German naval manufacturer Thyssenkrupp Marine Systems (TKMS) has secured the largest contract in its corporate history, a landmark agreement to deliver 12 submarines to the Royal Canadian Navy for approximately €20 billion ($21.7 billion).

Canadian Prime Minister Mark Carney announced the decision on Monday, confirming that Ottawa has selected the TKMS Type 212 CD (Common Design) submarine over the rival KSS-III model offered by South Korea’s Hanwha Ocean, which had also been under close consideration.

As a result of the selection, the navies of Germany, Norway, and Canada will operate the identical class of vessel. The three nations will be able to field an unprecedented combined fleet of 24 Type 212 CD submarines to counter the Russian Navy in the North Atlantic and Arctic oceans.

Beyond the naval contract, TKMS is reportedly laying the groundwork for an additional sweeping bilateral package valued in the tens of billions of euros. This broader economic initiative includes German purchases of Canadian liquefied natural gas (LNG) and the construction of launch facilities in eastern Canada for German space launch vehicles.

These aerospace facilities are intended to grant Ottawa operational independence from US launch infrastructure.

TKMS is experiencing a period of significant growth, further bolstered by fresh orders from the German Navy. Among these domestic programs, the company is developing the F127 frigate, which represents the most expensive defense procurement project in the history of the German armed forces.

Ottawa selects German industrial giant over South Korean rival

Canada has decided to award its long-planned contract for the construction of up to 12 new submarines to the Kiel-based naval specialist TKMS, passing over South Korean competition.

Prime Minister Carney announced the decision on the eve of his departure for the NATO summit in Ankara. Under the terms of the agreement, Ottawa will procure the Type 212 CD submarines, which TKMS produces in joint cooperation with Norway’s Kongsberg Defence & Aerospace (KDA).

Compared to the predecessor Type 212 A class, the Type 212 CD features advanced sensor suites and has been optimized for operations in the harsh environments of the North Atlantic and the Arctic, including under-ice deployments.

In winning the tender, TKMS defeated Hanwha Ocean. The South Korean shipbuilder’s KSS-III model, which carried a significantly lower price tag, was ultimately bypassed.

The total financial volume of the Canadian acquisition is estimated at approximately €20 billion.

The first Type 212 CD submarines are scheduled for delivery in 2033. It remains undisclosed whether the Royal Canadian Navy will take immediate delivery of these initial hulls or face a longer induction timeline.

While final contractual details are still being negotiated, TKMS confirmed that the submarines will be constructed entirely at the German group’s shipyards in Kiel and Wismar. Canada’s industrial contribution to the primary construction will be limited to the supply of specialized non-magnetic steel.

Germany, Canada, and Norway form North Atlantic alliance against Russia

Canada’s selection of the TKMS platform is closely aligned with the primary operational requirements of its maritime forces.

On one front, Ottawa is increasingly focusing on potential northern deployments given its vast Arctic coastline and the ongoing reduction of polar ice cover.

On another, Canadian naval strategy is heavily oriented toward patrols in the North Atlantic. These missions aim to prevent Russian surface combatants and submarines from transiting the Arctic Ocean past Iceland to project power into the wider Atlantic.

With the primary objective of securing the strategically vital Greenland-Iceland-United Kingdom (GIUK) Gap, Germany, Norway, and Canada established a joint “North Atlantic Security Partnership” at the NATO summit in Washington in July 2024. Denmark formally joined the defense coalition in 2025.

The scope of this trilateral operational cooperation is broad. In addition to underwater assets, Germany, Norway, and Canada are acquiring Boeing P-8A Poseidon maritime patrol aircraft to conduct coordinated aerial surveillance over the North Atlantic.

Germany and Norway have already jointly ordered 12 Type 212 CD submarines.

If Canada fulfills its planned acquisition of 12 additional vessels, the three partner nations will eventually operate a highly standardized fleet of 24 identical submarines, streamlining joint operations and maintenance.

Targeting strategic independence from the US

The acquisition of the TKMS Type 212 CD is further supported by extensive industrial offset agreements negotiated between Berlin and Ottawa.

These offset packages are designed to deepen German-Canadian economic integration and industrial cooperation.

Through these initiatives, both nations aim to reduce their respective economic reliance on the United States.

As part of the offset programs, TKMS plans to establish a joint center of excellence for submarine simulation, crew training, and maintenance in partnership with Canadian technology firm CAE.

On Tuesday, German aerospace startup Isar Aerospace signed an agreement with Maritime Launch Services, a Canadian company developing a commercial spaceport near Canso, Nova Scotia.

Beginning in 2028, Isar Aerospace intends to launch its Spectrum launch vehicle from the Nova Scotia facility to deploy small and medium-sized satellites. Historically, Canada has relied entirely on US launch infrastructure for its space access.

Under parallel reciprocal investment frameworks, the German state-backed gas importer Sefe is scheduled to import 1 million metric tons of Canadian LNG annually.

This supply agreement is intended to partially reduce Germany’s reliance on US shale gas imports.

Discussions have also taken place regarding German investments in Canada’s raw materials sector, specifically focusing on securing supply chains for rare earth elements.

TKMS order book swells amid defense procurement boom

The Canadian submarine contract provides significant commercial momentum to TKMS.

As of March 31, the company reported a record-high order backlog of €20.6 billion.

In the first half of the 2025/26 fiscal year, TKMS reported a 10% increase in revenue to €1.17 billion. While this remains substantially below the volumes recorded by German defense prime Rheinmetall—which grew its revenue by approximately 8% to €1.94 billion in the first quarter of 2026 alone—it highlights the broader defense boom lifting the naval specialist.

TKMS recently rose to 61st place in the Stockholm International Peace Research Institute (SIPRI) global ranking of the world’s largest defense contractors.

The company is anticipating further export orders. In late June, TKMS celebrated the christening of the third Tamandaré-class frigate being built for the Brazilian Navy in Itajaí, Brazil.

One vessel in the class has already been delivered, a second is scheduled to begin sea trials this year, and a fourth is currently under construction.

The Brazilian government is reportedly planning to place an follow-on order for an additional four TKMS frigates.

To manage this sharp increase in naval production, TKMS has been in ongoing negotiations to acquire the adjacent German Naval Yards facility in Kiel.

However, Rheinmetall has also expressed strong interest in acquiring the same shipyard to support its newly established maritime division.

US technology remains central to defense systems

TKMS is positioned to benefit heavily from domestic procurement programs initiated by the German Navy.

Following the cancellation of the F126 frigate project, TKMS secured contracts to build new MEKO A-200 class frigates as a rapid alternative.

The initial phase of the program involves the construction of four hulls at a cost of €6.63 billion, with a follow-on option for an additional four vessels valued at €5.3 billion.

These domestic surface combatant contracts, alongside the Canadian submarine program, are not yet reflected in the record €20.6 billion backlog reported on March 31.

Concurrently, development continues on the F127 next-generation frigate program, which TKMS is executing in partnership with the Naval Vessels Lürssen shipyard (acquired from Rheinmetall).

The German Navy currently plans to procure eight F127 frigates to serve as its primary air defense combatants over the coming decades.

Total program costs are estimated to exceed €26 billion, which naval analysts note makes the F127 the most expensive procurement project in German naval history.

However, the program has faced criticism regarding its planned air defense suite, which relies on Standard Missile interceptors and the SPY-6 radar system.

Both systems are manufactured by the US defense contractor RTX (formerly Raytheon), maintaining a significant degree of technological dependence on Washington.

Defense analysts point out that there are currently no equivalent European alternatives to these US systems, and note that Germany will remain reliant on US satellite and GPS networks for the next decade.

While a transition to European systems, such as the Iris-T interceptor family manufactured by Germany’s Diehl, could eventually offer strategic independence from the US, experts estimate that this technology will not be sufficiently mature for high-end naval air defense applications until the mid-2030s.

NATO allies on Tuesday announced defense industrial agreements worth tens of billions of dollars to acquire surveillance aircraft and advanced unmanned aerial vehicles.

“This is money well spent,” NATO Secretary General Mark Rutte said at the opening of a historic NATO summit held in Türkiye.

US President Donald Trump, who landed in Ankara on Tuesday afternoon for the summit, has previously characterized NATO as a “paper tiger” that could not function without US leadership and weaponry.

According to the Financial Times, Rutte announced the agreements on a stage featuring impactful videos and loud techno music, as he sought to convince Trump that European allies are serious about taking greater responsibility for the continent’s defense.

While several of the initiatives announced by Rutte involved major contracts with US companies, many were independent of them.

One of the most expensive items was an agreement to purchase up to 10 surveillance aircraft from a consortium led by Sweden’s Saab and Canada’s Bombardier.

The “GlobalEye” aircraft, which cost between $400 million and $450 million each, will replace NATO’s fleet of 14 AWACS early warning radar surveillance aircraft.

Micael Johansson, President of Saab, stated that the aircraft, early versions of which are already in service, could be delivered starting in 2030 if the agreement is finalized soon.

However, Rutte also announced that allies would purchase a maximum of five Northrop Grumman MQ-4C Triton high-altitude surveillance drones.

Norway, Finland, Germany, and Denmark signed a letter of intent to purchase these drones, which cost approximately $270 million each, according to recent procurement figures from the US Department of Defense.

“We need a transatlantic defense-industrial revolution. The hum of machinery must become a roar. The money is there, and much more is on the way. But this money needs to work… the security situation demands it,” Rutte said.

These high-profile defense industrial agreements follow Rutte’s visit to Washington late last month, which aimed to address US concerns that several European and Canadian nations were falling short of their defense spending commitments.

At the White House, Rutte presented a chart titled “The Trump Trillion,” which demonstrated that European and Canadian allies had increased their defense spending by $1.2 trillion since 2017.

However, Trump appeared largely unimpressed by Rutte’s presentation and expressed frustration that some NATO allies had refused to participate in the war with Iran. “We don’t need their money. I just want loyalty,” Trump said.

Ahead of the NATO summit, a senior US official noted that Trump had “pre-assessed the extent to which our allies are failing to meet their defense commitments, and he will deliver this message in person.”

The US official added that NATO allies must “be more capable” and “implement the Hague defense commitment as quickly as possible.”

The Hague commitment mandates allocating 5% of GDP to defense by 2035. Rutte stated on Monday that allies would be asked to present “clear, concrete, and credible plans” to achieve this target during the summit. He also warned that if there are countries that need to be persuaded, “we have our ways of doing so,” though he did not elaborate.

In addition to reassuring Trump, a senior European official said the objective behind this surge in defense agreements is to “increase our capacity, ensure interoperability among allies, and generally make progress in deterring anyone who intends to attack us.”

Nevertheless, some of the agreements highlighted the difficulties encountered in NATO’s efforts regarding the transatlantic co-production of new weapons.

German defense company Rheinmetall and US defense giant Lockheed Martin announced progress on a plan to produce rockets and missiles in Germany.

However, after months of discussions, this development fell short of the expectations expressed more than a year ago by Rheinmetall CEO Armin Papperger.

Those expectations included the licensed production of PAC-3 interceptor missiles for Patriot air defense systems, which have proven vital in protecting Ukrainian cities from Russian ballistic missile attacks.

Instead, the two companies only announced progress on ATACMS missiles, which represent a less high-tech product. The US is currently phasing out these missiles to replace them with a more technologically advanced successor.

In a separate announcement, plans were unveiled to establish a dedicated PAC-3 maintenance facility on European soil. However, the goal of producing PAC-3 interceptor missiles under license in Europe remained an elusive ambition.

Rather than offering a firm commitment, US Under Secretary of Defense Michael Duffey told reporters, “We remain open to the possibility of production outside the US.”

In a statement issued by London, the United Kingdom noted that 12 European nations, including the UK, France, and Germany, will spend more than $50 billion over the next decade to develop long-range precision weapons to strengthen NATO’s defense capabilities.

British Prime Minister Keir Starmer will announce the UK-led initiative in Ankara today, and the participating nations will issue a joint declaration containing additional details.

Turkish defense companies to cooperate with Palantir

ASELSAN, ROKETSAN, STM, and TÜBİTAK joined five major new multinational NATO programs during the 2026 NATO Summit held in Ankara.

Haluk Görgün, President of the Defense Industry Agency of Türkiye, announced that ASELSAN, ROKETSAN, STM, and TÜBİTAK will participate in the following five large-scale NATO programs:

• Strike Capabilities
• Integrated Air and Missile Defense (IAMD)
• Space and Surveillance
• Critical Materials for Defense Industry
• Unmanned Aerial Vehicle Superiority

In the strike capabilities program, Diehl of Germany and ROKETSAN of Türkiye are understood to be the primary suppliers. Participating countries in this program include Türkiye, Canada, the Czech Republic, Denmark, France, Greece, Italy, Norway, Slovakia, Sweden, and the United Kingdom.

The Integrated Air and Missile Defense (IAMD) program is viewed as a massive initiative with a budget of $26.27 billion. The IAMD program will contract ASELSAN, Raytheon, ROKETSAN, Anduril UK, Rheinmetall, Palantir, and Athea. The participating countries are Türkiye, Belgium, Denmark, Finland, Norway, Greece, and Romania.

Under the Space and Surveillance program, valued at approximately $4 billion, ASELSAN, Isar Aerospace, MLS, ROKETSAN, and TÜBİTAK have been contracted. The participants in this program are Türkiye, Canada, Denmark, Finland, Germany, the Netherlands, Norway, and Sweden.

US President Donald Trump’s outbursts against NATO allies, claiming “we spend all the money,” left a defining mark, particularly during his second presidential term.

At the 2025 summit in The Hague, member states pledged to allocate 5% of their annual GDP to defense by 2035. This marked a monumental leap from the 2% commitment made at the 2014 Wales summit.

This 5% commitment encompasses two primary categories of defense investment. The first is “core defense requirements”: allies agreed to dedicate at least 3.5% of their GDP to meeting baseline defense needs and fulfilling NATO Capability Targets, based on the agreed definition of NATO defense expenditure.

The second is “defense and security-related expenditure”: under this heading, member states will allocate up to 1.5% of their GDP to broader defense and security-related investments, such as protecting critical infrastructure, defending networks, ensuring civil preparedness and resilience, and strengthening innovation and the defense industrial base.

According to NATO’s own figures, European allies and Canada increased their defense spending by over $90 billion in 2025, representing an approximate 20% increase compared to 2024.

Official NATO reporting also indicates that European nations and Canada have steadily increased their collective defense investments over the past decade: rising from 1.4% of their total GDP in 2014 to 2.3% in 2025, culminating in a total investment of over $571 billion in defense spending this year.

According to NATO statistics, the United States consistently spends upwards of 3.5% to 4% of its GDP on defense. In absolute terms, of course, no single NATO power can match the expenditure of the American military.

Yet the issue of “burden-sharing,” which became highly visible during the Trump era, is not new. Setting aside the debates during the detente periods of the Cold War, American defense spending and public debt began to swell significantly in the late 1990s, spinning out of control in the wake of the invasions of Afghanistan and Iraq. Coupled with the rise of China and the US declaration of a military pivot to Asia, this ignited an open debate on how the “security architecture” of the Euro-Atlantic axis would transform.

Bush’s call

Attending the 2008 NATO summit in Romania, then-US President George W. Bush laid out a lengthy list of threats, primarily featuring Iraq and Afghanistan but also spanning Iran and Northeast Asia, before outlining the measures required to shield Europe from “missile threats.”

Bush stated:

“To build a strong NATO Alliance, a strong European defense capability is also essential. Therefore, at this summit, I will encourage our European partners to increase their defense investments to support both NATO and EU operations. America believes that if Europeans invest in their own defense, we will be stronger and more capable when we act together.”

Recently, an article written on behalf of the George W. Bush Presidential Center for the Ankara summit revisited the issue of “burden-sharing.” Authored by Elizabeth Kennedy Trudeau, a former State Department official, the piece references past debates, noting: “Today, it is abundantly clear that the endless debate over burden-sharing is no longer a theoretical issue, and that is also how the public perceives it.”

According to Trudeau, “Russia’s ongoing aggression against Ukraine,” “instability in the Middle East,” “China’s growing ambitions,” and emerging threat domains such as cyber threats, disinformation, and vulnerable supply chains have radically altered the geopolitical landscape. Consequently, NATO must adapt to this new reality.

Pointing out that European allies have increased their defense spending, the author welcomes the Continent’s steps toward assuming greater responsibility for “collective defense,” asserting: “This is not because the United States is pulling away from NATO; rather, a stronger Europe makes this powerful alliance even stronger.”

A sharp rebuke from Obama’s Defense Secretary Gates

However, the most scathing critique directed at the Old Continent from the US came during the presidency of Barack Obama.

In a university address, then-Defense Secretary Robert Gates argued that Europeans’ reluctance to employ military force was “limiting NATO’s ability to conduct effective military operations.”

At the time, redrafting the NATO alliance’s core strategic concept was on the agenda. In his speech, Gates called for sweeping reforms within the organization. He remarked that NATO’s success in preventing conflicts from erupting in post-WWII Europe had inadvertently fostered a new set of concerns:

“The demilitarization of Europe—where large swaths of the public and political class are opposed to military force and the risks that go with it—has gone from being a blessing in the 20th century to an obstacle to achieving real security and lasting peace in the 21st.”

Gates warned that unless NATO members maintained robust militaries and made the necessary budgetary commitments to modernize their forces, Europe would remain vulnerable to threats.

The Secretary stated, “Real or perceived weakness does not merely invite miscalculation and aggression; on a more fundamental level, the resulting funding and capability shortfalls make it difficult to act and fight together to confront common threats.”

Defining NATO as “a military alliance with real-world, life-and-death obligations,” Gates noted that the ongoing effort to “rethink and reshape” the alliance’s strategic mission came at a critical juncture.

“Currently, the alliance faces very serious, long-term, systemic problems. NATO’s budget crisis is but one example, and it is a symptom of deeper issues within NATO regarding how threat perception, requirement determination, prioritization, and resource allocation are handled.”

In a speech in Brussels the following year, Gates also criticized Germany for not participating in the NATO airstrikes aimed at toppling Muammar Gaddafi in Libya. He warned that patience was wearing thin in the US Congress toward Europeans who were reluctant to stand “on their own feet”:

“The blunt reality is that there will be dwindling appetite and patience in the U.S. Congress—and in the broader American body politic—to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense.”

It is worth recalling that an NBC report at the time remarked, “This assessment could prompt Europeans to question the future of their defense relationship with the US, upon which they have relied for much of their security over the past six decades.”

Moreover, the controversy erupted immediately after the withdrawal of an American combat brigade from Europe as part of a significant reduction in US troop levels on the continent.

During the Q&A session following his address, Gates also remarked that his generation’s “emotional and historical attachment” to NATO was “fading over time.”

Without naming them, Gates delivered a sharp critique of “countries apparently willing and eager for American taxpayers to shoulder the growing security burden left by cuts in European defense budgets.”

Warnings from Hillary Clinton

A similar theme was voiced by then-Secretary of State Hillary Clinton. Clinton observed, “NATO is turning into a two-tiered alliance, where the proportion of member states willing and able to pay for and bear the burden of collective defense is steadily shrinking.”

Intriguingly, this assessment closely mirrored remarks by former NATO Secretary General Anders Fogh Rasmussen at an annual national conference in Norway, where he noted that “the United States accounts for two-thirds of NATO’s defense spending.”

In her 2010 “Future of NATO” speech, Clinton stated:

“You will also hear this from Secretary Gates: despite historical and entirely understandable reasons why European countries have not yet committed to a level of per capita defense spending—not to the level we would like to see you reach, which is our level, but higher than where most of you are now—we believe this is a subject that must be discussed honestly. Because many of the infrastructure challenges we will face in the confrontation of these new threats—such as energy security or cybersecurity—will require member states to invest more so that we can network through NATO. It will be less about NATO doing the job than about member states coordinating and collaborating with their investments.”

Divergence in Europe

The impact of the 5% spending floor set at the Hague summit varies significantly across European states.

Reuters points out that two distinct groups have emerged since the decision: the first comprises Germany and mostly Nordic and Eastern European countries, which possess the fiscal flexibility to scale up spending; the second consists of several major actors struggling to achieve the same.

Guntram Wolff, a researcher at the economic think tank Bruegel, notes of Europe’s three largest economies after Germany: “The UK, for instance, cannot manage this. Neither can France, nor Italy.”

According to a draft budget obtained by Reuters ahead of Monday’s cabinet meeting, Germany will leverage a rule change exempting defense items from strict borrowing limits, doubling its spending to over 200 billion euros ($228.38 billion) between now and 2030.

Poland, Lithuania, and Estonia—countries where the perception of the Russian threat is most acute—have already made significant strides toward meeting the new targets. Warsaw, in particular, allocated 4.3% of its GDP to defense last year.

On the other hand, this initiative faces steep political and financial hurdles. Last week, Britain announced a plan for £15 billion in additional defense spending, to be partially funded by cuts in other areas.

However, it has emerged that a third of this sum remains unfunded, presenting an early budgetary headache for the presumptive new prime minister, Andy Burnham.

Meanwhile, Italian Prime Minister Giorgia Meloni is expected to announce at the summit that Rome will increase its core and non-core defense spending to 2.8% of GDP in 2026, despite carrying one of Europe’s heaviest debt burdens.

However, because rising military expenditures are unpopular with many voters ahead of next year’s general election, most of the increase will be covered by domestic security spending, such as policing duties.

France, through detailed plans unveiled in April, aims to increase its defense spending from the current level of around 2% to 2.5% of GDP by the end of the decade, all while trying to bring its overall budget deficit into alignment with Eurozone rules. With presidential elections on the horizon, how the Macron administration will generate this surplus remains a matter of curiosity.

The Spanish government, meanwhile, is not expected to waver in its commitment to cap defense spending at no more than 2.1% of GDP. Its plan is to redirect new resources largely toward technologies with civilian applications.

Furthermore, some countries appear to inspire little confidence at NATO headquarters: NATO officials have questioned claims by the Czech Republic, Slovenia, and Albania that they have met the old alliance target of 2% of GDP, requesting that these nations revise and resubmit their spending figures.