-Ho Pao Interview with Hannfried Haun by Chen Yu-Hui, "HDW will supply submarine hull to the United States for assembly," Lien-Ho Pao, September 14, 2002; in "Lien-Ho Pao interview with Germany's HDW on building submarines for Taiwan," FBIS Document CPP20020916000036.
 Meite Thiede, "Neuordnung im HDW-Aktionärskreis," Süddeutsche Zeitung, September 25, 2002; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 Andreas Rinke und Michael Backfisch, "HDW's submarine cooperation criticized," Handelsblatt, 16 August 2002; in "German HDW Agreeing on Cooperation With Northrop Grumman," FBIS Document EUP20020816000196.
 Kay Moeller, "U.S.-German Relations and U.S.-China Irritations," American Institute for Contemporary German Studies, www.aicgs.org.
 "Kommission gerät wegen Genehmigung der HDW-Übernahme unter Druck," Frankfurter Allgemeine Zeitung, June 4, 2002; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 J.A.C. Lewis and David Mulholland, "Thales, DCN mull HDW buy," Jane's Defence Weekly online edition, http://jdw.janes.com, July 16, 2003.
 David Mulholland, Joris Janssen Lok, Michael Nitz, Andrew Koch, Michael Sirak, Jim Smith, Richard Scott, Jürgen Erbe, "US bank takeover of HDW raises technology issues," Jane's Defence Weekly online edition, http://jdw.janes.com, March 20, 2000.
 Jürgen Erbe, "Germany fears HDW sale will yield technology to USA," Jane's Defence Weekly online edition, http://jdw.janes.com, July 10, 2002.
 "USA bieten Taiwan deutsche U-Boote an," Süddeutsche Zeitung, July 22, 2002; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 "Kockums joins Northrop Grumman 'composite' team," Jane's Defence Industry online edition, http://jdi.janes.com, December 1, 2002.
 Ch'en Yu-hui, "The German Company Howaldtswerk Deutsche Werft May Fall Into The Hands of Communist China," Lien-Ho Pao, August 6, 2003; in "Lien-Ho Pao: German-China Joint Venture Firm Threatens Taiwan Submarine Program," FBIS Document CPP20030806000086.
 Deborah Kuo, Central News Agency, October 26, 2003; in "CNA: U.S. Navy team arrives to report submarine procurement plan," FBIS Document CPP20031026000032.
 "Intelligence," Far Eastern Economic Review, September 6, 2001; Vol. 164, No. 35, pp. 10-11; in ProQuest Information and Learning Company, http://proquest.umi.com.
 Andrew Koch, "Funding problem puts Taiwanese submarines deal into limbo," Jane's Defence Weekly online edition, http://jdw.janes.com, July 11, 2003.
 Kathrin Hille, "Taiwan arms package faces further delays," Financial Times, April 30, 2003; in Lexis-Nexis.
 "News in brief," Naval Forces, 2003, Vol. 24, No. 3, pp. 142; in ProQuest Information and Learning Company, http://proquest.umi.com.
 Andrew Koch and Wendell Minnick, "Taiwan-US Ship Deals Stalled," Jane's Defence Weekly online edition, http://jdw.janes.com, May 26, 2004.
 Deborah Kuo, Central News Agency, October 26, 2003; in "CNA: CSBC capable of building subs: German consultants," FBIS Document CPP20031026000040.
 Hsu Shao-shuan, "The probability is low to realize local manufactoring of submarines," Tzu-Yu Shih-Pao, October 28, 2003; in "Taiwan daily notes problems likely to block domestic manufacturing of submarines," FBIS Document CPP20031031000115.
 Brian Hsu, Taipei Times, November 1, 2003; in "Taiwan: China Shipbuilding looks to expand defense production," FBIS Document CPP20031104000205.
 Taijing Wu, Taiwan News, November 3, 2003; in "Taiwan lawmaker threatens to freeze submarine budget if not built locally," FBIS Document CPP20031103000185.
 Brian Hsu, Taipei Times, November 4, 2003; in "Taiwan: domestic submarine construction plan support faltering," FBIS Document CPP20031104000133.
 Sofia Wu, Central News Agency, November 3, 2003; in "CNA: young reservists to be recalled first if cross- strait war erupts: Mnd," FBIS Document CPP20031103000159.
 Taijing Wu, Taiwan News, November 19, 2003; in "Taiwan defense ministry complains to AIT over chairperson's remarks," FBIS Document CPP20031119000195.
 The China Post, November 23, 2003; in "Premier reiterates proposal to involve Taiwan in construction of submarines," FBIS Document CPP20031124000241.
 Lien-Ho Pao, November 18, 2003; in "Taiwan defense minister may file 'protest' over US Shaheen's submarine remarks," FBIS Document CPP20031118000039.
 Sofia Wu, Central News Agency, November 10, 2003; in "CNA: Taiwan defense minister reaffirms determination to buy submarines," FBIS Document CPP20031110000167.
 Tiffany Wu, "Taiwan eyes submarines, anti-missile system," Reuters News Agency Website, www.reuters.com, August 30, 2003.
 Wendell Minnick, "Taiwan pushes US government on indigenous submarine build plan," Jane's Navy International online edition, http://jni.janes.com, April 1, 2003.
 Daniel Santoro, Clarin, January 22, 1996; in "Uncompleted Argentine submarines sold as spare parts," FBIS Document PY2501193396.
 "ULA-Klasse," Thyssen-Nordseewerke Website, www.thyssen-nordseewerke.de.
 Mure Dickie and Richard McGregor, "Problems surface over submarines pledged for Taiwan," Financial Times, July 16, 2002; in Lexis-Nexis Academic Universe, web.lexis-nexis.com.
 David Lague, "Coming about," Far Eastern Economic Review, December 13, 2001; Vol. 164, No. 49, pp. 19; in ProQuest Information and Learning Company, http://proquest.umi.com.
 David Young, "Taiwan may build its own submarines," The China Post, www.chinapost.com.tw, 7 April 2009.
The Republic of China on Taiwan is an importer of submarines and does not export them, due to its lack of production capacity.
This material is produced independently for NTI by the James Martin Center for Nonproliferation Studies at the Monterey Institute of International Studies and does not necessarily reflect the opinions of and has not been independently verified by NTI or its directors, officers, employees, or agents. Copyright © 2011 by MIIS.
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