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Understanding the Australian Submarine Deal: What AUKUS Means for Each Country

A submarine contract and an intelligence alliance

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The military and defense deal including the United States, the United Kingdom and Australia for an Indo-Pacific alliance leaves some countries like New Zealand or Canada apart. France feels betrayed while China sees it the AUKUS as a Cold War mentality.

On September 15 and 16, the heads of the United States, the United Kingdom and Australia remotely joined together to announce a new military pact: the AUKUS. Here is what is all means.

Submarine

What is included in AUKUS?

The alliance aims at enhancing the countries’ “joint capabilities and interoperability” with a “focus on cyber capabilities, artificial intelligence, quantum technologies, and additional undersea capabilities.”

But the main constituent of the deal is the construction of nuclear-powered submarines for Australia.

This involves a share of knowledge and technology from the U.S. and the U.K. to Australia, so that it can build nuclear-powered submarines. The quantity of submarines bought by Australia remains unclear. The next 18 months will be a consultation period to determine the elements of the program, so the construction and the delivery is not going to happen anytime soon. Australia’s defense minister anticipates delivery for the end of the 2030s.

This will be one of the most complex and technically demanding projects in the world, lasting for decades and requiring the most advanced technology“, said Boris Johnson, the U.K. prime minister.

Sharing nuclear technology is rare. The U.S. had only shared its nuclear propulsion technology with the UK in 1958. Australia will become only the seventh country in the world with nuclear reactors propelling submarines.

Nuclear submarines but no nuclear weapons

Building these submarines will take years and will not be operational before 2030. Moreover, Australia needs to ramp up its knowledge on the technology with the support of its two allies. As Australia has no domestic nuclear power, it would need to learn how to manage nuclear waste for instance.

This Indo-Pacific alliance also includes weapons such as the Tomahawk cruise missiles, air-to-surface, long-range anti-ship, and precision strike missiles. Australia will build a plant to be able to manufacture weapons on its soil.

But all three leaders insisted the deal didn’t include nuclear weapons. “Australia is not seeking to acquire nuclear weapons or establish a civil nuclear capability” the Australian prime minister, Scott Morrison, clarified.

This deal also means Australia breaks a contract with France, one of the largest military agreements in the world, in which they were involved since 2016. It was going to provide 12 submarines, based on diesel-electric power.

A dramatic change of strategy with an ironic twist

Nuclear-propelled submarines do not require to refuel and can stay longer underwater. “The beauty about this sub is that for about 35 years through the life of it, you don’t have to change the reactor“, minister of defense Peter Dutton answered on Australian media.

On the other side, diesel-based submarines are usually smaller, quieter, and harder to detect. Peter Jennings from the Australian Strategic Policy Institute, underlined the irony of the decision and the abrupt change of stategy: “Six year ago, Australia essentially selected a new nuclear-designed submarine and spent several hundreds million dollars working on changing that nuclear-propulsion capability to a conventional capability.

The Australian government also announced a AU $6.4 billion (US $4.7 billion) investment for upgrading its current submarines and $5.1 billion to improve destroyers’ combat management systems, which would support about 1,300 and 300 jobs in South Australia.

But overall’s job creation is unclear on the Australian part as the future of the current collaboration is not defined. Among other jobs, about 500 people, mainly Australians, were already working on Adelaide’s site in Naval Group, the company in charge of designing and building the diesel submarines.

What AKUS means for the U.S. and U.K.

For the U.S. and the U.K., this alliance is both an economic and political opportunity. But they mainly put the trilateral pact as an imperative to ensure “peace and stability in the Indo-Pacific over the long term”.

We need to be able to address both the current strategic environment in the region and how it may evolve. Because the future of each of our nations — and indeed the world — depends on a free and open Indo-Pacific enduring and flourishing in the decades ahead”, explained the U.S. president Joe Biden.

Although there was no mention of China in the briefing, most media report a message sent to Beijing. It reinforces their presence in the Indo-Pacific and is perceived to be a message for China.

More U.S. troops will be set in Northern Australia.

As the preparations for the deal would take 18 months, submarines will not be delivered before the end of the the 2030s. But it provides a muscled message to China on the short-term.

An economic opportunity but details to be explored

It is also an economic opportunity for the Anglo-Saxons. As Boris Johnson pointed out during the joint press conference, it will create “hundreds of highly skilled jobs across the United Kingdom, including in Scotland, the north of England, and the Midlands“.

However, neither leader laid out economic details right during the announcement but the Toma hawks sales and the cyber-security partnerships will economically benefit the U.S. and the U.K.

The combat systems included in the previous contract was built by an American company.

What AKUS means for Australia

For Australia, these submarines, which will take years to build, mean a more powerful navy force as it needed to renovate its fleet.

But the announcement also means breaking the Future Submarine program, a contract with France signed in 2016. The contract, which included 12 submarines, was criticized in Australia, mostly because of its extensive military investment.

Delays and cultural differences

Along with 12 submarines, 54 new naval vessels were also part of Australia’s overall investment, worth AU $90 billion (€56 billion). On top of that, maintenance until 2080 would cost about AU $145 billion (€90 billion).

But the discussions with the French group weren’t smooth.

Last June, the Australian prime minister Scott Morrison met the French president Emmanuel Macron after a G7 meeting in London to discuss the contract. The Defense department already considered a possible withdrawal and alternatives.

The French defense minister and the Australian prime minister at Naval Group to sign the Strategic Partnership Agreement in 2019
The French defense minister and the Australian prime minister at Naval Group to sign the Strategic Partnership Agreement in 2019 | @Naval Group

In 2019, Florence Parly, the French minister of armed forces, explained the frustration came from cultural differences between an Anglo-Saxon and a Latin country.

Concerns over delayed delivery have also been growing over time. Australia wondered whether it would need to further renovate its old fleet before receiving the submarines, which they announced shortly after the AUKUS deal. The Australian government will upgrade their current Collins class submarines and Hobart class destroyers before the nuclear submarines get delivered.

Billions already spent; several millions in compensation

Australia has already spent AU $2.4 billion (US $1.7 billion) in the last five years working on the program.

Moreover, financial penalties for Australia for breaking the contract could be around €90 million (AU $145 million in 2021)

Between 2016 and 2019, Naval Group worked on the concept design; Australia didn’t buy an off-the-shelf military equipment. In late 2018 until 2020, the Preliminary Design was supposed to start, following with the Detailed Design phase.

In March 2019, later than the original schedule, the Australian defense minister at the time, Christopher Pyne, signed the Submarine Design Contract with Naval Group. Worth AU $605 million (€361 million), the deadline for the first phase was set on January 2021.

However, Australian authorities didn’t accept the proposed design and gave until September 2021 to complete the first phase. They never accepted it.

And according to ABC, leaked documents revealed the breaking clauses signed in the Strategic Partnership Agreement in 2019, a contract providing the framework for the relations between the entities until 2056.

If the Defense department decided to stop the deal after completion of the Preliminary Design, Naval Group would receive €90 million (AU $140 million). If Naval Group had delivered a detailed design – the second phase – the compensation would have been much more expensive: €250 million (AU $404 million).

For Australia, it is almost a start over as the next 18 months will be another consultation period to determine the elements of the program. Nevertheless, technology transfer started in 2018 and already benefited Australia.

Also, nuclear submarines will be built in Adelaide, where Naval Group’s subsidiary for the program was settled, and where the building infrastructure was getting prepared – the first sod was turned in 2018.

What AKUS means for France

When Florence Parly, the French armed forces minister, signed the deal with her Australian counterpart and the Scott Morrison in 2019, she called it the “deal of the century.

Australian’s defection is now a “punch in the back” for the French minister of foreign affairs, Jean-Yves Le Drian, “angry” at the situation. Trust is broken” with Australia, he added.

For the Australian prime minister, he “understands” France’s disappointment but explains “it was a good submarine but it was a conventional submarine. It no longer met our needs and we had to do what was best for our national interests“.

As France complained that Australia’s behavior was not correct, Scott Morrison argued French authorities were told the night before the announcement.

For France, a diplomatic incident on top of an economic disappointment

The company Naval Group stateda major disappointment […]. The analysis of the consequences of this sovereign Australian decision will be conducted with the Commonwealth of Australia in the coming days.

France is also bitter against the Americans, and Joe Biden: “this brutal, one-sided and unpredictable decision reminds me in many ways of what Mr. Trump would do“, the minister of Foreign Affairs added.

On Friday, a party at the French Embassy in Washington celebrating a joint naval victory over the British Army during the American civil war was cancelled.

With France, it is also the European Union who feels sidelined in the Indo-Pacific, where “the world’s centre of gravity is moving both in geo-economic and geo-political terms” declared Josep Borrell, the EU’s foreign policy chief. Unaware of the deal until the announcement, “our strategy is of cooperation, not confrontationhe further stated.

What AKUS means for Canada and New Zealand

New Zealand will not accept Australian submarines in their waters

New Zealand and Canada were not part of the deal, and some critics in the country felt and wondered why their nations were left behind from some of their closest allies.

Indeed, along with the U.S., the U.K. and Australia, these two countries form the Five Eyes group, a multilateral intelligence alliance between the U.S., U.K., Canada, Australia and New Zealand

New Zealand was not aware of the new defense pact unveiled by their friends. “We were not approached nor did I expect us to be“, answered the prime minister Jacinda Ardern.

The Pacific island, whose region suffered from nuclear tests in the past, has a zero-nuclear policy. As such, Australian submarines will be banned from New Zealand waters.

The prime minister also minimized the importance of being part of the discussions. “This is not a treat-level arrangement. It does not change our existing relationships, including the Five Eyes or our close partnership with Australia on defense matters. […] Prime minister Morrison was very well aware that New Zealand was unlikely to be interested in building nuclear-powered submarines“.

Canada didn’t ban Huawei from operating on its territory

It also reflects their positions in the Five Eyes and their politics with China. Both New Zealand and Canada were softer against Beijing than the other members. In March 2021, New Zealand didn’t want to expand the role of the collaboration into including stances on human rights. It had also declined signed a joint statement denouncing the Chinese national security legislation in Hong Kong.

Canada is the last of the five without a policy to ban or restrict Huawei from its 5G network despite a diplomatic beef with China.

Canada has been detaining Huawei’s chief financial officer since 2018 on a U.S. warrant. Her extradition to the U.S. to face fraud and conspiracy charges is still at stake. Few days after the arrest, a Canadian businessman and a former Canadian diplomat were detained in China.

As Canadians vote for legislative elections on September 20, Erin O’Toole, the conservative leader and opponent of Justin Trudeau vowed to take a tougher line with China. If he wins the election, O’Toole said he would push to join the alliance.

Lijian Zhao, spokesman of the foreign ministry of China
Lijian Zhao, spokesman of the foreign ministry of China

What AKUS means for China

The deal is supposed to bring peace and stability from one side whereas it takes a hit from the Chinese perspective.

China is the first commercial partner of Australia. However, relations between both countries have been difficult recently.

In 2019, Australia experienced cyber-attacks originating from a state, highly suspecting China to be behind it. The alliance on cybersecurity is also a way help Australia fight online threats as most of its spy and counter intelligence migrated activities online.

More recently, Australia also asked for an inquiry on the origins of Covid-19 and Beijing blocked Australian beef imports.

Chinese territorial claims get more pressing

And Peter Dutton, nominated as Australia’s new defense minister last March, has been having a tougher line against China than his predecessors.

Media have reported the collaboration as a move against China’s territorial appetite. In fact, China increased its territorial pressure on Taiwan and the South China Sea.

When the Philippines wanted to recall an agreement with the U.S. providing the Americans a military presence in Asia, China took the opportunity to bring ships in a Philippine territory contested by Beijing. Duterte was yet more enclined to deal with Chinese before, but he made a u-turn on his decision and decided to continue with the U.S. military operations to protect the Philippine part of the South China Sea.

On September 10, the Financial Times reported that the U.S. were considering a request from Taipei for renaming their de facto embassy from the Taipei Economic and Cultural Representative Office to the Taiwan Representative Office.

A decision that could bring the ire to Beijing as it would make a step towards the recognition of Taiwan whereas the U.S.’s Taiwan Relations Act of 1979  defined a non-diplomatic relation with the people of Taiwan.

Few hours after commenting the AUKUS deal, Maoh Li, the spokesman of the ministry of Foreign Affairs in China insisted that: “Taiwan is part of China. China must and will be reunified. This historical trend cannot be stopped by any force. We warn the Taiwan authorities that any attempt to seek independence and reject unification is doomed to fail.”

For Beijing, AUKUS reflects a Cold War mentality

About the AUKUS, the Chinese foreign ministry spokesperson Zhao Lijian said that “the cooperation between the United States, Britain and Australia on nuclear submarines has seriously undermined regional peace and stability, intensified the arms race, and undermined international nuclear non-proliferation efforts.”

The country also considers the nuclear-based engines is “highly sensitive” and questions “Australia’s adherence to nuclear non-proliferation” treaties.

It also added they “should abandon the outdated Cold War zero-sum mentality“.

On Tuesday, before the announcement, the Chinese foreign minister Wang Yi also used the reference to the Cold War. It reacted to a question about the potential inclusion of South Korea into the Five Eyes collaboration, calling it a “product of the Cold War” Wang Yi, China’s foreign minister.

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