India and Germany on verge of $8 billion submarine agreement

Germany and India are hammering out the details of a submarine manufacturing deal worth at least $8 billion — the largest-ever defense agreement for New Delhi, according to officials with direct knowledge of the details.

The agreement, negotiated ahead of Chancellor Friedrich Merz’s visit to the South Asian nation next week, would for the first time include technology transfer for submarine production, the people said.

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India’s navy operates about a dozen aging Russian submarines and six new French-made models. If the deal under discussion goes ahead, India would scrap plans to buy three more French subs, the people said.

Germany’s Thyssenkrupp Marine Systems GmbH and Indian state-owned Mazagon Dock Shipbuilders Ltd. will work together to manufacture the vessels, said the people, who asked not to be named discussing confidential information.

Merz, on his maiden visit to India, will meet with Prime Minister Narendra Modi for talks in the western Indian state of Gujarat on Monday before flying to the technology hub of Bengaluru to see German companies there, a German government spokesman said.

The two countries are likely to increase cooperation in the pharmaceuticals sector as well as defense, the people said. Merz also plans to use his talks with Modi to speed up broader negotiations between the European Union and India on a free-trade agreement.

It will be Merz’s first trip abroad with a large delegation of German CEOs. The chancellor is expected to visit China with another business delegation in coming weeks, though there is no date fixed yet with Beijing.

The new submarines will be equipped with air-independent propulsion systems, which increase the boats’ endurance and allows them to remain submerged longer than with diesel-electric propulsion, the people said. The vessels will add to New Delhi’s ability to police the vast waters of the Indian Ocean region as China asserts its presence there.

A spokesperson for Thyssenkrupp Marine Systems declined to comment. India’s Ministry of Defense and Ministry of External Affairs did not immediately respond to a request for a comment.

The deal shows a deepening of defense ties between the two nations and is aided by a combination of factors.

New Delhi has long been encouraging global defense manufacturers to partner and share technology with Indian entities to ramp up weapons manufacturing there. The Modi government blocked the import of most defense platforms, including fighter jets, helicopters, artillery and warships, to encourage foreign weapons makers to shift production lines to India in 2020.

Even so, India is the second-largest importer of military hardware globally, sourcing most of its equipment from Russia, according to the Stockholm International Peace Research Institute, an international think tank that tracks weapons purchases.

Germany’s defense industry kicked into high gear after the Russian invasion of Ukraine. Berlin’s decision to share technology to make one of the most complex military platforms is also aimed at reducing India’s dependence on Russia for weapons, the people said.