MALAYSIA will enter formal negotiations with Norwegian defence giant Kongsberg Defence & Aerospace in mid-August to seek an amicable settlement over the abruptly cancelled Naval Strike Missile (NSM) procurement contract, following legal advice from the Attorney-General's Chambers.
The high-stakes talks come after Defence Minister Datuk Seri Mohamed Khaled Nordin delivered a stinging rebuke to Oslo in parliament, questioning how the global community could ever trust international commitments if a nation synonymous with the Nobel Peace Prize was prepared to disregard its agreed obligations.
Putrajaya has already slapped Kongsberg with a formal notice of demand seeking 226.1 million Euros, equivalent to approximately RM1.05 billion. The massive compensation claim covers substantial advance payments alongside direct and indirect losses incurred after the Royal Malaysian Navy was left without its primary surface-to-surface strike capabilities just weeks before scheduled delivery.
The dispute erupted on 4 February when Kongsberg informed the Ministry of Defence that the Norwegian government had suspended the export licences. Oslo later made the ban permanent under a restrictive new policy that limits the advanced missile systems exclusively to members of the North Atlantic Treaty Organisation and select allied nations.
Kongsberg has sought to classify the sudden intervention by its home government as a force majeure event beyond corporate control. However, the explanation has done little to appease the Malaysian government, given that Malaysia had acted in complete good faith and already paid €129.8 million, which represents 95 per cent of the total contract value.
In a ministerial statement to the Dewan Rakyat, Khaled made it clear that the government is prepared to exhaust negotiations before escalating the matter to international courts.
"The government's priority is a solution that delivers the best outcome, saves time and is in line with the country's interests," the Defence Minister said.
He confirmed that the upcoming mid-August sessions would rigidly dissect the status of the contracts, Malaysia's right to compensation, Kongsberg's remaining obligations, and the appropriate legal or commercial paths moving forward.
The minister stressed that Malaysia had fulfilled every single line of its contractual obligations, making the sudden European U-turn a severe breach of bilateral confidence.
"Malaysia has fulfilled all payment obligations under the contract and acted transparently with complete trust in its strategic partner," Khaled said, adding that Oslo's unilateral move diminished the importance of Malaysia as a sovereign partner.
"The Norwegian Government has shown no respect whatsoever for the spirit of friendship and cooperation that Malaysia has demonstrated over many years. The Malaysian Government is deeply regretful and disappointed by Norway's actions. Even more concerning, this decision creates an entirely unacceptable and highly damaging precedent."
"If a country long regarded as a champion of peace and synonymous with the Nobel Peace Prize is prepared to disregard commitments that have already been agreed, then can international commitments still be relied upon, trusted and respected by the global community?" he asked.
The strategic fallout has triggered an intense diplomatic counter-offensive from the highest levels of the Malaysian state. On 11 May, Prime Minister Datuk Seri Anwar Ibrahim personally contacted his Norwegian counterpart to register Malaysia's deep disappointment and lobby for a reversal of the export ban. Parallel diplomatic pressure has been applied through Foreign Minister Datuk Seri Mohamad Hasan and high-level defence channels, though Oslo has refused to budge on its NATO-centric export policy.
The financial roots of the failed procurement stretch back fifteen years. The Royal Malaysian Navy selected the Naval Strike Missile system in 2011 following exhaustive technical trials, eventually signing a principal acquisition agreement in 2018 worth €128.7 million to equip its troubled Littoral Combat Ship programme. A secondary contract for two launcher systems was signed in 2023 for €1.19 million, bringing the total combined value of the missile package to €137.91 million, or about RM642.6 million.
With deliveries originally locked in for March this year, the sudden loss of the weapons has forced the military to scramble for alternatives to prevent a critical vulnerability in national waters.
Khaled confirmed that the dispute extends far beyond commercial numbers, affecting strategic national interests, public funds, and the immediate operational readiness of the fleet.
To rectify the gap in naval defences, the Ministry of Defence has ordered immediate technical evaluations of alternative surface-to-surface missile systems from rival international suppliers. Those naval assessments are projected to finish by the end of this month, allowing the cabinet to choose a replacement system while legal teams concurrently battle Kongsberg for financial restitution in August. - July 6, 2026
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