The United States and the U.K. are entering into a new tripartite alliance with Australia in the Indo-Pacific region that will allow the Aussies access to sensitive U.S. technology to purchase nuclear-powered submarines for the first time.
The new defense pact, which provides the framework for Australia to build between eight and 10 nuclear-powered attack submarines, will begin with an 18-month trinational effort to determine how the submarines will be priced, built, procured and delivered starting in the early 2030s.
The new defense deal is being read as a way for the U.S. and its allies to counter China, which, in recent years, has become increasingly involved in territorial disputes in the South China Sea.
Australian Prime Minister Scott Morrison said yesterday the submarines will be built in Australia, though a final selection has not yet been made between the U.S. Virginia-class and the British Astute-class.
“We intend to build these submarines in Adelaide, Australia in close cooperation with the United Kingdom and the United States,” Morrison said, “But let me be clear: Australia is not seeking to acquire nuclear weapons or establish a civil nuclear capability and we will continue to meet all our nuclear non-proliferation obligations.”
The Pentagon was not able to immediately comment on the new defense pact’s potential impact on the U.S. defense industrial base.
Byron Callan, an analyst with Capital Alpha Partners, said in a note to clients that the new pact “raises the issue of what Australia will buy and what the role will be for U.S. and/or U.K. industry.”
“The U.S. is producing Virginia-class submarines and the U.K. is producing the Astute-class,” he wrote. “Primes on the Virginia-class are General Dynamics and Huntington Ingalls, and BWX Technologies is prime on the S9G reactor. Curtiss-Wright also provides propulsion components. BAE Systems is prime on Astute and Rolls-Royce provides the Core H reactor.”
Michael O’Hanlon, a defense analyst with the Brookings Institute, said the news is certainly positive for U.S. submarine makers and their suppliers if they become involved in providing Australia with eight to 10 new submarines.
“It would increase the net production by perhaps 1/3 if it goes at the pace of one a year,” he said. “That’s real change and real money. Hard to think of a comparably important foreign sale since some of the big fighter jet deals with the Saudis, etc. In fact, the entire F-35 program will add 1,000 foreign sale units to the 2,500 we are making for ourselves. In proportionate terms, this single deal with Australia on subs could have comparable proportionate importance, for the submarine industrial base in the U.S., to the entire foreign sales program of the F-35 fighter.”
However, Bill Greenwalt, a former Senate staffer who is now a non-resident senior fellow at the American Enterprise Institute, said there are still far too many unanswered questions for defense contractors to be optimistic.
“I will be highly skeptical until all of the details come out,” he said. “I am not yet sure that this is more than a unilateral administration idea and the details are still to be determined on how, if ever, this can be accomplished.”
Greenwalt said if he were the Australians he wouldn’t “replace real submarines with paper ones just yet.”
“Unless we are transferring operational submarines to Australia or basing them there, this is something that will not have a direct impact in theater or be implemented for 10-15 years,” he said. “Can Australia get French submarines faster and would that be worth it? Development and acquisition time could take a lot longer than advertised and mandated U.S. security constraints on operational use may ultimately undermine the benefits in the eyes of Australia of any agreement made.”
The United States has not shared its sensitive nuclear propulsion technology with another nation since 1958 when it did so with the U.K.
Greenwalt also said sharing U.S. defense technology, even unclassified technology, could also be an obstacle, especially considering the strictness of U.S. International Traffic in Arms Regulations.
“One U.S. fastener covered under ITAR that has nothing to do with shared nuclear technology might trigger an issue with operational control for the Australians,” he said, referencing a past issue between the American and British submarine programs.
Additionally, Greenwalt said officials from all three governments involved should be aware of how much help will be needed from the U.S. submarine industrial base.
“Right now, the U.S. submarine industrial base may not be capable of providing such assistance or performing new workload,” he said. “As reported in press accounts, it is said to be struggling with SSN production and the planning for the Ohio-class while the maintenance of current SSNs seems to be lagging. I am sure we will take care of our requirements first before helping out anyone else.”
A congressional staffer following the issue said it would be important for lawmakers to determine who the U.S. sub-tier suppliers might be.
“Members will be really interested in the local impact,” the staffer said.
A ‘stab in the back’
Australia, in entering the new pact with the United States and U.K., terminated a $90 billion deal with France’s Naval Group that covered 12 conventional submarines. Lockheed Martin Australia would have provided the conventional submarine’s combat system.
In a statement following Thursday’s announcement, Naval Group described the Australian decision a “major” disappointment.
Meanwhile, Jean-Yves Le Drian, France's minister of foreign affairs, likened the move to a “stab in the back” when he spoke to radio station Franceinfo.
Secretary of State Anthony Blinken tried to calm the situation at press conference today, calling France a “vital partner.”
“We cooperate incredibly closely with France on many shared priorities in the Indo-Pacific but also beyond around the world,” he said. “We're going to continue to do so. We place fundamental value on that relationship, on that partnership.”
President Biden stressed yesterday the defense pact with Australia does not include nuclear-armed submarines, but submarines powered by nuclear reactors.
"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 years ahead," he said.
In a comment to Reuters, Chinese embassy spokesman Liu Pengyu said the new defense pact is the sign of a “Cold-War mentality” and “ideological prejudice.”
Speaking at a press conference today, Defense Secretary Lloyd Austin castigated China’s “destabilizing activities” in the Indo-Pacific region. He has long called China the Pentagon’s “pacing challenge” and the Biden administration, as it tries to pivot away from U.S. wars in the Middle East, has made countering China a key focus of U.S. foreign policy.
“While we seek a constructive results-oriented relationship with [China], we will remain clear eyed in our view of Beijing’s efforts to undermine the established international order,” Austin said.
Speaking alongside Austin, Australian Minister for Defence Craig Dutton said the new pact meant there will be more "rotational deployments of all types of U.S. military aircraft to Australia," and "enhanced activities, including logistics and sustainment capabilities for submarines and surface combatants in Australia."