South Korean companies helped Taiwan build a submarine

South Korean authorities do not want to raise suspicions in China that they are helping Taiwan modernize its submarine fleet. As Reuters learned on October 17, it was for this reason that Korean law enforcement officers indicted SI Innotec in court back in February 2022 and arrested its executive director for violating trade rules. In particular, it supplied the Taiwanese shipbuilding company China Shipbuilding Corporation (CSBC) with components for the production of submarines. Meanwhile, it was at the CSBS shipyard that on September 28, 2023, the first Taiwanese diesel-electric submarine, Hai Kun (translated as the mythical sea fish Kun), was presented. This was a breakthrough for the island, which is seeking to use modern weapons (along with fighter jets and cruise missiles) to contain the ambitions of the PRC authorities to return it to its sovereignty.

It is noted that during the investigation, the Korean police consulted with the local regulator, the South Korean Defense Acquisition Program Administration (DAPA). It is alleged that SI Innotec’s contract with CSBS from 2019 provided for the supply and installation of welding and assembly equipment for the production of submarine hulls in the amount of $12 million. At the same time, as SI Innotec representatives said, the equipment they supplied was dual-use and was officially intended for development of wind energy, and not for military purposes. The verdict stated that SI Innotec’s deal with the Taiwanese counterparty “directly affected the overall security of South Korea” as it could lead to a sharp reaction from China and, as a result, cause negative economic consequences. SI Innotec was fined $10 million and its director received a suspended sentence. According to the court, the defendants knew that the equipment they supplied would be used in Taiwan to build a military submarine.

Similar harassment by South Korean authorities has affected two other defense industry subcontractors doing business with Taiwan, Keumha Naval Technology (KHNT) and S2&K. As the agency managed to find out by studying court records, their representatives were also charged with violating laws on trade and industrial espionage. However, in their cases, a direct connection with Seoul’s concerns about political risks could not be found. Moreover, KHNT, which apparently supplied equipment related to the torpedo tube to Taiwan, received preliminary approval from the Korean regulator for this supply, but then did not wait for the final approval of the transaction.

Seoul already has negative experience due to Beijing’s harsh reaction to its actions in the defense sector. In the summer of 2016, a decision was made to deploy a battery of the American THAAD missile defense system in South Korea, after which China intensified political and economic pressure on this country. Beijing canceled planned tours of Korean artists, limited the flow of tourists, and problems arose in China for both small Korean firms and the Lotte brand, which agreed to transfer its golf club site to the Korean government for THAAD. At the end of 2017, the parties normalized relations as South Korea took into account Beijing’s concerns, promising not to deploy more than six THAAD combat vehicles, not to integrate its missile defense with the American one, and not to create an alliance with the United States and Japan. However, the last commitment in 2023 can partly be considered as broken – the leaders of these countries agreed in August at Camp David to expand security ties, but so far without commitments in the style of an “Asian NATO”.

In addition, in 2021, the Chinese Foreign Ministry reacted sharply to a Reuters publication about the assistance of engineers, technicians and former naval officers from five countries (Australia, South Korea, India, Spain and Canada) in creating Taiwan’s submarine fleet. A department spokesman then said that these countries “are playing with fire, and those who play with fire will get burned themselves.” Until September 2023, Taiwan had only two submarines in service – modified Zwardvis submarines purchased from the Netherlands back in the 1980s. Two more, built in the USA in the 1940s, are used for training purposes. In 2001, former US President George W. Bush promised to supply eight diesel submarines to Taiwan, but in practice this never happened due to the high cost and the US lack of its own non-nuclear submarine project.

After failing to find a foreign submarine supplier on the island, the Taiwanese Navy signed a contract with CSBC in May 2019 to build a nationally produced lead submarine. Already in 2021, the official laying ceremony of the first submarine being built on the island took place, and in September 2023 it was rolled out of the boathouse in the port of Kaohsiung. It is known that the share of local components in the boat is 40%. According to Taipei’s current plans, a second such submarine should be commissioned into the Taiwanese fleet by 2027. In total, the program for building a Taiwanese-made Indigenous Defense Submarine (IDS) submarine fleet provides for the construction of eight submarines, for which it is planned to allocate about $9.73 billion.

China reacts quite harshly to military-technical cooperation with Taiwan, which is expressed in the form of various political and economic measures, says Vasily Kashin, director of the Central Committee for Medical Sciences of the National Research University Higher School of Economics. This led to the fact that from the late 1990s to the early 2000s. the circle of countries willing to maintain such cooperation with Taiwan has shrunk, essentially, to the United States and rare supplies of dual-use goods from European countries. The United States has long wanted to help Taiwan create a submarine fleet, but the Americans themselves produce only nuclear submarines, not diesel-electric ones, notes Kashin, and their allies were not ready to agree to such cooperation, fearing the reaction of the PRC. As a result, the United States could provide only limited assistance, and Taipei began privately purchasing engineers with experience. The presence of a powerful submarine fleet in Taiwan could really complicate China’s landing operation on the island until threats from submarines are neutralized, the expert notes.

South Korea suffered greatly from the sharp Chinese reaction in the situation with THAAD, and therefore now wisely suppresses the attempts of its businessmen to do business in military-technical cooperation with Taiwan, which makes it possible to prove to the PRC that its authorities are not involved in the process, the expert says.