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[LatelineNews: 2003-7-16] WASHINGTON - The Pentagon may urge Taiwan to buy surplus submarines on the world market rather than build new ones despite stiff Chinese opposition to any such arms deals, U.S. government and industry officials said on Wednesday.

Building from scratch for Taiwan is only one of "several options that we're considering," said Navy Lt. Commander Jeff Davis, a Pentagon spokesman. The other options "don't involve new construction," he added.

"They're (Pentagon) thinking of buying used (submarines)," said an official of General Dynamics Corp. (GD.N), which had been set to vie for the submarine work with three other big U.S. defense contractors — Lockheed Martin Corp. (LMT.N), Raytheon Co. (RTN.N) and Northrop Grumman Corp. (NOC.N).

Buying refurbished submarines would be much cheaper than building new ones and could lead to earlier deployment. It might also overcome a deadlock in Taiwan's legislature over approving start-up funding for a design competition among the would-be U.S. suppliers.

According to the authoritative Taiwan Defense Review, second-hand submarines promoted to Taiwan in the past include four from the Indian navy, eight from the Italian navy and two ex-Royal Dutch Navy Zwaardvis-class boats.

In addition, at least three surplus Russian KILO-class units were being offered through intermediaries, the defense review reported in its May 30 issue.

All of the second-hand submarines could be modernized with U.S.-supplied electronics systems and updated weapons capabilities.

Until now, Pentagon officials had not spoken publicly of anything other than helping Taiwan build up to eight conventional submarines — a purchase the U.S. Congressional Research Service has estimated could cost $4.5 billion.

In April 2001, President George W Bush approved Taiwan's request for help in obtaining them as part of the biggest proposed arms package for the island in a decade.

The United States has not manufactured diesel submarines for nearly 50 years, sticking to nuclear-powered ones.

Pentagon officials have urged Taiwan to give missile defense a higher priority than anti-submarine warfare to counter the threat of missiles from China.

Taiwan appears to have put off obligating funds for the planned submarine competition from 2004 to 2006, Rear Adm. John Butler, the Navy program executive officer for submarines, told reporters in Washington last week.

The original schedule called for construction of the submarines to start in 2006, with deliveries starting in 2010. Reuters