The Great Australian Submarine Race

The scramble to win Australia’s multi-billion dollar submarine contract is intensifying, with German, French, Swedish and Japanese contenders all in the race. After previously suggesting that plans were to build 12 new submarines in Adelaide, recent media speculation has centered on a likely overseas supplier, sparking a propaganda war over the potential impact on the nation’s security ties.

The intense debate reflects the economic prize at stake, with the replacement of Australia’s aging Collins class submarine fleet from 2026 estimated at costing up to A$60 billion ($48.8 billion) or even A$80 billion, dwarfing the A$12 billion recently spent on an extra 58 F-35 Joint Strike Fighter jets.

Amid claim and counter-claim, Australia’s government-owned shipbuilder ASC has estimated a price tag for the new subs of up to A$24 billion, comparable with estimated bids from Japanese and European makers of around A$20 billion, depending on the specifications, although maintenance costs could double or triple the price during the ships’ lifespan.

Yet with Australia’s defense minister, David Johnston recently commenting that he would not trust ASC “to build a canoe” due to cost overruns and delays on the nation’s new Air Warfare Destroyer vessels, the foreign bidders appear favored to triumph.

Nevertheless, at a submarine conference held in Canberra in April, Johnston reportedly said the nation’s desired new submarines would challenge any shipbuilder.

Reporting on the conference, The Monthly’s Claire Corbett noted: “What we want…is a conventional submarine (one powered by diesel-electric motors), with the power, speed and range of a nuclear submarine. Such a boat doesn’t exist. Nor, as the then chief of navy, Vice Admiral Ray Griggs, pointed out in his speech, has Australia even begun to acquire the infrastructure or invest in the training needed to support nuclear-powered submarines.

“As a senior defense consultant told me, Australia has the only navy in the world that flogs its diesel submarines thousands of kilometers across the ocean – and then goes on patrol. Designers of conventional subs, such as the Swedes and Germans, have experience with shorter ranges: designing a sub for the Baltic Sea is like designing a sub to do laps around [Australia’s] Gulf of Carpentaria.”

With a reported “sub-buying frenzy” currently underway in the Asia-Pacific region, including even Bangladesh, Thailand and Vietnam, Australia’s need for new submarines is based on their strategic impact, particularly given the fact that more than half the world’s submarines operate in the region.

Japan Subs ‘Best In World’

Japan Prime Minister Shinzo Abe’s July visit to Australia, where he signed economic and defense agreements, appeared to put Japan in the box seat on the submarine contract. Johnston reportedly praised the Japanese Soryu sub as “the best conventional submarine in the world,” with the Australian defense minister formally requesting Japanese cooperation during a Tokyo visit in October.

However, senator David Fawcett, a member of Johnston’s ruling Liberal party, has urged the government to honor pre-election promises by having the submarines built in Australia, claiming nothing suitable is available overseas.

“To my mind [it] has to be fit for purpose - we have to have that sovereign engineering capability, and the most cost-effective way to achieve that is to build them here in Australia,” he told ABC News.

“It’s important to realize that there is nothing available off the shelf at the moment for conventional submarines that is fit for Australia’s purpose,” he added.

Similarly, independent South Australian senator Nick Xenophon has called for an open tender process “to ensure that we are getting the best value for money.”

“You won’t be able to do that if you simply have a cosy deal with just one government, namely with Japan,” he was quoted saying.

“Those who are interested in bidding for this can do so. I would imagine it would be the Japanese, the Germans, the French and an Australian-based consortium, but the proviso must be that every bit of these submarines is built right here in Australia, otherwise we are foolishly exporting jobs.”

The opposition Labor party and Manufacturing Workers Union have also urged the government to ensure the new subs are built in Australia, with the union warning that 10,000 jobs could disappear. Labor leader Bill Shorten even invoked wartime memories at a rally held at an Adelaide shipyards to oppose the mooted purchase of Japanese subs, telling workers that “this is a government with a short memory…In the Second World War, 366 merchant ships were sunk off Australia [by Japan].”

Canbera-Tokyo ‘Alliance’

The Australian Financial Review’s Shanghai-based correspondent, Angus Grigg, even suggested that the reported A$20 billion deal to buy 10 Soryu class submarines from Japan would “effectively seal an alliance between Canberra and Tokyo.”

“Not only has Japan never previously worked with a foreign navy, but Abbott is making a totally unnecessary bet on Japan itself. He’s wagering Tokyo can maintain its position in the region beyond 2040, when the last of the submarines are due to enter service. Given that strategic influence is directly connected with economic power, this seems unlikely,” Grigg asserted.

Grigg said any such submarine deal with Japan would give China the perception that “Australia and Japan, along with the U.S., are teaming up to counter its growing military power and influence in the region,” arguing instead for the purchase of “proven submarines” from Europe.

South Australia’s defence industries minister Martin Hamilton-Smith told a Senate inquiry that buying the subs overseas could increase costs by “two to three times again, due to issues with supply chains,” with any Japan deal potentially hurting ties with China.

“It would be unfortunate if any decision the federal government might make on this matter of submarines were to put this state in a difficult decision,” he said.

South Australia’s Economic Development Board has suggested that Australia’s economy could lose A$29 billion if the fleet is built overseas.

However, Rory Medcalf, director of the Lowy Institute’s International Security Program and incoming head of the ANU’s National Security College, told The Diplomat that Canberra’s decision would be based principally on economics.

“If an Australian government seriously considers the Japan option, I think that decision would be based principally on issues of technology and capability and relative cost. I also think that it should be quite possible for an Australian government to achieve the submarine capability it needs if it pursued that path, without locking Australia into a quasi-alliance commitment with Japan,” he said.

“I would be surprised if the Japanese had unrealistic expectations on that score. Australia broadly opposes any kind of coercion in maritime Asia, and that means that Australia has a commonality of interests with Japan in any case. I certainly don’t think that some kind of submarine deal would somehow lock Australia into a military alliance with Japan; that’s a false concern that’s been raised in some quarters.”

Narushige Michishita, professor at Japan’s National Graduate Institute for Policy Studies, said Australia’s purchase of Soryu-class submarines, the world’s largest diesel-engine subs, would be a “win-win-win” deal for both Japan and Australia, with the two countries’ navies becoming highly interoperable.

He noted that the Soryu subs cost around A$600 million each, “less than half the price of an Australian-made alternative,” with Japan also benefitting by generating economies of scale in its relatively small domestic arms industry. With the Japanese government set to legally end a self-imposed ban on exercising the right to collective self-defense, Michishita said Japan would be able to “participate in robust training and exercises with other countries in the region, including Australia.”

However, with the Australian government expected to announce its decision “within days,” the European shipbuilders have expressed confidence that they will win the race over their Japanese rival.

According to a December 17 ABC News report, sources close to Germany’s TKMS bid team have suggested that Canberra is not “cut and dried with the Japanese solution,” with the government “going to too much trouble” to keep them engaged.

TKMS reportedly anticipates that itself, the Japanese, and French shipbuilder DCNS will make the final round, with Sweden’s Saab also a potential candidate. The German bid is said to be based on “building parts of the submarines at multiple shipyards around Australia, then completing construction in Adelaide,” winning political support compared to building the subs overseas.

With billions of dollars at stake along with future security relationships, Canberra will be anxious to ensure its decision placates the Adelaide shipbuilding lobby, at least by ensuring maintenance or other work is done locally, without risking diplomatic ties with one of its major trading partners. The easy option may be Europe, but Japan will be hoping its “special relationship” ensures Australia does not suddenly say “sayonara” to subs from the land of the rising defense industry.