A huge government-to-government submarine procurement deal faces the axe, if China is unable to fit the engines specified in the purchase agreement, warned Prime Minister Prayut Chan-o-cha on Monday.
He was answering reporters' questions following reports that a German company had refused to supply MTU396 diesel engines to China to be fitted into the S26T Yuan-class submarine being built for the Royal Thai Navy (RTN).
Gen Prayut, also defence minister, said he had instructed the navy to do its best to get the deal over the line, but if China could not fulfil the agreement, the contract would have to be scrapped.
Asked if he was concerned the issue would be brought up in the planned no-confidence debate, Gen Prayut said was he prepared as he had justified the purchase already several times in response to questions.
"What do we do with a submarine with no engines? Why should we purchase it? If the agreement can't be fulfilled, we have to figure out what to do. Isn't that how we solve a problem?" he replied.
When asked if the government can terminate the contract, he said the matter will be considered by authorities concerned and in line with the procurement process and the prime minister need not intervene at every stage.
He insisted that any cancellation will not affect Thai-Chinese relations and both sides have been working closely to resolve the issue.
On Saturday navy commander Adm Somprasong Nilsamai said no changes had been made to the submarine deal and insisted China would have to comply with the contract as signed.
Under the terms of the deal, the submarine's engines were to be supplied by Germany's MTU, but the company were barred from making the sale due to an embargo as they are designated a military/defence item.
According to navy spokesman Vice Adm Pokkrong Monthatphalin, the navy would hold talks with China Shipbuilding & Offshore International Co (CSOC) this month to resolve the problem even though it stands by the purchase-agreement stipulation.
It is reported that CSOC has asked the navy to alter the contract to replace the German engines with Chinese ones such as the MWM 620 which are of the same standard, but the navy is standing by the original contract.
Thailand formally signed an agreement to buy the S26T Yuan Class submarine from China in May 2017 under a budget of 13.5-billion-baht after the cabinet gave the green light a month earlier in April.
The payment had been agreed to be spread over a seven-year period with the first instalment of 700 million baht made in 2017.
The navy, after further talks with Chinese military top brass, agreed to a three-submarine package worth a total combined cost of 36 billion baht to be paid in 11 annual instalments
However, procurement of the two additional submarines, valued at 22.5 billion baht, was delayed for four years and is in limbo due to financial constraints following the pandemic.