Malaysia seeks US$251 million after Norway blocks Naval Strike Missile export licence

Defence Minister Datuk Seri Mohamed Khaled Nordin said the government was seeking compensation for both direct and indirect losses arising from the cancellation.

“We are claiming both direct and indirect costs. The direct cost amounts to EUR126 million, which has already been paid, and we are also seeking substantial indirect costs, bringing the total claim to about RM1 billion (approximately US$251 million),” he said.

Mohamed Khaled spoke to reporters after inspecting progress on the littoral combat ship (LCS) project at Lumut Naval Shipyard located within the RMN base in Perak on Tuesday.

Substantial payments already made

The minister said the direct claim of EUR126 million represented approximately 95 per cent of payments already made under the RM634.7 million contract involving missile systems for the LCS fleet as well as two RMN vessels, KD Jebat and KD Lekiu.

According to Mohamed Khaled, Malaysia had fulfilled all contractual obligations before Norway unilaterally revoked the export licence.

“We have paid 95 per cent of the contract value. But at the final stage, based on the chronology of events, the Norwegian government cancelled the export licence for the system unilaterally,” he said.

He said Norway’s revised export policy now restricted the sale of sensitive defence technologies to NATO members and countries regarded as close strategic partners.

“They refused to issue the export licence because their new policy restricts the export of sensitive defence technology only to allies and close strategic partners,” he added.

Malaysia is neither a member of the North Atlantic Treaty Organization (NATO) nor among the alliance’s partner nations.

Warning to ASEAN partners

Mohamed Khaled said the decision had triggered concerns about the reliability of international defence commitments and should serve as a warning to Malaysia and other ASEAN countries when engaging with Norway in future procurement arrangements.

“When commitments can be cancelled unilaterally, confidence in the entire system will begin to erode,” he said.

“We hope ASEAN countries and nations that are not close allies of Norway will learn from Malaysia’s experience and avoid purchasing or dealing with Norway.”

The minister also said the Defence Ministry had been instructed to avoid future procurement from Norway.

“For the Defence Ministry, I have also reminded them that future purchases, whether ammunition or otherwise, should no longer be sourced from Norway. We must be cautious when procuring from countries that may take similar action against us,” he added.

Restrictions linked to US component

According to USNI News, the NSM developed by Norwegian company Kongsberg Defence & Aerospace incorporates a United States-made gyroscope component that is now subject to tighter export restrictions.

The gyroscope is used to measure and maintain orientation, helping the missile remain on course towards its target.

The US Naval Institute’s online publication reported that Norway’s tightened export restrictions meant Kongsberg could only export the missile system to NATO members and NATO partner countries.

Malaysia signed the NSM agreement with Kongsberg Defence & Aerospace in 2018 as part of efforts to modernise the RMN fleet.

Kongsberg describes the NSM as a subsonic missile capable of striking both maritime and land targets.

The missile is also equipped with sea-skimming capabilities and an “Autonomous Target Recognition” system designed to improve targeting accuracy.

Norway defends policy shift

Norway’s foreign ministry has defended the export restriction, saying Oslo had increased oversight over sensitive defence technologies.

In a statement issued earlier, the ministry said exports involving some of Norway’s “most sensitive” defence products would be limited to its “allies and closest partners”.

The ministry added that Norway continued to value its bilateral relationship with Malaysia despite the decision.

The move came despite Malaysian warnings that the cancellation could damage confidence in European defence suppliers.

Prime Minister Anwar Ibrahim criticised the revocation earlier this week, arguing that it undermined trust in international defence contracts.

“Contracts are not confetti to be scattered in so capricious a manner,” Anwar said.

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

Anwar also stressed that Malaysia had fulfilled all obligations under the agreement since it was signed eight years ago.

“Malaysia has honoured every obligation under this contract since 2018: scrupulously, faithfully and without equivocation,” he said.

Broader geopolitical implications

The dispute has emerged at a time when defence supply chains and export controls are increasingly shaped by geopolitical alignments and strategic partnerships.

Norway’s latest policy effectively limits access to certain advanced military technologies to countries within its preferred security network.

The issue also comes as other countries continue strengthening defence cooperation involving the NSM platform.

Australia recently signed a Memorandum of Understanding with Norway under a multilateral framework involving 10 other countries operating the Naval Strike Missile and Joint Strike Missile systems.

The arrangement is aimed at enhancing information-sharing and collaboration among participating nations.

Malaysia’s response signals growing concern within Kuala Lumpur over the risks associated with dependence on foreign defence suppliers whose export policies may change according to shifting political or strategic priorities.

The cancellation may also complicate future procurement planning for the RMN, particularly for the delayed littoral combat ship programme, which relies on integrated weapons systems originally intended to include the NSM platform.