AUKUS: Risks and Rewards

A rare thing is happening in New Zealand – an actual debate over foreign policy. Specifically, over whether Wellington should join what is known as Pillar II of AUKUS, which involves sharing high and emerging technologies. The prospect was first put on the table publicly following meeting with senior Biden administration official Kurt Campbell, and Defence Minister Andrew Little said New Zealand was “willing to explore it”. The offer took some by surprise but past tensions over Wellington’s stance on nuclear ships (in 1987 New Zealand banned nuclear weapons and propulsion from its territory, leading Washington to suspend its ANZUS treaty obligations to the country) appear to be mended.

Yet the debate, so far, has been fairly one sided. Most political commentators, activists, former prime ministers, and opposition politicians are arguing that New Zealand should have nothing to do with AUKUS. In my view, there is a strategic case for New Zealand joining Pillar II – indeed, this presents a massive opportunity and many critiques are overblown.

But why should Australia care? What can New Zealand offer? There are four factors worth consideration.

The first is that New Zealand’s entry would establish a collaborative NZ-Australia framework on high-technologies. At present, there is no high-tech industrial infrastructure with military capacities in New Zealand that AUKUS can slot into. Yet New Zealand’s existing high-tech resources can be harnessed and AUKUS would be instrumental in their development. In turn, this would allow New Zealandto feedback into AUKUS in a meaningful way.

Additionally, New Zealand has many experts in various fields that, by virtue of being in New Zealand (far from much of the world) tend to think outside the box. The country has many innovators that, with the right investment and focus, can offer novel solutions and do so at considerably lower cost relative to most Western countries. Indeed, NZ companies, such as Rocket Labs, are already well-known and work with the US Space Force. Less known companies include Starboard that focuses on using AI for tracking illegal fishing vessels. Another company, X-craft, uses AI in their seacraft for a variety of tasks, from navigation to object detection and response command hierarchies. In short – there is expertise in New Zealand in rocketry, wireless power transmission, underwater sensors, hydrophones, data storage technologies, etc.

As such, New Zealand can contribute expertise to the present and future tech programs in AUKUS nations and offer niche manufacturing and testing.

The second reason is that the New Zealand Defence Force (NZDF) remains a professional one. It’s regular forces stand at approximately 9,200 personnel, making it about 1/6th the size of the Australian Defence Force, which maintains 59,304 regular forces. A review of Defence is currently underway in New Zealand, set for completion next year. The Labour government seems to understand there is a need to increase defence spending in coming years, while the recent 2021 Defence Assessment and the new Prime Minister Chris Hipkins are “clear-eyed” about the changing geopolitics in the Indo-Pacific.

There are rumours New Zealand will bring back its air-strike capabilities. As such, the days of tailoring the NZDF for peacekeeping operations appear to be ending, a fact reinforced by New Zealand’s acquisition of 4 P-8 Poseidon. This shift is one that complements ADF priorities but, for the NZDF to remain interoperable with the Australian military in the future, it needs to secure access to Pillar II technologies. Without this, New Zealand’s military doctrine will fall out of step and it will literally not be able to keep up in the field and/or communicate using allied communication channels. New Zealand will be unable to contribute in meaningful ways and its forces will become a liability in joint contingencies, whether they are of a military nature, in response to humanitarian emergencies or natural disasters across Oceania – including in Australia itself.

Fourthly, without joining Pillar II, New Zealand’s broader strategic, security, and intelligence ties with Australia and the AUKUS partners will atrophy. New Zealand’s diplomats and intelligence agencies engagement with Five Eyes intelligence sharing mechanisms will also not be able to access and share intelligence. Ultimately, New Zealand may be pushed out, leading to gaps in the network.

Finally, with China’s rapid and profound military rise the broader Indo-Pacific balance of power in the region is changing. As it does the prospects of interstate war are increasing since, generally, as a state’s relative military power grows, so too does its prospects of successfully conducting military operations.

AUKUS is about increasing the costs and risks to China of using its military forces. It’s about deterrence. New Zealand has no illusions, understanding that it is a small power in the Indo-Pacific balance. Nonetheless, it can add its weight to collective efforts to deter conflict and maintain peace and security in the region. In being allied to Australia and obligated to come to Canberra’s defence in the event of conflict, it makes immanent sense that the NZDF is prepared for such an eventuality to the greatest extent possible. Having access to the technological capabilities of Pillar II – should it need them – is vital to this, and ultimately will improve Australia’s own security.

Ultimately, New Zealand entry into Pillar II of AUKUS will benefit all members and be a win-win for both Antipodean allies.

The Australian government has proudly stressed its commitment to nuclear stewardship as part of the AUKUS nuclear-powered submarine plan. Responsible nuclear stewardship involves more than proper handling of nuclear materials under the oversight of the International Atomic Energy Agency, however. In fact, the riskiest and most consequential aspects of nuclear stewardship involve a part of the AUKUS plan that we’ve heard the least about: how the government intends to safely create a long-term storage facility for the military-grade nuclear waste from the nuclear-powered submarines.

While long-term nuclear waste storage involves significant technological challenges, most plans do not break down due to technical problems. Instead, a failure to obtain community consent is the largest factor in the dozens of fizzled plans globally for nuclear waste repositories. This community consent is commonly referred to as “social licence,” and includes ongoing popular and political support for, and confidence in, the technical, political and economic plans for nuclear waste storage.

Plainly put, if the Australian government does not take the immense challenges of social license seriously, it invites the negative outcome known as DADA: Decide, Announce, Defend, and Abandon. However, if it treats social license as equally important as technical plans for nuclear waste storage – including in up-front planning and resources – the government will dramatically improve the likelihood of success.

By taking social license seriously, the government can avoid spending taxpayer money on a process that is unlikely to succeed and can also avoid wasting precious time on building a safe, long-term storage facility that is required to protect human health and the environment.

What does social license entail? Most important, it is not a set of boxes to tick off. Rather, it involves a mindset of genuine dialogue and consultation: being willing to listen openly and to hear unpleasant and contrary perspectives. Social license is not merely educating the public. It involves deep engagement, at the end of which communities are allowed to say “no thank you”.

Social license is not something that technical personnel do to reassure emotional, uninformed members of the public. Instead, it involves an acknowledgement that what constitutes appropriate safety for nuclear waste storage is not just a technical issue – it is also a social and political judgment to be determined by communities in a democratic society.

Genuine, participatory social license processes take a great deal of time and resources, but if done properly, can build the trust required: trust not only in geological studies and technical plans, but also trust in the people and institutions managing the building and operation of a nuclear waste repository. If done right, it can create legitimacy for the project and confidence that technical challenges will be handled professionally and in consultation with the community.

In short, social license done right is expensive, takes a long time, and requires the right kind of expertise. Perhaps hardest of all, it requires planners and policymakers to be humble in the face of community engagement, rather than dismissive or arrogant.

For Australia and other countries with First Nations peoples, fully including traditional owners from the start is absolutely critical to maintain any sort of legitimacy of the social license process. Consultations should embrace participation from Indigenous communities rather than exclude or sideline them. This is especially the case in Australia, where harm from nuclear activities has been borne most heavily by Aboriginal peoples, including British nuclear testing in Maralinga.

On this point, the Albanese government needs to pay close attention to the lessons of the Morrison government’s bungled proposal for a low-intermediate nuclear waste storage facility, planned for Kimba, South Australia, which is already on the road to DADA.

Although community consultation took place, including a ballot of ratepayers, traditional owners have argued they were excluded from the consultation process and were not permitted to vote, even though they are native title holders, because they do not live in council’s boundaries. Indeed, the Barngarla people asked to be included in the vote, arguing that allowing freehold people to vote while excluding native title holders seemed to infer racial discrimination. According to the chair of the Barngarla Determination Aboriginal Corporation, Jason Bilney, “if a proper heritage assessment and consultation with the Barngarla people had occurred, the dialogue could have been less combative.” Instead, the matter is now in court, and South Australian Premier Peter Malinauskas has publicly sided with the Barngarla people.

The Australian government has spent decades trying to locate a suitable site for the low-medium nuclear waste repository, but because of the Morrison government’s attempt to short circuit a responsible social license process, the Kimba facility teeters on the edge of falling over. Even if the government does manage to win through the courts, it will still have lost the larger battle of trust and confidence so critical to social licence.

Both the current government and Defence planners need to learn the lessons of Kimba – being willing to take the time to consult, including with traditional owners, in a genuine manner, even if it raises costs and extends timelines. In addition to the principles of open and humble social license, this principle of First Nations engagement must be enshrined in the government’s approach for the high-level nuclear waste repository siting. Responsible nuclear stewardship demands no less.

The debate over the value of the AUKUS deal, and nuclear-powered submarines in particular, is heating up. So in the true spirit of the dismal science, it is time to apply some economic thinking to the question – what is in it for us?

Economics has a few powerful tools that help us answer this question. One is the concept of opportunity cost, another is cost-benefit analysis. So how does the AUKUS deal perform when applying these two economic concepts?

Opportunity cost is the benefits Australia would have had from making a different decision, whether about an investment like submarines, or a relationship such as the Australia-US alliance. Details about what AUKUS means for both are somewhat sketchy. The price tag for the submarines ranges from AU$268 to AU$386 billion, although experience tells us that cost blow-outs on submarines, or any cutting-edge defence technology, are to be expected. The French submarine deal had increased from AU$40 to AU$66 billion before any construction started. There has been a fair bit of speculation on what some $300 billion could buy instead, not least 77 billion Magnum Almond ice-creams, or 20 “sons of Collins” submarines. Cold treats aside, increasing defence spending to a projected 2.3 per cent of GDP does have an opportunity cost. Some clarity on if AUKUS is to be paid for through higher taxes, reduction in other areas of government expenditure, or higher borrowing and debt (which must be paid for in the future with higher taxes or lower expenditure) would help Australians understand the opportunity cost of AUKUS submarines.

The opportunity cost of the relationships embedded in AUKUS is a more complex matter. Commentators, most recently former foreign minister Gareth Evans, have raised the question of what the deal means for Australia’s “capacity for independent sovereign judgement”. Given its past support for US military ventures, AUKUS likely only reduces Australia’s options on this front, rather than being a decisive factor.

But to the extent that AUKUS reduces sovereignty over defence priorities, this imposes an opportunity cost if it excludes alternative defence assets and strategies, such as a focus on regional defence cooperation. China has labelled the AUKUS deal a “wrong and dangerous road”, professing concerns about nuclear proliferation. Other countries in our region have also expressed concerns about AUKUS, variously reflecting their economic and security vulnerabilities to China and to the United States. As much of Australia’s current and future economic prosperity lies with trade and investment relationships in Asia, there is a risk that AUKUS imposes an opportunity cost in lower levels of trade and investment. Managing this risk will be a primary consideration for the Department of Foreign Affairs and Trade. It would be good to know if there has been a detailed analysis of this opportunity cost, and that it was taken into account by the Albanese government in the decision to proceed with the Morrison-era AUKUS deal.

When it comes to a cost-benefit analysis, investments justified on security grounds tend to avoid scrutiny. A cost-benefit analysis on the meta data retention laws introduced in 2015 might have found that the cost of the increased risk to privacy, along with the cost to firms of implementing the laws (only some of it offset by a government subsidy paid by taxpayers), exceeded the intelligence value. A recent review (which the government has committed to implementing most of its recommendations) addressed privacy concerns, but took as a given the benefits of the intelligence. A proper cost-benefit analysis of the meta data retention law would have asked about the effectiveness and cost of the information in resolving crimes relative to other information sources, and the scale of any deterrence effect. While the benefits might be hard to measure in dollar terms, at a minimum the agencies defending the need for these laws should be able to produce convincing evidence of their cost-effectiveness.

Defence spending, particularly on Australian builds, similarly avoids the scrutiny that a cost-benefit analysis would impose. As an industry development policy, defence procurement was regularly challenged on a value for money basis by the Productivity Commission. The cost per direct job created by the local build of the newly designed AUKUS submarine has been estimated as upward of AU$18 million. As pointed out by John Quiggan, the skills required are in demand in other industries, so the net gain in jobs would be lower, raising the cost per job. The spill-over benefits to other industries will need to be very large if the benefits of a local build are to outweigh its cost. As John Edwards has observed, the prime minister’s choice of comparing the AUKUS submarine investment to that of the automobile industry was an unfortunate example if trying to make this case.

A cost-benefit analysis would force government to undertake a detailed examination of what benefits can be expected. Such an analysis, shared between governments and commercial partners, if not the public, would surely improve the chances that the promised spill-overs will arise. It certainly might dampen optimism bias.

The AUKUS deal would benefit from less enthusiasm and more analysis. Applying more economic thinking to security investments would be a good place to start.

Almost two years since it was first announced, the AUKUS submarine deal between Australia, the United Kingdom and the United States hasn’t been getting much love across Southeast Asia. Despite repeated reassurances by top US and Australian officials, with Foreign Secretary Penny Wong categorically vowing “Australia will never seek to acquire nuclear weapons” in a recent interview with Singapore’s media, key regional states remain unconvinced.

While Malaysia warned against “any provocation that could potentially trigger an arms race or affect peace and security in the region”, Indonesia, the current chair of the Association of Southeast Asian Nations, implied that AUKUS could potentially undermine “peace and stability in the region”. And even though Australia is set to receive nuclear-powered yet conventional-weapons-carrying submarines, Indonesia still insisted on potential proliferation risk, thus calling on its southern neighbour to “remain consistent” in fulfilling its obligations under the Non-Proliferation Treaty.

As if that weren’t enough, top Indonesian officials are contemplating restriction of Australian submarine passage through the country’s waters in the name of international law and strategic neutrality, while The Jakarta Post issued a spirited editorial deriding Canberra as the “self-appointed deputy sheriff in this part of the world for the United States”. For their part, two vital ASEAN states of Vietnam and Singapore, which have developed robust defence ties with the West due to shared concerns over China, have also settled on a combination of strategic equivocation or tortured neutrality.

Not to mention, public criticism at home from no less than former prime minister Paul Keating on the Labor side and former PM Malcolm Turnbull of the Liberals who have raised concerns over the value and viability of the massive $368 billion submarine deal. Even non-partisan analysts have warned of potential mission creep, namely Australia getting dragged into a conflict over Taipei, which “is more than 7000 kilometres from Sydney”.

There is, however, one notable exception to the generally lukewarm, if not hostile reception to AUKUS. And that, quite ironically, is the Philippines, which until recently was under the thumb of an unabashedly pro-Beijing populist, Rodrigo Duterte.

Shortly after the recent AUKUS confab in California that gathered the leaders of the three partnered states, the Philippine Department of Foreign Affairs released a statement in which it praised AUKUS as a critical component of important “partnerships or arrangements in the Indo-Pacific region”, which collectively “support our pursuit of deeper regional cooperation and sustained economic vitality and resilience”.

Although Manila, as one of ASEAN’s founding members, emphasised the importance of upholding “ASEAN’s central role in the regional security architecture”, it openly characterised AUKUS as “essential to our national development and to the security of the region”.

Interestingly, even the former administration, although not Duterte himself, also backed AUKUS when it was first announced in September 2021. Then Philippine foreign secretary Teodoro Locsin Jr. enthusiastically supported the pact as an indispensable step towards “restor[ing] and keep[ing] the balance” of power in the region in order to check China’s maritime ambitions.

The convergence of three main factors explains the seeming “Philippine exceptionalism” in ASEAN. First of all, the Philippines, notwithstanding its deeply troubled democracy, has considerable ideological affinity with the West. Largely built on American colonial legacy, the Philippines’ political system is the closest version of a liberal democracy in Southeast Asia. Such values-based alignment with the West has been clearly on display since Russia’s invasion of Ukraine. Not only has President Ferdinand Marcos Jr. openly sympathised with Ukraine’s patriotic struggle, but the Philippines is also the only Southeast Asian state to have consistently voted in favour of Ukraine in all key United Nations votes in the past year.

Second, the Philippines is the only Southeast Asian state to have not only a Mutual Defence Treaty with Washington but also a Status of Visiting Forces Agreement with Australia. And over the past decade, the Philippines has hosted massive wargames along with the United States, Australia and increasingly Japan. And under Marcos Jr., the Southeast Asian country is pursuing a SOVFA-style agreement with Japan and, more broadly, a trilateral Japan-Philippine-US (JAPHUS) security partnership, especially in light of growing concerns over potential Chinese invasion of neighbouring Taiwan. In many ways, Manila views AUKUS as a potential complement to the emerging JAPHUS, with both Washington-led trilateral security partnerships aiming to constrain China’s maritime ambitions across the so-called First and Second Island chains.

Finally, the Philippines’ support for a US-led “integrated deterrence” strategy against China is also based on the country’s unique sense of vulnerability as well as lingering frustrations with ASEAN. Despite its proximity to major flashpoints, especially Taiwan and the South China Sea, Manila is yet to develop a minimum credible defence posture, thanks to decades of internal conflict, bureaucratic corruption and overreliance on US support. Meanwhile, the Philippines has been deeply disappointed by ASEAN’s inability to unify on and finalise a legally-binding Code of Conduct with Beijing amid festering disputes in adjacent waters. Nor has ASEAN supported the Philippines’ landmark arbitration award victory against China based on the United Nations Convention on the Law of the Sea (UNCLOS).

As a result, the Philippines hopes to counterbalance China’s maritime aggression through a diversified network of alliances, including AUKUS but also the emerging JAPHUS.

Defence Minister Richard Marles is sure that the AUKUS submarine deal does not commit Australia to support America in a war with China over Taiwan. He made the point in two different ways during an interview with the ABC’s Insiders program on Sunday, responding to two questions from host David Speers.

SPEERS: In return for access to these Virginia-class subs, has Australia given the United States any sort of commitment explicitly, implicitly, that we will be there in the event of a conflict over Taiwan?

MARLES: The answer to that is of course not … I’ve listened to that conjecture from a number of commentators. It is just plain wrong.

SPEERS: So no quid pro quo here over access to these Virginia-class subs?

MARLES: Absolutely not. And I couldn’t be more unequivocal than that … The moment that there is [an Australian] flag on the first of those Virginia class submarines in the early 2030s, is the moment that that submarine will be under the complete control of the Australian government of the day … that is obviously the basis upon which this is happening.

Marles’ second answer is no doubt right. If and when the Virginia-class subs are in service with the Royal Australian Navy under Australian command, they will not go anywhere unless the Australian government sends them. That is our choice.

But that is not quite the point. The real question is how AUKUS affects that choice – the choice Australia would make about whether to join a war with China. And the answer is clear: AUKUS commits Australia to fight China if America does, simply because the AUKUS deal will be off if we don’t. So Marles’ answer to Speers’ first question is wrong.

That is because America will only sell us Virginia-class boats if absolutely certain that those boats would join US operations in any war with China. They will come straight out of the US Navy’s order of battle, because no extra Virginia-class boats are to be built to meet Australian needs. So every boat that joins the RAN is one less in the US fleet, and the US Navy is already desperately short of submarines. It is simply inconceivable that Washington would agree to a significant diminution of its submarine capability in this way as its military rivalry with China escalates. So the Americans must be very sure that any Virginia-class subs they pass to Australia will be available to them when war comes.

Nor will Washington provide the systems and technologies essential to the Anglo-Australian AUKUS-class subs unless our commitment to support America in a war with China is clear. Why else would they take this extraordinary step? Unless Australia is willing to go to war with China, the whole AUKUS deal will not be in America’s interests.

So the Americans must believe that there is, at least, a clear implicit commitment. That commitment will probably have to be made fairly explicit sometime soon if the deal is to proceed. It is hard to imagine that Congress would authorise the transfer of the Virginia-class without firm undertakings.

Indeed, AUKUS has only got this far because Washington already takes our commitment for granted. They keep saying that we have fought with them in every war for more than a century. They heard then defence minister and now Opposition leader Peter Dutton say in 2021 that it was “inconceivable” that Australia would not fight with them against China, and they hear the way the Albanese government speaks of the alliance, and it simply does not cross their mind that we would not be there for them.

In July 2022, the US Chairman of the Joint Chiefs of Staff General Mark Milley reflected this when asked by Sarah Ferguson on ABC 7.30 whether Washington would expect Australia to join America in a war in Asia. He expressed complete confidence that “if something occurred in the future, then Australia and the United States would still be shoulder to shoulder”.

And no wonder. Americans see this as a fundamental obligation of the alliance that we hold so dear and that we declare to be the very heart of our foreign and strategic policy. No one who was there will ever forget the way one of Washington’s most renowned figures, Richard Armitage, spelled this out in words of one syllable to an audience of prominent Australians almost 25 years ago.

So AUKUS is only going to work if the Albanese government plainly acknowledges Australia’s willingness to join America in a war with China. But that is a war that America has no clear way to win, and which may well become a nuclear war. That is one of the many reasons why AUKUS is a dumb idea. It also raises big questions about Australia’s whole approach to the US-China contest.

Indonesia, a nation that controls vital maritime chokepoints, finds itself at the epicentre of an unfolding geopolitical drama. As rivalry builds between the United States and China, the prospect of more nuclear submarines passing through Indonesian waters – including plans for AUKUS boats under the newly formed pact between Australia, the United Kingdom and the United States – brings an underlying legal question into focus.

Would it be permissible under international law to deny access of foreign nuclear-powered submarines through archipelagic sea lanes?

All ships, including submarines, have guaranteed rights under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which Indonesia is a party to, to navigate through archipelagic waters under the right of “innocent passage” or the right of “archipelagic sea lanes passage”. The right of archipelagic sea lanes passage grants all ships the right to navigate continuously and expeditiously in their “normal mode” through archipelagic waters and the adjacent territorial sea. Submarines may navigate submerged since that is their normal mode of passage. This right “cannot be impeded or suspended” by the archipelagic state for any purpose. An archipelagic state may designate sea lanes through its archipelagic waters, but all normal routes used for international navigation must be included. If such a designation has not occurred or is considered a partial designation, the right of archipelagic sea lanes passage may be exercised through the routes normally used for international navigation.

Outside of archipelagic sea lanes, all ships are entitled to the more limited right of innocent passage throughout archipelagic waters and through the territorial sea. Submarines exercising the right of innocent passage must navigate on the surface and show their flag, and comply with other rules on innocent passage, such as refraining from engaging in any activity that is prejudicial to the peace, good order or security of the coastal state. An archipelagic state may “temporarily suspend the right of innocent passage” for foreign ships in specified areas of its archipelagic waters and territorial sea if such suspension is essential for the protection of its security, after providing due notice.

Statements by some Indonesian government officials in the wake of the AUKUS announcements suggest that Indonesia should consider prohibiting the passage of foreign submarines through its archipelagic waters if they are engaged in activities related to war or preparation of war or non-peaceful activities. While UNCLOS promotes peaceful uses of the seas and oceans, it contains no provision permitting archipelagic states to suspend the right of archipelagic sea lanes passage through their archipelagic waters. Rather, it specifically provides that there shall be no suspension of the right of archipelagic sea lanes passage.

While it is true that foreign nuclear-powered ships exercising the right of innocent passage are subject to stricter requirements under UNCLOS, such as carrying appropriate documents and complying with special precautionary measures established by international agreements, the intention is not to limit passage, but rather to guarantee that hazardous activities are effectively managed in line with international standards.

UNCLOS makes no exception to the passage rights of submarines based on their intended use or purpose. It only requires that the passage of submarines is in conformity with the provisions in UNCLOS. Even if there is an ongoing war, archipelagic states have an obligation to respect the right of archipelagic sea lanes passage of foreign submarines.

Some debate has arisen as to whether the provisions in UNCLOS are applicable during an international armed conflict. Views vary from UNCLOS not applying at all to UNCLOS remaining applicable. A moderate position suggests that the maritime rights and duties that states enjoy in peacetime continue with minor exceptions during an armed conflict.

In wartime, the law of naval warfare is considered the lex specialis regime that supersedes UNCLOS “for belligerent parties”. However, UNCLOS continues to govern the conduct between neutral and belligerent states, and among neutral states. This principle applies in particular to passage rights of foreign ships, including the rights of archipelagic sea lanes passage and innocent passage through archipelagic waters. The law of naval warfare thus modifies the relationship between neutral and belligerent states to some degree to ensure that neutral states are not harmed by the conflict and to prevent the conflict from escalating.

The law of naval warfare has evolved over time and is primarily based on customary international law. A series of conventions have been adopted to regulate naval warfare, but not all have been widely accepted. The San Remo Manual, prepared by a group of legal and naval experts, provides the most detailed and current rules for the conduct of naval warfare. While it is an unofficial statement, it appears to be widely accepted as a reflection of customary law.

Finally, the San Remo Manual provides that the passage rights applicable to archipelagic waters in peacetime shall continue to apply during an armed conflict. A neutral archipelagic state may condition, restrict or prohibit the entrance to or passage through its neutral waters by belligerent warships and auxiliary vessels on a non-discriminatory basis, “except for passage through archipelagic sea lanes” – whether formally designated or not.

Indonesia’s policy on the passage of AUKUS submarines through its archipelagic waters will have significant implications for its relationship with the countries involved and its commitment to uphold international law, especially if it attempts to prohibit or restrict the passage of foreign submarines in a manner inconsistent with its rights and obligations under UNCLOS. The legal principles and frameworks will undoubtedly play a crucial role in shaping the outcome.

Australia suffers from a deficit of expertise on China’s military capabilities, and it is distorting the national debate about the threat China poses to Australia.

Under the AUKUS project, Australia has now embarked on a AU$268–368 billion transformation of its navy. The release next month of the Defence Strategic Review will bring further changes to the force structure of the Australian Defence Force, and probably a boost to defence spending. Australia is doing all of this based on a belief that China threatens the country militarily, yet almost no one who is engaged in this debate has offered specifics about the nature of the threat. The Lowy Institute tried to fill this gap in 2021 when it published Thomas Shugart’s analysis paper, Australia and the Growing Reach of China’s Military. I’m not aware of any other publication devoted to the question of how much military power China can project against Australia now and in future, and the circumstances in which it might do so.

To the degree that any specifics about a Chinese assault on Australia are offered, a sober assessment ought to prompt a re-think about the severity of the threat. The Red Alert series published by The Sydney Morning Herald this month, in which five experts were brought together to discuss the China threat, concluded that defence spending should double to four per cent of GDP because of Australia’s growing vulnerability to China’s military – the People’s Liberation Army (PLA). Part Two of Red Alert says China could attack Australia because of US bases here, and because US troops could be moved here in a crisis with China. It also talks about cyberattacks and the mining of Australian harbours.

This is all plausible but needs to be kept in perspective. The mining of Australian harbours, for instance, is certainly a risk, but would this “devastate the nation by cutting it off from critical supply routes”? That seems unlikely if Australia invests in a decent mine countermeasures capability, which wouldn’t break the bank. Even in the unlikely event that China could choke Australia’s trade routes entirely, what critical war aim would that achieve? Given the strength and resilience of the Australian economy (look how well the country got through the severe economic test of Covid), such a blockade would have to last months, maybe years for Australia to succumb to it, especially given that air supply routes would be unaffected. It seems an unlikely investment of scarce resources for China.

That brings us to strikes against Australian bases, fuel and munitions holdings, and ships. Again, this is plausible. As Shugart’s map shows, China has the missiles and aircraft to reach the Australian landmass.

But despite the dramatic pace and scale of China’s rise as a military power, it remains incredibly costly and technologically difficult to bomb another country from thousands of kilometres away. China has built a formidable ballistic missile armoury but unless armed with a nuclear warhead, the destructiveness of each missile is pretty modest. By contrast, protecting key targets against such attacks is affordable. Australia could start by building hardened shelters to protect its multi-billion-dollar fleet of stealth fighters and build the capacity to repair damage quickly. Improving Australia’s ability to absorb losses and bounce back quickly is in itself a form of deterrence, since it signals to an adversary that using armed force against Australia won’t work. Retired Major General Mick Ryan strikes just the right tone in his contribution to Red Alert when he criticises Australia’s focus on offensive weapons (the “cult of the offensive”) while ignoring the relatively cheap steps it could take to improve resilience.

Australia is extraordinarily well protected by geography. Peter Jennings, former Executive Director of the Australian Strategic Policy Institute (ASPI) says in Red Alert that “Distance is no longer equivalent to safety from our strategic perspective”. But in fact, distance buys Australia a huge margin of safety. If distance didn’t matter, then Australia would be as vulnerable as Taiwan to Chinese military power. But the strait separating Taiwan from mainland China is just 160 kilometres wide at its narrowest point. By contrast, Australia’s most northerly military base in Darwin is more than 4000 kilometres away from Sanya, China’s most southerly naval base.

China’s military capabilities will certainly continue to improve, but China will never overcome the limits imposed by geography. That’s why the direction of contemporary Australian defence policy is so puzzling. Distance is Australia’s single biggest defence asset, but Australia is now pursuing a submarine project, and a defence strategy, dedicated to compressing the distance between Australia and China. The chief advantages that nuclear power offer to submarine operations are range and endurance. A nuclear-powered submarine can go virtually anywhere on the world’s oceans undetected, and it can stay underwater for as long as the crew can sustain it. In Australian hands, the most plausible use for such a capability is for the navy to operate close to Chinese shores. But when Australia does that, it gives China the advantage of distance and surrenders its own.

In contrast to the AUKUS announcement in 2021, the most recent trilateral AUKUS statement has passed with hardly a murmur from the Pacific. This time round, the Australians were careful to provide advance briefings and to directly address pressing issues on Pacific minds. No subs will carry nuclear weapons. No nuclear waste will be disposed in the Pacific Islands. And Australia recognises that the most urgent security issue for the region is climate change.

The quick visit by PM Anthony Albanese to Fiji on the way home from the San Diego announcement won acceptance from the Fiji Prime Minister Sitiveni Rabuka. There are more pressing Pacific development and economic issues than those occupying the international press concerning who pays for the subs, delivery times, and the expenditure of huge sums.

So, is this the end of AUKUS concerns in the Pacific? There are still issues that will affect receptivity when the nuclear-powered subs head out and into Pacific waters.

When learning of the AUKUS commitment, Kiribati Prime Minister Taneti Maamau reflected on the South Pacific nuclear experience: “Our people were victims of nuclear testing … we still have trauma”. More than 300 nuclear tests occurred in the region between 1946 and 1966, and the region still suffers from resulting cancers, health and ecological impacts. That trauma was one impetus that brought the Pacific Island countries together in solidarity to declare the region free of nuclear weapons and nuclear waste dumping under the 1985 Rarotonga Treaty. Albanese has been clear, as a signatory to that Treaty, Australia will honour it.

AUKUS is a trilateral security pact between Australia, the United Kingdom and the United States to share technology, improve interoperability and deploy nuclear-powered submarines. Australia does not have nuclear weapons. That said, there may be jitters about the US policy to not confirm or deny if nuclear weapons are onboard subs. Will there be nuclear weapons transiting the region unknown?

New Zealand has made clear that they support ANZUS, the treaty between Australia, New Zealand and the United States to protect Pacific security, but nuclear submarines will not be welcomed in their ports under their nuclear free zone policy (the focus of the 1980s ANZUS crisis). Other countries with similar policies may follow, such as Vanuatu. For other countries that signed the Rarotonga Treaty, it will be a sovereign decision whether or not to allow nuclear-powered craft in their ports. The Rarotonga Treaty only explicitly bans nuclear testing and nuclear waste disposal.

There is a regional determination not to accept any future nuclear risks, evident in the strong opposition of the Pacific Island Forum secretariat to the Japanese proposal to dispose of nuclear waste water from the Fukushima reactor damaged by the 2011 tsunami. The Japanese claim the disposal is safe, but the Secretariat made it clear there was not enough information to convince them. For AUKUS, a good start has been made, but ongoing strategic reassurance and updates will be expected. Australia might have to be clearer on just what the benefits are for the region, and, other than subs, what elements of AUKUS will affect the Pacific Islands?

We are just learning about the type of subs likely to patrol the region, but before they are permitted into the sovereign waters of the Pacific Islands, leaders will want to know more about the technology and indeed about the whole-of-life management and regulation. The nuclear fuel might be contained for 30-odd years, but it does not disappear. The Pacific has been assured that what is produced for Australia will stay in Australia – but details matter. There have been promises before of technology safety, as well as sound storage and management systems to protect the environment, and then impacts occurred, including cracks in the nuclear storage areas in the Marshall Islands.

Finally, the Pacific Islands have learned from the Second World War that when elephants fight, the small can get trampled. Geopolitical tensions in the Pacific between Australia, the United States and China are already causing concerns among Pacific Island countries. Papua New Guinea Prime Minster James Marape has previously declared “we cannot afford the stand-off between our trading partners” and Tuvalu’s Foreign Minister Simon Kofe has this week raised concerns.

The 2011 Fukushima disaster highlighted the danger of nuclear power to human health and the environment. As we discuss nuclear-powered submarines in the Pacific, we must also address concerns about increased militarization of the region. #EnvironmentalProtection #PeacefulSolution https://t.co/ZCQ0hbn86q

— Simon Kofe (@Simon_Kofe) March 18, 2023

AUKUS nuclear-powered submarines may be a technological innovation that helps protect maritime territories and the region, but if operational in the South Pacific region, the worry will be that it “ups the ante” in the geopolitical contest. The Pacific does not want its Blue Pacific continent militarised, and certainly doesn’t want China feeling it needs to bring its rapidly increasing naval and nuclear assets into the region for “balance”.

Some in the region, no doubt, will welcome the greater efforts by the West to bolster security and protect ocean spaces. Some leaders have reinforced the “Pacific Family First” approach to security and are sticking with their valued traditional allies. Australia is rapidly strengthening bilateral security agreements around the region, including with Fiji, Kiribati, Vanuatu and Papua New Guinea. The recent Ukraine-Russia war has demonstrated how fast tensions can escalate and nuclear power accountability be abandoned. Regional security among trusted friends is at a premium.

Pacific neighbours understand the drivers behind AUKUS and the Australian desire to shore up its security. But that won’t alleviate concerns about the militarisation of the region and potential “accidents” when nuclear military vessels come to their waters.

And as the deal rolls out, some will also look at the huge sums to be spent on these subs and feel their very pressing existential threat from climate change also requires this type of focused, coordinated and substantial investment.

AUKUS is Herculean in scale, complexity, and concept. But rather than connecting the waters of the Atlantic and the Mediterranean, as Hercules did, it unites the Atlantic and the Indo-Pacific in one of the most ambitious and demanding endeavours I have seen in my life, for Australia to acquire conventionally armed, nuclear-powered submarines.

This is not the stuff of whimsy. Nor is it a convocation of the “Anglosphere”, as some would contend – including those who oppose AUKUS because they fear it will blunt their own ambition. It does not pose challenges to the nuclear non-proliferation regime and strategic stability. Those are to be found in Vladimir Putin’s war in Ukraine and his threats of nuclear escalation, and in China’s rapid and so far unexplained expansion of its military capabilities, including big increases in its nuclear arsenal.

As Australia’s circumstances change, so too must national policies and priorities. This simple truth underpinned the Defence Strategic Update of July 2020. That document was delivered by a Coalition government and endorsed by the then Labor opposition. Though highly capable, the Australian Defence Force is comparatively small. It is precisely to dilute the risk of unequal military conflict that the ADF, and Australia writ large, must exercise much greater deterrent effect in the face of mounting and morphing challenges to our sovereignty, security and prosperity.

The contours and the import of those challenges became ever more apparent over the past decade, but we didn’t recognise them in real time and now are engaged in Herculean labour to make up lost ground.

To deter, Australia must be credible. Credibility rests on coherence, cohesion, commitment, capability, and clear communication. The partnership with the United States and United Kingdom through AUKUS is the hard-headed response of three nations that share heritage, embrace and avow common principles, institutional resilience and rigorous accountability, possess complementary skills and capabilities, and are intent on meeting common challenges.

For Australia this is a nation-building task which should excite something we have never really done in my lifetime, namely, engage in serious, thoughtful, dispassionate and self-confident national discourse about what we value and wish to preserve, what must change, and at what cost (not just financial), if we are to become and remain the Australia we wish to be. The world cannot be willed into more benign shape if we just squeeze our eyes shut tightly enough and wish it were so.

Acquiring and operating nuclear-powered submarines will be hard. It will be expensive, but we should not be cowed by big numbers, not least because who knows what inflation and exchange rates will be in two or three decades?

This is a decision informed by some of the most rigorous, disciplined and critically self-aware analysis I have observed in more than three decades in public policy-making. As important is that this is a bipartisan commitment, not just in Australia, but also in the United Kingdom and the United States. Both sides of the aisle in Congress are united in support of AUKUS. They will intently scrutinise Australia’s performance as only the third steward of America’s most sensitive military technology. That is entirely appropriate, and a deep and acute understanding of the responsibility we have embraced has been the hallmark of all those who have worked on this.

AUKUS is Herculean also because it consists of two pillars. In my role as Deputy Secretary in the Department of Defence, I was the Australian lead for what is known in shorthand as “Pillar Two”, that is, the identification and development of “advanced capabilities” across a range of technologies critical to preserving and, in some cases, re-acquiring the military edge we need to sustain both Australia’s deterrent and, in extremis, its warfighting capability.

Prominent among these are undersea and electronic warfare, quantum technologies, hyper- and counter-hypersonics, and artificial intelligence. The trilateral work under way in these areas must be transformational not only in delivering practical gains for our militaries. The Covid pandemic awoke us to the fragility of global supply chains. AUKUS is the accelerant needed to broaden the expanse of our collective R+D, financial, and industrial bases and, with full political authority, to eliminate legislative, policy, and attitudinal barriers to technology transfer and industrial collaboration that hinder our ability to generate results faster.

Some accounts hold that inscribed on the Pillars of Hercules was the phrase “ne plus ultra”, meaning “nothing further beyond”. AUKUS exceeds that in its ambition and promise. The three nations are demonstrating a resolve not only to protect their own sovereign interests and national security, but to preserve a strategic environment and law-based framework which ensures states, regardless of size and heft, have agency to make choices about their own interests, security, and prosperity.

Not long before I left public service in 2022, I spoke with a retired senior Indonesian military officer. I asked how he thought the region viewed AUKUS, one year on. He said without hesitation: “We do not fear a strong Australia. But we would be concerned about a weak Australia.”

Let that sentiment be a guide.

Enthusing about Australia’s nuclear-powered submarine project, Prime Minister Anthony Albanese drew an analogy with the creation of an Australian car industry after the Second World War. As the car industry “helped drive advanced manufacturing” in Australia, so too the submarine project will be a “catalyst for jobs, innovation and growth”. In the Prime Minister’s telling, the submarine project is an industry policy innovation designed to create a new high technology base for Australian manufacturing, a frequently expressed Albanese government aim.

The Prime Minister is surely right that if Australia could build a motor vehicle industry when its population was a third of today’s, when its economic size was a tenth of today’s, it can now build nuclear-powered submarines. Admittedly, there are plenty of problems. Australia today does not have the engineering skills, the familiarity with nuclear propulsion, or the means to store highly enriched spent uranium. But with American and British help, with sufficient money and determination, all these needs and more can be met and a new industry of making and maintaining nuclear-powered submarines can be created, just as a car industry was created over 70 years ago.

The more troubling aspect of Albanese’s analogy is that Australia no longer has a car industry. Controlled by overseas-owned car makers, the Australian industry was never very interested in exports. As time went by, as Japan and then Korea became major producers, as the efficient size of global car production lines increased, as research and development costs increased for major producers, the Australian car industry became less and less competitive. It survived only behind high tariff barriers. Australian cars were among the most expensive in the world.

In the end the Australian car industry fell behind changing market demand for compact sedans, and later for SUVs. Loved in the 1950s, by the 1990s the Australian-made four door six-cylinder sedan was no longer wanted. High Australian wages were not the problem. By then wages in Japan and South Korea were equal to or better than in Australia, and in any case, robots were replacing workers. The problem was the lack of scale in an industry that did not seek a world market.

What was true for the car industry will be even more so for the Australian nuclear-powered submarine industry. Dependent on their patents, their intellectual property licenses, their continuing technology innovations, confined by the very war superiority that its advocates say nuclear-powered submarines possess, the Australian submarine industry will never be permitted by its American and British sponsors to be an export industry. It will build eight submarines for the Australian government, and then become a maintenance business. Long before the last boat is delivered, the business will be winding down.

It might become a hub for new technology industries, but probably won’t. Nuclear propulsion is after all now a very old technology. The first nuclear-powered submarine was launched just on 70 years ago. By the time Australian built nuclear-powered submarines are launched the technology will be over a century old. Australia will anyway acquire only bits of the technology. The nuclear reactors will be made elsewhere, the weapons, communications and control systems made elsewhere, and the vessels designed elsewhere.

The submarine project is a cut above a flat pack assembly business, though perhaps not all that much above. If the past two generations of submarine building projects in Adelaide did not create a major flourishing industry which outlasted the submarine projects, why should this one?

It is certainly true there will be a lot of valuable high technology skills employed in building submarines in Australia, including frontier IT skills, project management, materials science, and other commercial skills involved in such a complex and expensive project. These skills will be employed in making submarines, however, not in businesses with a prospect of a sustained commercial future.

The skills will be diverted from civilian commercial uses. The cost of the project will be the opportunities missed for deploying those skills elsewhere. The more complex the project, the higher the demand for advanced skills, the bigger the loss to Australia’s non-defence economy.

In these respects the submarine project reflects the vast change in the relationship between defence industries and commercial industries over the last half century. Once the leaders, defence industries are now followers. In the United States the military pioneered in funding and exploring new technologies that had defence applications but led to the creation of new commercial industries. These included jet engines, nuclear energy, semiconductors, the internet, space satellites, and navigation systems. Today commercial research and development vastly exceeds military research and development, with the military far more often adapting commercial developments than the other way around.

Whatever the arguments for Australia building nuclear-powered submarines, the creation of commercial spin-offs, of new high technology commercial industries, should not be among them.