Germany’s ThyssenKrupp Terminates Greek Submarine Contracts
A picture of happier days: the launching of “Papanikolis”.
TKMS to put the dispute on unpaid submarines into arbitration
08:57 GMT, September 22, 2009 defpro.com | The turbulences in Greek submarine procurement programme, which have been hampering any further progress for months, now reached their climax: After having accumulated arrears exceeding €520 million ($762 million) the Greek Ministry of Defence was informed on Monday by Germany’s ThyssenKrupp Marine Systems (TKMS) that the contract for the construction of four submarines was terminated.
As ThyssenKrupp summed it up on Monday, “the Greek state has long ceased to honour its contractual obligations.” Although the submarines have been completed and are ready for delivery to the Greek Navy, the state refused to pay for the submarines due to technical shortcomings which have allegedly been discovered by the Greek Navy during sea trials in 2006.
As defpro.com already reported in late May (see:
http://www.defpro.com/daily/details/320/), the refusal to meet its contract obligations may also be due to the fact that Greece is facing a huge budget deficit and obviously decided to enter a sort of a complex “waiting game” in order to not have to meet all of the current payment obligations at the same time. Now, TKMS has decided to make an end to this waiting game and announced that it wishes to put the dispute with Greece into arbitration.
TKMS has been involved in two contracts with the Greek state. The first of the contracts, dubbed “Archimedes Project”, was for the procurement of four 214-class boats, which are also successfully operated by the German Navy. Those boats are fitted with a state-of-the-art fuel-cell technology, allowing it to operate submerged for a very long time. According to TKMS, all four were ready for delivery. The second contract has been concluded to retrofit three 209-class submarines with fuel-cell propulsion technology.
The first 214-class submarine, christened Papanikolis, was laid down in Kiel as far back as February 2001 and launched in April 2004. The contract planned for the manufacturing of the remaining three boats at the Hellenic Shipyards, near Athens, which just as HDW is now part of the German ThyssenKrupp Marine Systems (TKMS) group. As soon as the Papanikolis started her sea trials, however, the Hellenic Navy found a veritable host of major and minor problems with the vessel, which until today has resulted in the refusal to accept her.
The Hellenic Navy declared that the submarine suffered from insufficient stability while sailing in rough sea conditions, heeling by as much as 35-58°. Beyond that they found that the AIP system became inoperable after a few hours and noted problems with the ISUS battle system. The official report of the Navy also said that sea water was leaking into the hydraulic systems and that the submarine was not quite as expected. Therefore, Papanikolis has been docked in Kiel since 2006.
German industry accepted some of the shortcomings liabilities and maintains to have finally fixed the problems, however, payment has still not been made. Some expert suggested that Greece has been intentionally protracting the problem in order to delay payments and renegotiate the price. In fact, Greek Defence Minister Evangelos Meimarakis said in January he would try to renegotiate the contract.
Since the delivery of the Papanikolis, TKMS insisted that the submarine “met all standards” and, subsequently, engaged into long and fruitless talks with the Greek government on the issue. In addition to the production of the submarines, TKMS has largely invested in modernising and expanding Hellenic Shipyards site, buying it in January 2005. According to TKMS is has provided Greece with the most modern yard to build non-nuclear submarines on the entire Mediterranean.
Back in May, a ray of hope had appeared, when the Chief of the Hellenic Navy General Staff, Vice Admiral Giorgos Karamalikis, was quoted as saying that the technical problems with the Type 214 submarine were being solved and that Greece could soon be in a position to accept the three follow-on vessels. According to the quote, HDW had been willing to keep the Papanikolis and try to sell it to another interested buyer, which may have been Poland.
Although recent reports do not refer to this earlier development, it seems that this alternative has not been successful, as TKMS has now clearly decided to terminate the contracts and to see that payment will finally be made by the Greek government.
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by Nicolas von Kospoth, Editor
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