Navy works to stall submarine deal with Taiwan

Last summer, the U.S. Navy billed the Taiwan government $2.5 million to cover the cost of a little-known operation dedicated to helping Taipei close a ground-breaking arms deal to acquire eight American-made diesel submarines.

But after investing about $8 million since 2001, Taiwan refused to pay, despite Navy warnings in two August 2005 memos that it would shut down its submarine "pre-selection" operation without more money, a move sure to trigger long delays and higher costs.

When President Bush approved Taiwan's request for arms in April 2001, the weapons deal was heralded as a turning point in U.S. relations with the Taiwan government, which clamored for years to augment its four aging submarines -- two of them World-War II-era boats from U.S. shipyards -- to deter China's rapidly strengthening navy.

But five years later, the U.S.-Taiwan submarine deal has run aground, with responsibility for the situation resting in both Taipei and Washington.

For its part, Taiwan has failed more than 40 times to appropriate $12 billion for the subs amid a continuing political battle over the costs and need for submarines, as well as fears of provoking China.

But on this side of the Pacific, Navy officials have played a central role in actively stalling the deal. Their resistance to diesel submarine exports has been tacitly accepted by Pentagon and other administration officials, whose growing indifference has helped to lock the deal in neutral.

"As this has lagged and support has started to wane within the administration, those in the Navy that wanted to make this difficult, I think, are subtly running a rearguard action of sorts and not being as helpful as they could to get the deal across the finish line," said Randy Schriver, the State Department's East Asia point man when Colin Powell was secretary.

Republican Rep. Rob Simmons, whose Connecticut district includes General Dynamics' Electric Boat division, blames the delay on "bureaucratic problems on both sides," and has chastised the Navy brass almost as often as he has traveled to Taiwan to try to jumpstart the deal.

Publicly, the Navy backs the submarine sale, and senior officials say they are poised to carry it out once Taiwan appropriates money. "The Navy is supporting this deal, in accordance with what the president signed in 2001," a spokesman said.

But the Navy, with a long history of blocking diesel submarine exports, has erected barriers to make the submarines economically unattractive, and perhaps even unfeasible, for Taiwan, according to several former administration officials.

An independent cost estimate sought by the Navy in 2002 put the price tag for eight submarines at about $12 billion -- an amount far higher than earlier, unofficial estimates and one quickly decried by Taiwan officials as exorbitant.

Meanwhile, the Navy has steadfastly required Taiwan to appropriate all the money for the submarines up front, before the Taiwanese inspect the design. Indeed, one of the August 2005 memos obtained by CongressDaily said the Navy intends to move ahead with the deal "as soon as Taiwan commits to a level of funding consistent with the program's cost estimate."

"You make it pretty impossible when you go to a foreign government and say you have to fund the entire [program] without actually seeing a design," said Dan Blumenthal, the Pentagon's former senior country director for China and Taiwan. "The effect of that is to freeze the program."

Additionally, senior defense officials limited Taiwan's role on the submarine program to repair and maintenance in 2004, shooting down Taiwan's efforts to create jobs domestically by co-producing the submarines.

The Navy's chief concern, according to the former officials, is a widespread fear that moving forward with the Taiwan submarines could dismantle the all-nuclear submarine force. If U.S. shipbuilders, none of whom have built a diesel submarine in more than 40 years, returned to the diesel business, the Navy worries a budget-minded Congress would choose less expensive, but also less capable, boats for the U.S. fleet.

Many U.S. officials also prefer that Taiwan instead buy P-3C maritime patrol aircraft as well as PAC-3 antimissile systems approved in a later deal. The Pentagon has increasingly viewed those technologies as far more necessary for Taiwan's defense in the event of a China offensive.

"The individuals that are involved in this complex, very time-intensive project feel that there are better priorities, given Taiwan's defense situation," said Therese Shaheen, who served from 2002 to 2004 as the Washington-based chairwoman of the American Institute in Taiwan, which the U.S. government operates in lieu of an embassy.

Despite Navy resistance, most former officials agree that Taiwan could help put the deal in motion by appropriating the funds. Indeed, Pentagon officials are growing frustrated that Taiwan will not pass a defense budget that is "close to meeting Taiwan's defense needs," Shaheen said.

Simmons, a fluent Mandarin speaker who was stationed in Taiwan as a CIA officer in the 1970s, traveled to Taiwan in February to outline a compromise funding plan he believes makes the deal more affordable.

He has suggested Taiwan pay about $225 million for the submarine design now, and pay the billions to produce and buy the boats later. His goal is to secure a financial commitment from Taiwan to allow U.S. industry to begin the sub design.

"Once [the design] is done, then you know what you're getting with the rest of your money," Simmons said. "I see a huge problem with trying to sell the whole enchilada."

Taiwan's military wants the legislature to accept the Simmons plan, but a former U.S. government official with direct knowledge of the deal says Navy officials continue to require the full $12 billion appropriation before they will proceed.

Experts agree the Navy would drop its delaying tactics only if pressured to do so. "The Navy will need congressional and administration leadership in finding creative solutions for the submarine program, or the current course will continue," Blumenthal said.