AUKUS: Risks and Rewards

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.

When the long-anticipated AUKUS announcement is made in San Diego next week, the specifics of the “optimal pathway” for Australia’s future nuclear-powered submarines – which design, who will build them, when we get them and how much will they cost – will all be revealed. (Hopefully.) Such unknowns, important as they are, have been subjected to frenzied media speculation in recent days, to which this article does not propose to add.

Instead, I recently had an illuminating conversation with David Oliver in Washington, DC. A retired Rear Admiral in the US Navy, Oliver served aboard both diesel and nuclear-powered submarines – commanding the latter – and was later a political appointee across multiple US administrations. He is also author of many books including on the “father of the US nuclear navy” Hyman Rickover to most recently defence reform.

My principal question was to ask him what are the big issues still beneath the surface of the AUKUS debate?

In case the ultimate point of this capability is being missed, Oliver is emphatic: “Nuclear powered submarines will give Australia invulnerability. There is no nation or system that can prevent a determined attack by a nuclear submarine,” he says.

Avoiding detection – a key factor for abandoning the French-designed Attack Class – will move to the next level, especially for potential operation in waters closer to mainland China. As Oliver puts it:

Nuclear submarines have such inherent advantages, in that the ocean is so noisy and layered that sounds pursue odd paths. Then there is the fact that a competently driven boat can cause the problem to reset faster than computers can track and analyse.

Making the transition from diesel-electric – which Australia has operated since HMAS AE1 and AE2 more than a century ago – to nuclear-propulsion is a step Oliver has personally made. While the increased cost per boat is widely appreciated, the cost of attracting and retaining crew might be more than expected.

“You are going to want to sell many facets of the program to get and keep sufficient quality people,” he says. “But we finally accepted that it took money. Submariners needed to be paid more, because if they are the ones you want, they can be successful in many fields that pay more.

“At the same time, I believe you attract and keep young people by giving them lots of responsibility and having them face the physical and mental challenges of the deep. Some will say that nuclear-powered submarines are more comfortable [typically more space and artificially produced oxygen and water] but I believe few of these high performers care much about their bunks.”         

Besides the attractions of pay and challenging work, Oliver says there is at least one motivation in common with the surface fleet: port visits. (Australia’s Collins Class are routine visitors to places such as Singapore and Guam, but also occasionally locations such as Noumea and Brunei.) “We screwed this up early in our program, but then finally realised the basic fact that people join the Navy to see the world,” he says.

“If you look at where a US nuclear submarine goes, it is completely dependent upon safety studies. You will find that lots of port visits can still be conducted by using a pier that is not ‘downtown’ per se. It will be workable for Australia too.”  

With the phrases “nuclear mindset” and “nuclear stewardship” recently entering the Australian defence lexicon, Oliver emphasises that the shift in safety culture is the greatest intangible challenge and cannot be underestimated.

“You are going to need a different view of quality, errors and responsibility. It is why Hyman Rickover when putting the entire Navy through the trauma of changing from diesel to nuclear, he personally controlled every officer who entered and every officer who became an engineer or commanding officer.

“No one goes home to the wrong house after work, even when they have a cold or are distracted. Why should Australia accept any less for nuclear personnel at work?

“One mistake, depending on its egregiousness, might be grounds for termination from our program. Several errors always were. Your personnel system has to be prepared to handle this.”

In part, this change in mindset and skills will occur through what is known as “cross-decking” personnel for training – essentially allowing foreign submariners to serve on boats, a practice less rare than most people think.

“On my first ballistic missile submarine (SSBN), we took the man who was going to command the first United Kingdom SSBN on a patrol. Under another special arrangement I put US submariners on Japanese boats,” he says.

“I don’t see a problem cross-decking between US, Australia, the UK and I would include Canada. I think our basic tenets are the same and we are working from a very common purpose.”

Looking beyond nuclear-powered submarines, few have asked whether Australia should follow the US into other nuclear-powered naval vessels. Probably not, in Oliver’s view.

“I long ago realised that when air was freely available on the surface of the ocean, the cost of nuclear power would never be competitive. We found that nuclear power adds about 30-40 per cent to the initial cost. Therefore, as long as oil tends to average less than about US$120 a barrel, the initial nuclear power cost overwhelms the analysis.

“However, by the time we realised this, we had already sold the concept of nuclear aircraft carriers, so they have continued. But you will note that we did away with the nuclear-powered cruisers in the 1990s, very early in their life.”

Another feature of nuclear-powered submarines hiding in plain sight: they are not exposed to refined petroleum supply chains, which, for the ADF, is true of essentially every other vehicle and vessel.

“Fuel logistics was a major consideration for our entire Navy,” says Oliver, “especially during the 60s and 70s, and we were debating going fully nuclear. Eventually we decided that we already had a global fuel system, and some control over the price of oil.” Australia, he points out will always have access to US Navy fuel infrastructure in the Pacific.

Oliver is rare among former submariners in speaking publicly, albeit carefully. He says that the lack of general awareness of submarine operations and capabilities – even within the surface navy and defence communities, let alone the public – can cause problems. How should Australia build the “social license” for this secretive but very expensive capability?

“Pick the right people to serve and then focus on stories about how good, hard-working, unique and Australian they are,” he says, “and leave what they are doing to everyone’s imagination.”

While nuclear-powered submarines steal much of the media limelight, the AUKUS security partnership between Australia, the United Kingdom and the United States is about much more than the submersible warships. And it is headed for a critical phase.

The partnership will include additional cooperation in defence-related science and technology, industrial production and supply chains, and cyber and AI capability. This will involve significant contributions from the private sector of each partner economy and require ongoing intellectual property (IP) transfers between partners. Such transfers and storage of highly sensitive data will require information security and network resilience. In the contemporary era of strategic competition between economically interdependent nations, IP theft poses unique challenges that AUKUS partners must overcome.

The economic cost of IP theft is difficult to calculate, with official US economic losses due to Chinese actions estimated at between US$225 billion and US$600 billion. Even the lower end of this estimate is vast. While there seems to be no comparable official estimate for Australia, there are high-profile examples of IP theft (here, here and here), as well as Australia serving as legal jurisdiction for the adjudication of an IP theft case involving Motorola and Chinese firm Hytera. The Chinese state is recognised by AUKUS governments as the single most active global actor in conducting and/or sponsoring malicious cyber operations with the aim of transforming stolen IP into defence capabilities and private sector products. It is well documented that China’s legal system actively enables IP theft, which is made possible by a politically dependent judicial system subject to Chinese Communist Party (CCP) directives.

Yet it may surprise some that another significant contributing factor to Chinese economic espionage is the unwillingness of victimised private businesses to take legal action against Chinese firms or the state. A recent investigation of IP theft in the world’s most targeted economy, the United States, found that it was “allowed to quietly continue because US companies had too much money at stake to make waves”. For example, in 2010, when Google revealed a major China hack, 33 other American businesses that were also hacked refused to make public statements.

One reason for their silence relates to the CCP’s willingness to use its vast domestic market access as both carrot and stick, punishing firms that make statements on issues the Party views as politically sensitive. Private businesses operating in China are therefore right to fear they will suffer potentially serious financial costs if they displease Beijing. Their ultimate concern is making profits for owners and shareholders, resulting in micro-motives that have the unintended effect of undermining national security imperatives around safeguarding IP. Wendy Cutler, an experienced negotiator at the Office of the US Trade Representative notes, “We are not as effective [combating IP theft] if we don't have the US business community supporting us”.

The issue of private firms wishing to remain anonymous when targeted by Chinese IP theft will become increasingly important for AUKUS members operating within the context of economically entangled strategic competition. At present, a key issue is the lack of a universal mandatory duty of corporations to report cyberattacks. A duty to report, enforced by financial penalties, would be a good initial step to improve corporate cyber governance. At present, only firms listed on the Australian stock exchange (ASX) are obliged to report a cyberattack.

Breach of disclosure obligations can lead to large financial penalties if discovered by the Australian Securities and Investment Commission (ASIC). The rationale is that such information could be crucial for assessing the market value of the targeted company. However, given that Australia’s defence economy relies mostly on small businesses across the country, notwithstanding a few large defence contractors, the limitation of relying on ASX disclosure rules becomes clear.

From an Australian perspective, Canberra should engage in policy-learning from Washington’s recent initiatives by following suit on two fronts. The first involves an Australian version of the US Commission on the Theft of American Intellectual Property. Others have already made convincing arguments for that institutional development, to which the authors of this article add their support. Such a commission is a much-needed step to fully understand the threat posed by IP theft to Australia. A second proposal is to create a parliamentary committee with a mandate similar to the recently established Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party. The remit of this committee includes a focus on US corporate relationships with China, and how these impact issues of national security.   

While the US example is mostly bi-partisan in nature and calls for the private sector to play its part in terms of awareness and alertness, one of Australia’s challenges is to establish a whole-of-government approach that allows for engagement between the business community, national security community and academia by way of co-opted membership of respective organisational bodies. This would allow better cross-understanding of each group’s risks and goals, as well as how these intersect dynamically.

“Australia is facing an unprecedented challenge from espionage and foreign interference”, the Australian Security Intelligence Organisation’s Director-General pointed out during last week’s presentation of ASIO’s fourth Annual Threat Assessment. And China is central to those challenges. As a result, the valuable economic gains Australia and China both harvest from their bilateral trade relationship should not be used to justify a policy of “softened” vigilance concerning China’s clear and present danger to the nation’s democracy and economy. AUKUS supply chains and private defence contractors across the partner economies are clearly in the firing line. It is the government’s job to reduce their exposure.

If a week is a long time in politics, 18 months makes for a lifetime in diplomacy. That’s the time now elapsed since the “stab in the back” ­– words French Foreign Minister Jean-Yves le Drian used to describe Australia’s surprise announcement in September 2021 to scrap a $90 billion contract for 12 French-designed diesel-powered Attack class submarines in favour of a nuclear-powered option in collaboration with the United States and United Kingdom.

But France and Australia are now putting AUKUS behind them. This week in Paris saw the latest step towards normalisation of the relationship, with the second-ever Franco-Australian Foreign and Defence Ministerial Consultations – also referred to as a 2+2 meeting. The headline announcement was a joint plan to manufacture 155mm artillery shells to provide Ukraine resistance to Russia’s invasion, with a French company to provide the shells, while Australia supplies the gunpowder.

This announcement will undoubtedly be welcome news to Kyiv since these shells are essential to the military equipment provided by key Western partners. The fact that this will not be a one-off delivery but appears to be an ongoing commitment is also significant.

But beyond the impact on the conflict in Ukraine, this partnership shows that the relationship between France and Australia is progressively improving. Following the announcement of the co-production of the artillery shells, France’s ambassador to Australia Jean-Pierre Thébault went as far as saying that the relationship was fully repaired. This is a bit of a stretch, since decisions such as the one made by Australia to retire its European-made Taipan helicopter fleet early and to replace it with 40 American-made UH-60M Black Hawk helicopters keep creating tensions between the two countries. Yet it is undeniable that we have come a long way since French President Emmanuel Macron accused then Prime Minister Scott Morrison of lying.

Many factors have made this normalisation possible, but three are particularly significant.

First, Canberra has acknowledged that France is a key Indo-Pacific power, which is something that was particularly important to Paris as it is keen to promote France’s international status and in particular its role in the region.

Second, the $835 million payment made by Australia for the cancellation of the submarine deal was crucial.

But the real turning point was the change in government in Australia with the election of Anthony Albanese in May 2022. It allowed both Macron’s and Albanese’s respective administrations to claim that what happened was not a breach of trust between France and Australia, but by Morrison’s government specifically. While this claim somewhat oversimplified the crisis, it provided a powerful narrative to help move past it. US President Joe Biden had used a similar approach when he attempted to appease the tensions with France by shifting some of the blame to Morrison, claiming that he “was under the impression that France had been informed long before”.

As a result, ever since Albanese came to power, Paris and Canberra have kept emphasising that their relationship would be based “on mutual trust and respect”.

So what now?

This normalisation is good news for both Australia and France. For instance, while Paris does not speak for the European Union, France can be expected to go back to promoting negotiations of the free trade agreement between Australia and the EU and to help negotiate some of Canberra’s less popular requests. This support had stopped following the AUKUS announcement after Macron sought to “Europeanise” the crisis and slow down the negotiations.

For France, stronger cooperation with Australia is also a boon. Prior to the AUKUS-induced breakdown, Paris had clearly identified Australia as a pillar of its Indo-Pacific strategy.

In coming years, three areas of cooperation have been identified as particularly important. First, Paris and Canberra want to increase military cooperation in order to promote a rules-based international order, which involves containing China’s growing influence in the Indo-Pacific. Australian Defence Minister Richard Marles flagged talks about pursuing a reciprocal access agreement, which would take the military cooperation between the two countries to a new level. Marles and his French counterpart Sébastien Lecornu also signed “a declaration of intent between the two countries on military space cooperation”. Increased cooperation in the field of climate change is also expected, through climate finance and climate change mitigation, along with education and culture.

What concrete steps are taken in coming months – particularly after the announcement of the AUKUS “optimal pathway” in March ­– will be key to fully grasping the place Franco-Australian cooperation has in Australian foreign policy. But for now, these latest announcements confirm what was suspected following Albanese’s visit to Paris in July 2022: that the relationship between France and Australia is normalising and the worst of the AUKUS tensions have receded.

Of all the places to drop a bombshell about Australia’s quest for new submarines, could Defence Minister Richard Marles have picked a worse one than Paris? The question put to Marles in yesterday’s joint press conference with Foreign Minister Penny Wong and their French counterparts was whether France had any hope of securing a contract for an interim submarine, in light of the fact that Australia’s nuclear-powered boats are likely to arrive too late to prevent a gap after the retirement of the existing Collins-class boats:

… there are no plans for any … conventionally powered interim submarine capability, as we move towards gaining the nuclear-powered submarine capability, which we are working towards.

It was less than 18 months ago that former Prime Minister Scott Morrison ripped the heart out of the Australia-France relationship by announcing the cancellation of the deal to buy 12 French-designed submarines in favour of a US or UK nuclear-powered design. Granted, France’s response was overwrought. After all, there was a cancellation clause in the contract, which included generous compensation. Australia merely exercised it. Still, for Marles to stand before senior members of the French government in their own capital to announce that France had no chance of a face-saving deal for an interim submarine seems impolitic.

I don’t share many of the views of The Australian’s foreign editor Greg Sheridan on defence policy, but he was the first to point to the extreme risk of the AUKUS agreement, and to question whether we will get the nuclear-powered submarines at all. Sheridan’s response to the Marles comment is interesting, also.

On Marles ruling out an interim submarine, Sheridan says: “The navy has won a big political battle here”. Sheridan doesn’t explain further, but one way to interpret him is that the navy thinks the Defence Department simply cannot handle three submarine projects (AUKUS, the Collins-class life-of-type extension, and the interim boat) at once. Another interpretation is that the navy is against any gap-filler submarine because such a project could go from being an interim solution to a fall-back solution. In other words, Australia needs to walk a tight rope towards a nuclear-powered submarine, and the navy would prefer we do it without a net, because the net would merely tempt us to make a soft landing rather than cross the ravine towards AUKUS.

Sheridan goes on to list the many ways the AUKUS project could go wrong. America doesn’t have enough production capacity. Australia doesn’t have the crews or facilities. Australian politics is too unstable to offer 20+ years of support. Nuclear-powered submarine production in Adelaide is a “fantasy”. He also says: “There are still substantial sections of the US Navy and industry which are against this program. There are also substantial parts of the UK Labour Party against it.”

Can I humbly suggest to Australian journalists posted in Washington and London that this part of the AUKUS story is under-reported? AUKUS was so secretive in conception that bureaucratic involvement was kept to a bare minimum. It was an agreement conceived at the political level and largely kept there until it was publicly announced. It is not surprising that it should now be meeting bureaucratic resistance, but that story is yet to be fully told.

In light of all that, it is mildly astonishing for Sheridan to conclude that “nuclear submarines are the best and we should proceed, notwithstanding the difficulties”. No, merely having “the best” is not a good enough reason for Australia to embark on this massively costly and risky project. We need a much better reason.

Let’s hope that when the government finally makes an announcement about the future submarine in March, they tell us not just what model we are getting and what it can do, but why we need them. Just hinting that it’s all about China or making loose references to “deterrence” will not do. There are many ways to deter China; why are we choosing this one?