On December 14 the US Congress passed the 2023 National Defense Authorization Act (NDAA) that includes further detail about the AUKUS agreement. The entire document is a massive 4,409 pages, covering everything from the acquisition of B-21 bombers through to protocols about the use of guard dogs.
The AUKUS-specific legislation had been stuck in the Senate for the last six months, so Democrat and Republican power brokers wrapped it up inside the much larger spending bill to finally guarantee its passage. It is designed to put in place a number of procedures leading up to a possible sale of two second hand Virginia class submarines to Australia about a decade from now, with a third new vessel also part of the mix.
The bill also clears the way for a special account to be set up, administered by the US Secretary of the Navy, for Australia to transfer US $3 billion (AU $4.47 billion) that has the objective of increasing the output of American submarines. In an Op-Ed published in ‘The Australian’ on December 19, Defence Industry Minister Pat Conroy said of this payment, omitting to mention how much it is:
“The act also clears the way for Australia to invest in the US submarine industrial base to help realise the transfer of Virginia-class submarines to Australia as soon as possible. That’s fair enough. Australia always pays its own way. It is fair and proportionate.”
It is difficult to know what the Minister means about Australia paying its own way – and APDR is unaware of any similar advanced payment to subsidise the industry of another country. Normally, you pay for the equipment you are buying – and if it’s an FMS purchase (which admittedly this is not), the price for Australia is meant to be very similar to the one the US military pays for the same thing.
However, the $4.47 billion is not a deposit or a down payment – it is a unique financial contribution to US defense industry – and in particular contractors such as General Dynamics Electric Boat, designer and builder of the Virginia class. With more than 100,000 employees and annual revenue of about $59 billion – more than the entire Australian Defence budget – they will undoubtedly be pleased by the prospect of some extra cash.
The arrangement is self-evidently unique because of the need for legislation to make it happen. No other country has gone down this path of handing billions for the Secretary of the Navy, currently Carlos Del Torro, to spend as they see fit.
It also seems a bit cute to refer to this as an investment in the US industrial base. It appears to be a no strings attached gift. To date, Defence has failed to provide any information about how this huge amount was calculated, or even if the Americans asked for it in the first place. Certainly, the US is not going to turn down such generosity even though their economy is fifteen times larger than our own.
In his article, Minister Conroy also writes:
“In an unprecedented step, Australia will be included in the US Defence Production Act’s definition of domestic source. This means Australian-based businesses will be eligible to receive loans, grants and purchasing contracts direct from the US government to support priority sectors, such as critical minerals supply chains, guided weapons, and advanced capabilities.”
If it happens that will be good news because to date the US has been woeful at buying any military hardware from Australia, with the partial exception of the Nulka hovering rocket decoy, in service with the USN. Even in that case, the complex – and expensive – electronic payload comes from American suppliers. In comparison, Australia is the world’s 4th largest purchaser of US hardware, regularly importing around $5 billion worth of stuff every year.
The track record of the UK – the other AUKUS partner – when it comes to buying Australian military equipment is even worse.
The problem is that the actual wording in the NDAA is far less direct than Minister Conroy suggests and there are still several administrative steps to go through until Australian companies have direct, unfettered, access to the US market. When and if that happens, it will be interesting to see to what extent Australia can overcome American parochialism and a natural tendency to continue dealing with the company down the road rather than a new player from the other side of the Pacific.
As for the possible sale of second-hand Virginias, this will be decided by a US President at an unspecified time, presumably around 2028. The Act says that the deal can go ahead if the President decides it:
i) will not degrade the United States undersea capabilities;
ii) is consistent with United States foreign policy and national security interests;
That seems to give the US quite a lot of wriggle room – and the $4.47 billion doesn’t include a refund clause. The way that AUKUS has been structured, the only thing that Australia can currently contribute is cash.
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Thanks Kym
For your final podcast (No. 30) of 2023 at https://shows.acast.com/asia-pacific-defense-report/episodes/657fa2c71585de0012491c56
I think the Virginia is unique in being the only SSN actually available to Australia in the 2030s. But its true value lies with a US AUKUS ally paying for 3 to 5 Virginias that can quickly and at long range meet American objectives.
A future US President will only supply the Virginias to the RAN if Australia promises to make them available for such US objectives as:
– securing oil, shipping and/or Israeli interests in the Middle East (noting the current US request that RAN surface ships operate in the Red Sea against Yemeni Houthis threatening Israel and shipping)
– the Taiwan Strait (the fastest way the RAN could substantially man a US “Coalition of the Willing”) against China, and
– to destroy future Chinese SSBNs in the Indian Ocean that have nuclear SLBMs
mainly aimed at the US and its allies.
Thanks for your expert reporting throughout the year.
Cheers Pete
Thanks Pete. Theoretically, I think we could acquire Barracudas (built in Australia) in a similar timeframe – but that’s not going to happen because AUKUS isn’t actually about nuclear-powered submarines, it’s a return to the comfortable world of the Anglosphere.
But Barracudas don’t have a VLS…
Correct – but KSS-III Block 2 does
So does the C718 from SAAB with a drop in module and Japans Taigei successor. But you said in the podcast the attack class was not worth it because it didn’t have aip and then you advocated for the Barracuda with no VLS and now the Korean kss III, but it seems they will move away from aip in the future like japan has and go solely with lithium ion batteries. 450-500wH/kg density now looks possible, twice that of current batteries.
We were better of reducing the ssn numbers, building the fabrication hall above the old asc in the first phase of Osborne north expansion, produce a new interim submarine(ssg), skip the interim Virginias and go to aukus ssn. As the interim D/E is are being produced, workforce expanding and exp building the rest of the ssn infrastructure would be built. IMO, A mixed fleet of both ssn and ssg would have been better. The Virginias going to RAN just guarantees maintenance and supply chain for the u.s fleet until 2060 miniumum.
I have no idea how the government’s “20,000 well paid union jobs” are somehow magically going to appear in 2040 to start building the AUKUS submarine. The Collins LOTE will have a much smaller workforce. But with every day that passes, the concept of an interim KSS-III Batch 2 – or anything else – becomes less likely just because of the passage of time. It’s almost as if the RAN has deliberately embarked on a strategy that guarantees we will have no submarines at all.
and I’m very happy about the anglosphere, but does it require AUKUS ?
I think Barracuda would do us nicely, and I think the frogs would talk to us, or the next gen British boat if it has British only kit in it
in that case, the deal is off. I have no interest in looking after Israeli or Taiwanese interests. In terms of the latter, both USA and Australia offically have a one China policy
These subs should be used in our interests only, and I know it can be argued what our interests are, and are not
I love to know who signed off on this deal, I’d like to talk to them about some prime real estate in the Florida Everglades that I can sell them for a fair price.
It’s completely outrageous. In any other country people would be rioting in the streets.
me too.
regardless, there is such a thing a ministerial responsibility
$4.7 billions to build US industrial base, $3.7 billion wasted on French Nuclear sub modifications and then $850 million compensation paid, and that just peanuts compared to how much we will have to pay for subs
we could have ordered 10 French Nuclear subs for $20 billion in 2016 and first one would be built by now, full IP transfer and they use civilian grade Uranium so even reactors could be built and refuelled here
Exactly.
Yes. The great lie of AUKUS was to dismiss the French SSN option because they “could not be refuelled here”. For a fraction of the cost of AUKUS refuelling infrastructure could have been built in Adelaide and spare reactor cores stored. Even without it, returning a Suffren SSN to France for refuelling once every ten years would have had a negligible impact on availability.
Suggestions this impacted on sovereignty were also very selective. The RAN will be totally dependent on EB/HII and BAE for spare parts and reactor maintenance, without which RAN Virginias and SSN Aukus sub would become inoperative. And France has capacity to build SSNs now, whereas UK and USA do not. Years saved as well as billions.
The real failing in AUKUS was not to have a proper tender process, with comparison of timing and cost of options.
Totally agree.
we could even refuel Barracuda here if proper arrangements made couldn’t we
Also the US boat can take up to 2 years to service in standard maintainance and overhall. Plus there are other problems
https://edition.cnn.com/2023/07/12/politics/us-attack-submarines-repair/index.html
French Suffren brings a revolution: Maintenance. The new submarine need just one technical stop per year (which lasts about 2.5 months) and may spend over 200 days at sea following these overhaul periods
it means our fearless leaders are both confused and intimidated
indeed