HALIFAX: Prime Minister Mark Carney has stressed the importance of working with North Atlantic Treaty Organisation (Nato) allies to defend against growing threats in the melting Arctic as he chose a German-Norwegian offer to build a new fleet of submarines for Canada’s navy.

Thyssenkrupp Marine Systems (TKMS) is the preferred supplier to build as many as 12 submarines, Carney said in a speech at a naval base in Halifax, Nova Scotia, where he stopped en route to the Nato summit in Ankara, Turkiye.

The German firm beat out South Korea’s Hanwha Corp in what the prime minister said was a close competition.

“As threats grow faster and harder to detect, Canada’s Arctic is becoming integral to the security of both North America and Nato’s western flank,” Carney said.

It’s Canada’s largest-ever military procurement, worth “tens of billions” of dollars, he added, with final numbers subject to negotiation.

Climate change means Canada’s Arctic is warming nearly three times faster than the global average.

This is “a shift that adversaries are actively looking to exploit”, said an accompanying statement from Carney’s office.

Carney captured global attention at the World Economic Forum in Davos in January with a speech arguing that democratic middle powers needed to work together to push back against coercive and aggressive actions by global superpowers.

On that same day, he said: “Russia is without question a threat in the Arctic. Without question. Russia does lots of horrible things.”

The prime minister, 61, has pursued closer integration with European defence initiatives as the United States under Donald Trump takes a more sceptical approach toward Nato.

TKMS won the bid with a submarine that will be “one of the stealthiest submarines in the world” and can travel underwater for 40 days in near-total silence, the government said.

It’s ideal for operations in Arctic waters and is compatible with vessels run by other Nato allies, Carney said.

The German company supplies a third of the alliance’s members, and the Type 212CD submarine that Canada chose is designed for maximum interoperability, the prime minister added.

German Defence Minister Boris Pistorius said the deal means there will be a shared fleet among allies of as many as 24 submarines, which can easily work together and be maintained at four different shipyards in the northern hemisphere.

“We’ve earned Canada’s trust today,” said Oliver Burkhard, chief executive officer of TKMS.

“Our job now is to prove that we deserve it.” Shares of TKMS surged more than 12%.

Canada only recently met Nato’s target of spending 2% of gross domestic product on defence after many years as a laggard, for which it has been repeatedly criticized by the United States.

Last year’s Nato summit set out a new target of 5% by 2035, including 1.5% in related investments.

Canada is on track to hit 4% by the end of the decade, Carney said.

“This is a major strategic project that will bind Canada, Germany and Norway together for decades,” German Chancellor Friedrich Merz said in a statement.

“It is a reflection of our long-term partnership, which extends far beyond security and defence policy.”

The Carney government’s expectation is that the submarine contract will also boost Canada’s industrial and technology base, potentially replacing some jobs that have been lost due to the trade war with the United States.

He said the province of Manitoba will see aerospace technicians build torpedoes for the subs, while Montreal will make simulators to train sailors.

A condition of the contract is that the total value of the government’s investment “must be matched here in Canada”, the prime minister said.

Canada plans to conclude commercial negotiations for the TKMS subs by the end of 2027 and, if successful, take first delivery of four submarines by 2034, under a contract eventually totalling as many as 12.

The timing marks an acceleration from the past schedule.

Canada reserved the right to shift talks to Hanwha if negotiations with TKMS fell through. — Bloomberg