AUKUS: No refund for $9.4 billion gift to US & UK submarine companies

Shedding light on the details of the impending $4.7 billion (US $3 billion) transfer to US shipbuilding coffers has always been difficult – but thanks to the Senate Estimates process on May 6 more information is becoming available.  An almost identical handout to UK companies is also finally coming under scrutiny, and the results don’t look pretty. Under questioning from Green’s Senator David Shoebridge, the Head of the Australian Submarine Agency, VADM Jonathan Mead, refused to answer a series of questions about whether Australia will get its money back if the US fails to transfer Virginia class submarines in the 2030s. Having established – with some difficulty – that under the agreement, $1.5 billion will be transferred next Financial Year and $1.8 billion will go in 2025-26 (with some possible variations because of exchange rates), Senator Shoebridge asked what would happen if the sale to Australia did not go ahead.  This might be because a future US President simply might not authorise the sale – a logical possibility. The written transcript hardly does justice to the awkwardness of VADM Mead’s attempts at deflection: Sen Shoebridge: What if the United States determines not to give us a nuclear submarine? Is there a clawback provision in the agreement? VADM Mead:  That’s a hypothetical and I’m not going to entertain… Sen Shoebridge: I’m not asking about hypotheticals. I’m asking about what’s in the agreement. Is there a clawback provision in the agreement? VADM Mead: The US has committed to transferring two nuclear-powered submarines to Australia. Sen Shoebridge. You know that’s not my question VADM. I’m asking right now, as we sit here, is there a provision in the agreement that we get our money back if the US doesn’t live up to its side of the bargain? Surely you included that? Are you telling me you didn’t? VADM Mead: The US has committed to transferring two nuclear-powered submarines and a third one… Sen Shoebridge: So, there’s no clawback provision? VADM Mead:  …we are investing in the US submarine industrial base. Sen Shoebridge: Whether we get one or not?  You cannot be serious. VADM Mead:  The US has committed to this program. Sen Shoebridge: You know it depends on a Presidential approval, don’t you?  The US has made it 100% clear that it depends on that approval. VADM Mead: That is your statement, which I refute. Sen Shoebridge: VADM, you know that the US legislation says that the US can only provide an AUKUS attack class submarine to Australia if, first of all, the USN gives advice it won’t adversely affect their capacity. Secondly, after receipt of that, the US President approves it. Do you understand that? VADM Mead: Yes. Sen Shoebridge: And if neither of those things happen, we don’t get a sub. Do you agree with that? VADM Mead: I agree with that. Sen Shoebridge: Does the agreement provide – the one where we are shelling out $1.5 billion next year and $1.8 billion the year after that and another $1.7 billion or more over the rest of the decade – if the US does not provide us with an AUKUS submarine then we get our money back? VADM Mead:  The US will provide us with an AUKUS submarine. Sen Shoebridge:  Did you not understand that my question wasn’t about a future hypothetical. I’m asking about what’s in the agreement.  Is the reason why you won’t answer what’s in the agreement is because it embarrassingly it fails to have that detail? VADM Mead: You are talking about a future hypothetical. Sen Shoebridge: I’m talking about what’s in the agreement now. VADM Mead: The US will provide two transferred submarines…. Sen Shoebridge: It may be embarrassing that you have entered into an agreement that sees Australian taxpayers shelling out $4.7 billion – which we don’t get back if we don’t get our nuclear submarines. That might be embarrassing, but that’s not a reason not to answer. Does the agreement have a clawback provision? VADM Mead: The US is committed to transferring….. Sen Shoebridge: The only way of reading that answer is no – and it’s embarrassing. Do you want to explain why it’s not in the agreement? VADM Mead: I go back to my statement that the US is committed to providing two submarines. This excruciating exchange continues further with VADM Mead seeming reluctant to admit that he does not know who the future US President will be, or who will be in Congress several years from now.  With limited time available, less information was provided about the situation with the UK, but apparently whatever agreement exists it also does not contain a clawback provision. A small section can be viewed here: https://www.abc.net.au/news/2024-06-07/submarine-bossmulti-billion-aukus-payments/103952528 APDR will run the entire 5 minute clip of VADM’s humiliation when it becomes available, along with the full written transcript. Even if there is only a small chance that the US will not transfer submarines to Australia, there should have been a clawback clause.  This is standard legal practise for all purchases – everything from a nuclear-powered submarine to a toaster.  None of this is affected by the huge amount of enthusiasm people have for AUKUS – this should be simple commercial reality. It looks as if VADM Mead has never been questioned in detail, and as the transcript shows he was evasive and unconvincing throughout.  This is exactly what happens in hermetically sealed organisations such as the RAN where the word of a superior is never questioned. This is no way to run any program, let alone one worth untold billions of dollars.  It’s also no way to run a government and Ministerial collusion in a clearly defective process should greatly concern all Australians, but particularly the millions of people experiencing cost of living pressures. 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