Submarine Sale Sticking On Cost

Taipei Times | June 28, 2002 | Charles Snyder

[Stand Watch Listen]

National Defense: US officials are wondering if Taiwan is really prepared to pay for the eight diesel-powered submarines the Bush administration has agreed to sell

By Charles Snyder, Staff Reporter in Washington

The high up-front costs of designing diesel submarines that Taiwan wants to buy from the US have emerged as the chief stumbling block to the deal, US government sources said.

The issue emerged as a Ministry of National Defense (MND) team headed by Vice Admiral Wang Li-shen wound up two days of intensive talks with the Pentagon on the submarines and other US weapons sales to Taiwan.

In a bid to overcome the problem, a team of US officials will travel to Taipei next month for talks with Taiwanese officials on the submarines' funding, US sources said.

The costs of evaluating the options for the submarine sales will be substantial, running in to many millions of US dollars, US officials said. Under US law, American taxpayers cannot pay for these preliminary costs, so Taiwan must agree to foot the entire bill for the submarine sale to be finalized, the sources said.

The MND is reportedly balking at paying these costs. This has prompted some US officials to wonder whether Taiwan will be able to buy the submarines at all.

"If they cannot pay for the program assessment, then they cannot pay for the submarines," said one US official.

The cost of the eight submarines the George W. Bush administration agreed to sell Taiwan in April last year could be as much as US$6 billion, making them the most expensive weapons system Taiwan has ever bought from the US.

Complicating the issue is the fact that the US has not built diesel submarines for half a century, and none of the earlier ones remain in existence.

As a result, the vessels might have to be designed and built from scratch, sharply increasing the amount of work that has to be done before construction begins.

"The costs are not insubstantial," one official said. "Engineers have to evaluate complex proposals from a technical point of view.

"We're looking at a system that has to run underwater, and you've got to take a proposal that may be a blueprint or may be something even more amorphous, and you've got to take from this abstract concept a concrete figure.

"You have to answer, `how will this perform, what is the likelihood of this performing, how much will it cost, how much will its service life be?' You're talking about a lot of money," he said.

Weighed against this is the commitment the Bush administration made to Taiwan last year to sell the submarines.

"The government is committed. We committed our prestige. The president committed his prestige to deliver this to the Taiwan government," a US official said.

"But that's going to take time," he added.

While Washington has been exploring the possibility of using German designs for the submarines, which would substantially reduce the up-front evaluation costs, the German government, under pressure from Beijing, has repeatedly said it would not allow German-built submarines to be sold to Taiwan.

Reports that Germany might allow the sales resurfaced in March, when an American company, American One Equity Partners, planned to buy 75 percent of Germany's largest shipbuilder, HDW, a sale approved by the European Commission last month.

Leading American defense contractor Northrop Grumman is a partner in the HDW acquisition.

German Chancellor Gerhart Schroeder earlier this month reiterated his position barring submarine sales to Taiwan.

In addition to the submarines, the Wang mission also discussed the acquisition of Kidd-class destroyers, self-propelled howitzers, missile defense systems, data links and other weapons systems Washington has already agreed to sell to Taiwan.