Malaysia to seek compensation from Norway over scrapped defence deal
Malaysia's Response and Diplomatic Tensions
By Danial Azhar and Rozanna Latiff
KUALA LUMPUR, May 14 (Reuters) - Malaysia's defence minister said on Thursday the country planned to claim compensation and was considering legal action over Norway's decision to revoke export approvals for a naval strike missile (NSM) system intended for Malaysian combat ships.
Background of the Defence Deal
In an escalating diplomatic row, Defence Minister Mohamed Khaled Nordin said the government had already paid nearly 95% of the contract value when Norway pulled the approvals in March, just days before the missile systems were due to be delivered.
The defence arm of Norwegian group Kongsberg said in 2018 it had agreed a 124 million euro ($145.23 million) contract with the Royal Malaysian Navy to supply NSM missiles for six littoral combat ships. Mohamed Khaled said on Thursday there was a second deal to supply the system to two other naval vessels.
Malaysia's Compensation Claim
"We are doing the computation right now - we would not only claim the amount that we have paid, but also the damages arising from the breach of contract," he told reporters, according to a recording of his remarks provided by the ministry to Reuters.
Norway's Position and Export Controls
The Norwegian Foreign Affairs Ministry repeated that certain licenses related to the export of specific defence technology to Malaysia have been revoked due to Oslo's export control regulations.
Norwegian Government's Statement
"It is regrettable that this affects Malaysia," the ministry said, adding that the security policy landscape in Europe and globally has changed significantly in recent years during which the government has strengthened controls on defence technology.
"Exports of some of the most sensitive Norwegian-developed defence technologies will be limited to our allies and closest partners," it said.
It added that Oslo values its relationship with Malaysia and looked forward to a constructive dialogue.
Kongsberg's Response
Kongsberg said last week licensing decisions were handled wholly by Norwegian authorities and that it had complied with all applicable regulations.
Implications for Regional Security
Malaysia's Concerns
MALAYSIA SAYS REGIONAL SECURITY AT RISK
Norway's decision to cancel the approvals caught Kuala Lumpur by surprise with Prime Minister Anwar Ibrahim saying it was "unilateral and unacceptable," and he objected in a phone call with Norwegian Prime Minister Jonas Gahr Stoere.
The decision would have grave consequences for Malaysia's defence operational readiness and "undoubtedly carry broader ramifications for the regional balance," Anwar said.
"Signed contracts are solemn instruments. They are not confetti to be scattered in so capricious a manner," he said.
"If European defence suppliers reserve the right to renege with impunity, their value as strategic partners flies out the window."
Impact on Malaysia's Naval Projects
Malaysia's ships project, launched in 2011, was supposed to supply the navy with five of six planned vessels by 2022 at an initial cost of 6 billion ringgit, but the local shipbuilder tasked with building them failed to deliver.
Amid allegations of mismanagement and corruption, the government relaunched the project in 2023.
Current Status and Future Plans
The delivery of the first vessel, scheduled for August this year, has been delayed until December due to late equipment deliveries from manufacturers and ongoing rework issues.
Minister Mohamed Khaled said the programme would continue as planned but without a missile system installed.
Malaysia was also evaluating several alternatives, but the process was complicated as any replacement missile system would have to be compatible with the ships' existing equipment, he added.
Additional Information
($1 = 0.8538 euros)
($1 = 3.9260 ringgit)
(Reporting by Rozanna Latiff and Danial Azhar; Additional reporting by Ashley Tang; Editing by David Stanway, Kate Mayberry, Alexandra Hudson)
