Saab Wins $1 billion Submarine Deal With Sweden

By Christina Zander

STOCKHOLM--Sweden Tuesday signed an 8.6 billion Swedish kronor ($1 billion) submarine deal with defense company Saab AB, marking an important step toward refitting its anemic defense capabilities to counter increased Russian aggression in the Baltic Sea region.

The orders for two new submarines and mid-life upgrades on some of its existing fleet come 15 months after Sweden yanked the lucrative contract from Germany's ThyssenKrupp AG following a row over prices and export possibilities.

The small Scandinavian nation has since worked with Saab to clinch the deal and establish its headline defense company as a new rival in the global submarine market.

For Sweden, which largely ran its defense forces into the ground after the end of the Cold War, closing the deal with Saab marks an important step towards raising its underwater capability, Swedish Defense Minister Peter Hultqvist said Tuesday.

Concerns about the strength of the country's defenses rose in mid-October last year when Sweden confirmed a foreign submarine had sailed secretly into its territorial waters close to the capital, Stockholm. The intruder was never identified but suspicions were directed at Moscow after recent airspace violations by Russian warplanes and historical instances of Soviet submarines being spotted in Swedish waters during the 1980s.

Like the majority of its Nordic and Baltic neighbors, Sweden is ramping up military spending amid fears the Kremlin will attempt a Ukraine-style assertion of influence over the Baltic Sea region.

In signs of rising regional tensions, Sweden is refitting warships previously set for retirement and increase its submarine fleet, while Poland is budgeting for new naval vessels, helicopters and coastal defense systems.

The deal with Saab also marks the culmination of a battle for submarine business across the Baltic Sea.

Sweden, which is developing new, stealthier submarines known as A26, had initially tapped ThyssenKrupp, the world's largest exporter of non nuclear submarines, to build two new submarines and handle upgrades on some of its current underwater fleet. But disagreements over price and submarine exports prompted Sweden to change its plans.

The Swedish Defense Materiel Administration pulled work on the A26 submarine from ThyssenKrupp at the beginning of last year and said it had hired Saab to investigate how Sweden could maintain its submarine capacity over the long term. Saab bought ThyssenKrupp's Swedish submarine business in June, 2014.

Sweden, which is not a member of the North Atlantic Treaty Organization, defends its independence with armed forces supplied by a domestic arms industry. But the country doesn't buy enough arms to support its defense contractors, so export is key in bringing down development costs.

Swedish officials have named the Netherlands, Canada, Poland and Norway as potential submarine export markets.

Write to Christina Zander at [e-mail]