Ashton
Member
On 14 May 2026, Norway confirmed what Malaysia's defence establishment had begun to fear. The export licence for the Naval Strike Missile — the centrepiece of a $145 million agreement signed in 2018 between Kuala Lumpur and Norwegian contractor Kongsberg Defence and Aerospace — had been revoked. The missiles were intended to arm six Maharaja Lela-class Littoral Combat Ships. More than 95 percent of the contract value had already been paid.
Malaysian Prime Minister Anwar Ibrahim condemned the decision in direct terms. "Signed contracts are solemn instruments. They are not confetti to be scattered in so capricious a manner," he said in a statement published on social media. Malaysia subsequently demanded $251 million in compensation, covering the contract value and additional costs including the dismantling of missile infrastructure, retraining of personnel, and redesign of combat systems built around the NSM as the primary anti-ship weapon.
An official speaking to US Naval Institute News indicated that Norway's revocation may be linked to a US-made gyroscope component in the NSM, which the United States is now restricting from export to third parties. According to The Online Citizen, Norway's tightened controls meant Kongsberg could only export the missile to NATO members and NATO partner countries. As Prime Minister Anwar Ibrahim noted in a statement to The Vibes, "If European defense suppliers reserve the right to renege with impunity, their value as strategic partners flies out the window."
The episode illustrates a structural problem that extends well beyond the Malaysia-Norway dispute. As the European Union implements its most ambitious defence financing mechanism to date, Asian nations are finding that the rules governing European arms procurement are becoming harder to navigate — and in some cases impossible to satisfy.
The Security Action for Europe instrument was launched in March 2025 as part of the ReArm Europe Plan and adopted by member states in May 2025. It provides up to €150 billion in low-interest, long-maturity loans to EU member states for the common procurement of high-priority defence equipment over the period 2025–2030. According to the European Council, procurement contracts funded under SAFE must ensure that no more than 35 percent of component costs originate from outside the EU, Ukraine, or countries that are part of the European Economic Area and the European Free Trade Association.
The instrument also requires, for equipment under its second capability category, that design authority reside in or be transferred to the EU. According to the International Institute for Strategic Studies, the full transfer of design authority over some types of equipment is likely to be a major impediment from the perspective of non-EU partners. Contractors and key subcontractors must be established in the EU, EEA-EFTA states, or Ukraine, with executive management located in these territories. Third-country control is prohibited unless specific mitigation measures are in place.
The IISS has assessed that SAFE's complex third-country rules could reduce procurement options and strain relations with allies. For Asian defence firms seeking to participate in European supply chains, or for Asian governments seeking to purchase SAFE-funded equipment, these requirements impose significant constraints. Modern weapons systems are integrated across international supplychains. The 35 percent rule, in practice, limits the extent to which Asian firms can contribute components to SAFE-eligible platforms.
The EU has provided a formal pathway for non-member participation. Under SAFE, countries that have concluded a Security and Defence Partnership with the EU may negotiate enhanced
participation terms. The EU has concluded such partnerships with Japan and South Korea. In principle, this offers Tokyo and Seoul a route into the mechanism.
In practice, the experience of countries that have already pursued this route gives cause for concern. Canada and the United Kingdom — among Europe's closest defence partners — applied for enhanced participation terms under SAFE. According to IISS research, unattractive terms and a limited timeframe proved insurmountable for the UK. Canada secured an agreement on 1 December 2025 — one day after member states were required to submit procurement plans to the Commission, leaving Canadian industry little opportunity to be factored into national plans. South Korea and Turkey were not invited to conduct formal negotiations at all, which the IISS notes suggests the European Council did not give equal consideration to all potential partners.
The costs of attempting to negotiate enhanced participation are themselves a deterrent. The process required potential partners to pay significant fees to secure participation terms, adding financial risk to an already uncertain outcome. For Japan and South Korea, whose Security and Defence Partnership status theoretically places them ahead of Canada in EU defence relations, the Canadian and British experience nonetheless signals that proximity and goodwill are insufficient to guarantee meaningful access on workable terms.
The Malaysia case exposes a further complication that SAFE's architecture does not resolve. European weapons systems are not always entirely European in their components. The NSM is a
Norwegian-designed and Norwegian-produced missile, but its navigation system incorporates an American-made gyroscope. When the United States restricted export of that component to third parties, Kongsberg had no ability to fulfil the contract. Norway's export control framework requires compliance with US re-export restrictions on American-origin components. Washington's decision became Oslo's obligation, and Oslo's obligation became Malaysia's loss.
This dynamic will not disappear under SAFE. The 35 percent non-EU component threshold technically permits some American-origin content in SAFE-funded systems, but that threshold does not override US export control law. An Asian country purchasing SAFE-funded European equipment that contains US-origin components — sensors, semiconductors, guidance systems — remains exposed to the same risk Malaysia encountered. A unilateral change in American export policy can render a European contract undeliverable. The EU has no mechanism to prevent this outcome.
Industry sources have indicated Malaysia may now pivot towards France's Exocet missile system as a replacement for the NSM. The irony is that Exocet, a French system, may itself contain components subject to American export controls. The underlying vulnerability — that European weapons systems depend on American technology that Washington can restrict at any time — is not resolved by switching suppliers within Europe.
Europe is expanding its defence industrial base at a pace not seen in decades. The SAFE instrument represents a genuine strategic investment in European autonomy. The EU's preference for Europeanand Ukrainian suppliers reflects considered policy choices made in response to real security pressures. From a European perspective, the logic is coherent.
From the perspective of Asian nations seeking stable, long-term defence partnerships, the picture is more complicated. The Malaysia-Norway crisis demonstrated that a legally binding, fully paid contract offers limited protection when US export controls intersect with European compliance obligations. SAFE's 35 percent rule, design authority requirements, and the difficulties encountered by Canada and the United Kingdom in accessing enhanced participation terms all point in the same direction. Japan and South Korea hold Security and Defence Partnership status with the EU, but status has not, on recent evidence, translated into predictable or favourable access.
The question Asian defence planners are now asking is not whether European technology is capable. It is whether European defence agreements, operating within a regulatory framework oriented primarily toward European strategic autonomy and Atlantic alliance structures, can be relied upon over the life of a contract. Malaysia's experience — a decade of planning disrupted, $251 million in demands, and six warships left without their primary weapon — is the clearest available answer to that question.
Malaysian Prime Minister Anwar Ibrahim condemned the decision in direct terms. "Signed contracts are solemn instruments. They are not confetti to be scattered in so capricious a manner," he said in a statement published on social media. Malaysia subsequently demanded $251 million in compensation, covering the contract value and additional costs including the dismantling of missile infrastructure, retraining of personnel, and redesign of combat systems built around the NSM as the primary anti-ship weapon.
An official speaking to US Naval Institute News indicated that Norway's revocation may be linked to a US-made gyroscope component in the NSM, which the United States is now restricting from export to third parties. According to The Online Citizen, Norway's tightened controls meant Kongsberg could only export the missile to NATO members and NATO partner countries. As Prime Minister Anwar Ibrahim noted in a statement to The Vibes, "If European defense suppliers reserve the right to renege with impunity, their value as strategic partners flies out the window."
The episode illustrates a structural problem that extends well beyond the Malaysia-Norway dispute. As the European Union implements its most ambitious defence financing mechanism to date, Asian nations are finding that the rules governing European arms procurement are becoming harder to navigate — and in some cases impossible to satisfy.
The Security Action for Europe instrument was launched in March 2025 as part of the ReArm Europe Plan and adopted by member states in May 2025. It provides up to €150 billion in low-interest, long-maturity loans to EU member states for the common procurement of high-priority defence equipment over the period 2025–2030. According to the European Council, procurement contracts funded under SAFE must ensure that no more than 35 percent of component costs originate from outside the EU, Ukraine, or countries that are part of the European Economic Area and the European Free Trade Association.
The instrument also requires, for equipment under its second capability category, that design authority reside in or be transferred to the EU. According to the International Institute for Strategic Studies, the full transfer of design authority over some types of equipment is likely to be a major impediment from the perspective of non-EU partners. Contractors and key subcontractors must be established in the EU, EEA-EFTA states, or Ukraine, with executive management located in these territories. Third-country control is prohibited unless specific mitigation measures are in place.
The IISS has assessed that SAFE's complex third-country rules could reduce procurement options and strain relations with allies. For Asian defence firms seeking to participate in European supply chains, or for Asian governments seeking to purchase SAFE-funded equipment, these requirements impose significant constraints. Modern weapons systems are integrated across international supplychains. The 35 percent rule, in practice, limits the extent to which Asian firms can contribute components to SAFE-eligible platforms.
The EU has provided a formal pathway for non-member participation. Under SAFE, countries that have concluded a Security and Defence Partnership with the EU may negotiate enhanced
participation terms. The EU has concluded such partnerships with Japan and South Korea. In principle, this offers Tokyo and Seoul a route into the mechanism.
In practice, the experience of countries that have already pursued this route gives cause for concern. Canada and the United Kingdom — among Europe's closest defence partners — applied for enhanced participation terms under SAFE. According to IISS research, unattractive terms and a limited timeframe proved insurmountable for the UK. Canada secured an agreement on 1 December 2025 — one day after member states were required to submit procurement plans to the Commission, leaving Canadian industry little opportunity to be factored into national plans. South Korea and Turkey were not invited to conduct formal negotiations at all, which the IISS notes suggests the European Council did not give equal consideration to all potential partners.
The costs of attempting to negotiate enhanced participation are themselves a deterrent. The process required potential partners to pay significant fees to secure participation terms, adding financial risk to an already uncertain outcome. For Japan and South Korea, whose Security and Defence Partnership status theoretically places them ahead of Canada in EU defence relations, the Canadian and British experience nonetheless signals that proximity and goodwill are insufficient to guarantee meaningful access on workable terms.
The Malaysia case exposes a further complication that SAFE's architecture does not resolve. European weapons systems are not always entirely European in their components. The NSM is a
Norwegian-designed and Norwegian-produced missile, but its navigation system incorporates an American-made gyroscope. When the United States restricted export of that component to third parties, Kongsberg had no ability to fulfil the contract. Norway's export control framework requires compliance with US re-export restrictions on American-origin components. Washington's decision became Oslo's obligation, and Oslo's obligation became Malaysia's loss.
This dynamic will not disappear under SAFE. The 35 percent non-EU component threshold technically permits some American-origin content in SAFE-funded systems, but that threshold does not override US export control law. An Asian country purchasing SAFE-funded European equipment that contains US-origin components — sensors, semiconductors, guidance systems — remains exposed to the same risk Malaysia encountered. A unilateral change in American export policy can render a European contract undeliverable. The EU has no mechanism to prevent this outcome.
Industry sources have indicated Malaysia may now pivot towards France's Exocet missile system as a replacement for the NSM. The irony is that Exocet, a French system, may itself contain components subject to American export controls. The underlying vulnerability — that European weapons systems depend on American technology that Washington can restrict at any time — is not resolved by switching suppliers within Europe.
Europe is expanding its defence industrial base at a pace not seen in decades. The SAFE instrument represents a genuine strategic investment in European autonomy. The EU's preference for Europeanand Ukrainian suppliers reflects considered policy choices made in response to real security pressures. From a European perspective, the logic is coherent.
From the perspective of Asian nations seeking stable, long-term defence partnerships, the picture is more complicated. The Malaysia-Norway crisis demonstrated that a legally binding, fully paid contract offers limited protection when US export controls intersect with European compliance obligations. SAFE's 35 percent rule, design authority requirements, and the difficulties encountered by Canada and the United Kingdom in accessing enhanced participation terms all point in the same direction. Japan and South Korea hold Security and Defence Partnership status with the EU, but status has not, on recent evidence, translated into predictable or favourable access.
The question Asian defence planners are now asking is not whether European technology is capable. It is whether European defence agreements, operating within a regulatory framework oriented primarily toward European strategic autonomy and Atlantic alliance structures, can be relied upon over the life of a contract. Malaysia's experience — a decade of planning disrupted, $251 million in demands, and six warships left without their primary weapon — is the clearest available answer to that question.
