Advertisement

Papanikolis at HDW
(click to view full)

On Monday Sept 21/09, ThyssenKrupp Marine informed the Greek Minister of Defence that it was canceling “The Archimedes Project” contract for 4 U-214 diesel-electric submarines with Air-Independent Propulsion technology, because the government’s payments had remained underwater for too long. Accumulated payment arrears are over EUR 520 million ($767 million). ThyssenKrupp and its subsidiary Hellenic Shipyards will now seek international arbitration, in order to recover some of the payments due under its contract.

This development is the just the latest chapter in a long saga. If the issue remains unresolved, or arbitration results in termination payments but no delivery, Greece could find itself without a submarine force…

Greece’s Submarine Program: Types and Travails

S118 Okeanos painting
(click to view full)

Greece currently fields 8 boats: 4 Glavkos class U-209/1100 boats commissioned between 1971-1979 (S110-S113), and 4 Poseidon class U-209/1200 boats (S114, S117, S118, S119) commissioned from 1979-1980.

In 1989, the Neptune I program began to upgrade the 4 Glavkos class boats. They received flank array sonar and significant electronics upgrades, including the ability to fire UGM-84 Harpoon anti-ship missiles. In 2002, Hellenic shipyards received the Neptune II contract for the “mid life” modernization and repair of 3 Poseidon class boats, which included cutting the hull and installing an 6.5m long Air-Independent Propulsion section, as well as hydrogen storage tanks for the AIP. Flank array sonar, electronics upgrades, an electro-optic mast with satellite communication capability, and Harpoon missile firing capability reportedly round out the upgrade’s major features.

No ship lasts forever, and that’s especially true of submarines. While Neptune II proceeded, therefore, the Greek government signed a contract in February 2000 for 3 of HDW’s new Type 214 submarines + 1 option. It was the first order for the new class.

Papanikolis (S120), the first-of-class U-214, was laid down in Kiel, Germany in February 2001 and launched in April 2004. In January 2005, HDW’s ThyssenKrupp Marine (TKMS) parent company bought Hellenic Shipyards near Athens, Greece, and invested heavily in modernizing it. Submarine work had already been underway since 2002, and Hellenic Shipyards built the next 3 Greek U-214 submarines: S121 Pipinos, S122 Matrozos, and S123 Katsonis.

Once the Papanikolis’ sea trials began in 2006, however, the Hellenic Navy found a host of issues with the new submarine. Poor performance from the AIP system that supplements its diesel engines for long underwater operations, problems with the ISUS combat system, poor surface seakeeping in high seas, and hydraulic system issues were among the major flaws reported. The Navy refused acceptance, leaving HDW to fix the boat.

HDW set to work on Papanikolis, but the submarine has been docked in Kiel since 2006 waiting for Greek acceptance. HDW says acceptance is now justified, as the defects have been fixed, but the Greek government refuses to accept the boat. It has raised other issues, such as the ad-hoc nature of several required modifications to avoid disassembling the boat, the number of sea trials that have consumed some of the onboard equipment’s operational life – and one rather more traditional reservation, which is not expressed but plays a role. Sailors are famously superstitious, and Papanikolis’ tribulations have given it a reputation as an unlucky boat.

Meanwhile, the other 3 submarines are reportedly complete now, or very close to it. Pipinos was launched in April 2007, Matrozos followed in 2008, and Katsonis was launched at the end of 2008. Not one of them has been accepted for service. Sources currently report payments to TKMS of almost EUR 2 billion, but accumulated payment arrears of EUR 524 million ($770 million): EUR 300 million claimed by Hellenic Shipyards SA, and EUR 224 million owed to HDW.

U-214 SSK
(click to view full)

Greece is facing a very large budget deficit, expected to grow to 6% of total GDP in 2009. By dragging the problem out, the government can delay payments and possibly create enough pressure to renegotiate the price. In January 2009, Greek Defence Minister Evangelos Meimarakis lent credence to this view when he said that he would try to renegotiate the submarine contract. In May 2009, there were rumors of a deal that would have Greece accept the other 3 submarines once Pipinos passes acceptance trials, while HDW would be left with Papanikolis and could resell it elsewhere.

TKMS’ filing and notification indicate that these options have all failed. “The Greek state has long ceased to honour its contractual obligations,” said TKMS’ release announcing its cancellation of the contract for default. Commerzbank AG analyst Dirk Nettling is even more succinct: the Greek government “can’t pay, won’t pay, or has other priorities.” As a result, a TKMS spokeswoman told Jane’s that ”...continuation of the contract is no longer economically justifiable.”

The cancellation is also set to affect the Neptune II project to upgrade and refurbish Greece’s existing U-209 boats by adding Air Independent Propulsion systems. While S118 has been accepted and re-launched, Jane’s reports that this contract has also been canceled.

This leaves the Hellenic Navy with something of a problem. Submarines have a limited safe lifespan, in part because of the regular squeezing and release of water pressure on their hulls. The youngest Type 209s are already pushing 30 years, which is a long time. Very few submarines can safely last beyond 40 years in service, a milestone that even refurbished Neptune II project boats would reach in 2020.

Given a required lead time of several years from orders to fielding, and the issues that a sustained contract cancellation would raise with potential builders, Greece may find itself with a limited window of just a few years to work out a new submarine strategy and place an order. The alternative would be a submarine force that could face significant operational limitations – and perhaps even no submarine force at all.

A problem its rival Turkey would not have, since Turkey is set to begin inducting 6 of its own U-214 submarines, beginning in 2015.

Contracts & Key Events

U-214 cutaway
(click to view full)

Oct 21/09: Kathimerini reports that Greek Defense Minister Evangelos Venizelos held talks with ThyssenKrupp Marine Systems CEO Hans Christoph Atzpodien, in a bid to resolve the submarine issue. The basic framework of the deal appears to involve TKMS retaining the Papanikolis for resale, and the other 3 U214 submarines being accepted by Greece pending certain defined criteria. It adds:

“Sources said that ThyssenKrupp appears determined to quit its involvement in [Hellenic Shipyards SA] as early as next month, despite government concerns about the job losses that this might cause. There were, however, discussions between the two sides about how some private involvement in the shipyards could continue…. An unidentified third country is reported to be interested in buying the [Papanikolis] and the two sides have agreed that selling it would be the best way out…. The two men reportedly agreed that if the technical problems are ironed out, Greece will accept delivery of the remaining three submarines.”

Sept 21/09: ThyssenKrupp notifies the Greek Minister of Defense that it’s formally canceling the Project Archimedes U-214 contract, and says it intends to seek international arbitration for contractual damages.

Unsurprisingly, this announcement is becoming an election issue in Greece. Capital.gr | Aviation Week | Bloomberg | defpro | Jane’s.

July 2/09: ThyssenKrupp Marine receives a EUR 2.5 billion contract with Greece’s rival Turkey for 6 U-214 submarines, supplemented with Air-Independent Propulsion technology. They will be built at the military-owned Golcuk Shipyard near Izmit, using pre-built sections and equipment supplied by HDW, as well as Turkish electronics and items. Delivery is expected in 2015. Read DID’s “Turkey Subs” for more.

May 28/09: The Hellenic Navy’s Chief of staff, vice-admiral George Karamalikis, announces the future direction of Greece’s naval procurement. among these items, DefenceNET Greece reports that:

“The HN has decided to accept the 3 T 214 submarines that are being constructed in Greece but the first submarine of the PAPANIKOLIS class, that was build in Germany, is not going to be received by the Navy. Instead, a new submarine will be ordered, in order to fulfill the demand for 4 T 214 submarines.”

Feb 26/09: Greek U-209/1200 submarine HS Okeanos (S118) is re-launched at Hellenic Shipyards in Skaramangas, following a mid-life refit that added Air-Independent Propulsion. It is the first submarine to be re-launched under the Neptune II program. Source.

Additional Readings & Background

As most of our readers know, the ancient Greek scientist Archimedes is best known for Archimedes’ Principle: a body immersed in a fluid is subject to an upward force (buoyancy) equal in magnitude to the weight of fluid it displaces. He also invented the lever, the compound pulley and Archimedes’ screw, as well as weapons used during the war between Rome and his city of Syracuse. Archimedes was killed in that war, despite orders from the Roman general that he should not be harmed.

• TKMS Hellenic Shipyards – The Class 214 Program

• TKMS Hellenic Shipyards – Neptune II program

• GlobalSecurity – Type 209

• Defencenet.gr (May 27/09) – ??? ???? ??????????, ??? ??? ???????? ???? 214. This is in Greek; the characters do not render properly.

• Bosphorous Naval News (March 4/09) – Greek Naval News

• NTI – Submarine proliferation – Greece: Current Capabilities