Australia reaches settlement with France over scrapped submarine deal

Australia scrapped a multi-billion-dollar order for submarines with French military shipyard Naval Group in 2021. PHOTO: ROYAL AUSTRALIAN NAVY/FACEBOOK

WELLINGTON (REUTERS, AFP) - Australia Prime Minister Anthony Albanese said on Saturday (June 11) that his government had reached a 555 million euro (S$812 million) settlement with France's Naval Group over the decision last year to scrap the French submarine deal.

"This is a fair and equitable settlement," Albanese told a news conference.

He said the settlement followed discussions with French President Emmanuel Macron and he thanked him for the cordial way in which the relationship between Australia and France was being re-established.

Australia last year scrapped a multi-billion-dollar order for submarines with French military shipyard Naval Group and opted instead for an alternative deal with the United States and Britain. The move enraged Paris and triggered an unprecedented diplomatic crisis.

In September 2021, then-Australian prime minister Scott Morrison abruptly ripped up the French contract, which was years in the making.  

He announced that Australia would be buying US or British nuclear-powered submarines, a major shift for a country with little domestic nuclear capability.

The decision drew fury from French President Emmanuel Macron, who publicly accused Morrison of deceit.

Relations were on ice until this May, when centre-left leader Albanese was elected.

Speaking to reporters in Singapore on the sidelines of the Shangri-La Dialogue security summit, France’s defence minister said Saturday the compensation deal will allow Paris and Canberra to “look to the future”.

“This agreement is important because it permits us to turn a page in our bilateral relations with Australia and look to the future,” Sebastien Lecornu told journalists.

Lecornu said France valued its “friendship” with Australia. “Just because a government in the past did not keep its word, it does not mean we have to forget our strategic relationship. Australia has a new team in power, we are happy to be able to work with them.”

The nuclear-powered submarine contract is the centrepiece of Australia’s race to develop its military capabilities, as it fears the threat from a more assertive China under President Xi Jinping.

The nuclear-powered submarines are likely to give Australia the ability to operate more stealthily and pose much more of a deterrent to China.

But there remains deep uncertainty about how quickly it can be implemented.

The first US or British submarines likely will not be in the water for decades, leaving a long capability gap as Australia’s existing fleet ages. 

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