Norway cancels naval missile contract with Malaysia, citing tightened export controls

Norway has revoked export licences tied to a naval strike missile system contracted for the Royal Malaysian Navy, citing the application of tighter national export control regulations that limit the transfer of sensitive domestically developed defence technologies to NATO allies and closest partners only. Malaysia is not a member of NATO.

The Norwegian Foreign Ministry confirmed the decision on 14 and 15 May 2026, describing it as regrettable and attributing it solely to Norway's export control framework rather than bilateral relations.

"Exports of some of the most sensitive Norwegian-developed defence technologies will be limited to our allies and closest partners," the ministry said in a statement quoted by the New Straits Times. Oslo added that it valued its relationship with Kuala Lumpur and sought a constructive dialogue on the matter.

A US$145 million contract signed in 2018 between Kongsberg Defence and Aerospace (KDA) and the Royal Malaysian Navy provided for the supply of Naval Strike Missiles (NSM) and associated equipment for six Maharaja Lela-class Littoral Combat Ships (LCS).

A separate agreement concluded in 2025, valued at US$11.19 million, covered the installation of NSM launchers on the navy's two in-service Lekiu-class frigates.

Malaysia has already paid nearly 95 per cent of the total 2018 contract value, amounting to more than RM500 million (US$127 million), according to Malaysian officials.

Force majeure invoked

Malaysian Ministry of Defence Secretary General Lokman Hakim Ali confirmed that Norway formally invoked force majeure to cancel the contract — a contractual clause that releases both parties from liability or obligation when extraordinary circumstances prevent fulfilment of agreed terms.

Malaysian officials were first informed of the cancellation at the Defence Services Asia Exhibition conference last month. Defence Minister Mohamed Khaled Nordin received what was expected to be a routine engagement with a Norwegian delegation headed by State Secretary Eivind Vad Petersson.

Instead, the delegation informed Malaysian officials that Norway's new export restrictions precluded KDA from supplying NSMs to any nation outside NATO and its partner countries.

Khaled said on Thursday that there was no indication Norway would reverse its position.

"So far negative," Khaled told the New Straits Times when asked whether Malaysia could still expect delivery of the missiles as originally agreed.

Anwar condemns Oslo's decision

Prime Minister Anwar Ibrahim formally conveyed Malaysia's "vehement objection" to the cancellation during a telephone call with Norwegian Prime Minister Jonas Gahr Støre.

Writing on Facebook, Anwar criticised what he described as Norway's "unilateral and unacceptable decision," stating that Malaysia had honoured all obligations under the contract since 2018.

"Signed contracts are solemn instruments. They are not confetti to be scattered in so capricious a manner," Anwar wrote.

He warned that Norway's decision would have grave consequences for Malaysia's defence operational readiness and for its LCS modernisation programme. He also framed the cancellation as carrying broader regional implications.

"If European defence suppliers reserve the right to renege with impunity, their value as strategic partners flies out the window," Anwar said.

Legal action and compensation

Khaled announced that the defence ministry had formed a special committee to assess the full scope of legal remedies available against KDA.

He said Malaysia's claim would not be limited to recovery of payments already made but would also encompass damages arising from the breach of contract.

"We are doing the computation right now — we would not only claim the amount that we have paid, but also the damages arising from the breach of contract," Khaled told reporters in remarks provided by the ministry to Reuters on Thursday.

Lokman, who was present at the meeting in which Norway communicated the cancellation, similarly confirmed that Malaysia would seek the return of all funds paid.

"We are very disappointed with the decision, and we will seek to claim back the money paid under the contract," Lokman said.

Khaled also said he expected to meet his Norwegian counterpart in Singapore later this month to seek further clarification on Oslo's decision to block the export licence.

US component restrictions may be a factor

An official speaking to US Naval Institute News indicated that Norway's revocation may be linked to a US-made gyroscope component used in the NSM, which the United States is now restricting from export to third parties. Gyroscopes measure orientation and rate of change in flight, allowing a missile to maintain its designated trajectory.

NSMs were originally scheduled for delivery to Malaysia in early March 2026. Malaysian officials were notified of unspecified delays before the full cancellation was communicated. The NSM is currently fielded by Norway, Australia, the Netherlands, Poland, the United Kingdom, and the United States.

Australia, which is also not a NATO member, is constructing a manufacturing facility for the NSM and its derivative, the Joint Strike Missile, with production expected to begin in 2027.

Alternatives under evaluation

The defence ministry is examining alternative weapons systems for the LCS programme, though Khaled cautioned that no immediate substitute was readily available.

"This is not like buying a car where the item is already available. These systems have to be ordered according to specifications, and they must be able to connect and communicate with other systems on the ship," Khaled said at a press conference on Thursday, as quoted by the New Straits Times.

Industry sources told US Naval Institute News that Malaysia is likely to consider arming the LCS with the Exocet surface-to-surface missile, manufactured by French defence company MBDA. The latest variant is the Block 3c, of which only Greece has so far received export approval.

Background on Malaysia's troubled LCS programme

The LCS programme has faced persistent difficulties since its inception. Boustead Naval Shipyard (BNS) won a contract in 2014 to construct six vessels based on French company Naval Group's Gowind-class corvette design, with the first ship initially projected for delivery in 2018.

The programme was effectively halted by the government in 2019 amid allegations of corruption. Subsequent disruptions included the COVID-19 pandemic and political instability that saw Malaysia cycle through three different administrations before late 2022.

In January 2023, the government decided to resume the programme but reduced the order from six ships to five and orchestrated a takeover of BNS, renaming the company Lumut Naval Shipyard. The future KD Maharaja Lela, the first ship in the class, is now scheduled for delivery in December 2026.

The weapons configuration for the LCS was itself a source of contention.

The government had preferred a combination of the Exocet surface-to-surface missile and a vertically launched Mica surface-to-air missile.

The Royal Malaysian Navy had recommended the NSM and Evolved Sea Sparrow Missile.

The ships were ultimately designed to accommodate the NSM and VL Mica configuration.