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 christina.zander@wsj.com