Zakirin
KUALA LUMPUR — In a decisive move, Malaysia has immediately severed new defense procurement ties with Norway following a recent Cabinet decision. The sweeping freeze comes in direct response to the Norwegian government’s sudden revocation of the export license for the Naval Strike Missile (NSM) system, which was slated to equip the Royal Malaysian Navy’s six Littoral Combat Ships (LCS).
A Disrupted Contract
The original NSM procurement contract was signed in 2018 between the Royal Malaysian Navy and Norwegian supplier Kongsberg Defence and Aerospace (KDA), valued at approximately €128.7 million. An additional contract for two sets of surface-to-surface missile (SSM) launchers was secured in 2023 for €1.19 million, bringing the total contract value to €137.91 million, or equivalent to RM642.6 million.
Norway’s decision to halt the export was reportedly based on a geopolitical policy shift, with Oslo stating that its sensitive defense technology exports would now be strictly limited to its “allies and closest partners,” including NATO members.
Malaysia Demands Over RM1 Billion in Compensation
Defence Minister Datuk Seri Mohamed Khaled Nordin stressed that Malaysia had strictly fulfilled all of its payment obligations on schedule, having already paid approximately 95 percent of the total contract value prior to the cancellation.
In response to the unfulfilled deal, the Malaysian government is seeking heavy compensation. Putrajaya has officially issued a notice of demand seeking RM1.06 billion in damages from KDA. This figure covers more than just a refund of the direct payments; it factors in substantial indirect costs. These include the financial burden and knock-on effects of having to physically remove the NSM mounting systems that were already installed on the naval vessels, as well as the cost of integrating replacement systems supplied by alternative vendors.
Next Steps and Negotiations
The first round of negotiations to reach a settlement between the Malaysian government and Kongsberg Defence and Aerospace is scheduled to take place in mid-August. While Putrajaya is seeking an amicable resolution, Mohamed Khaled issued a firm warning, stating that the Ministry of Defence remains vigilant and will not allow the upcoming talks to be used as a tactic by the supplier to stall the compensation process.
To keep the long-delayed LCS project on track, the Ministry of Defence has already established an evaluation team to identify a replacement anti-ship missile system, with potential suppliers from Turkey, South Korea, and two other European nations currently shortlisted.
