PARIS (AFP, REUTERS) - France on Friday (Sept 17) recalled its ambassadors to the United States and Australia for consultations in a ferocious row over the scrapping of a submarine contract, an unprecedented step that revealed the extent of French anger against its allies.

President Emmanuel Macron ordered the recalling of the envoys after Canberra ditched a deal to buy French submarines in favour of US vessels, Foreign Minister Jean-Yves Le Drian said.

Mr Le Drian said in a statement that the decision was made to "immediately" recall the two French ambassadors due to "the exceptional seriousness of the announcements made on Sept 15 by Australia and the United States".

A diplomatic source in France said it was the first time Paris had recalled its own ambassadors in this way.

Australia said on Saturday it regrets France's decision to recall its ambassador to Canberra, but it values its relationship with France and will keep engaging with Paris on many other issues.

"We note with regret France's decision to recall its ambassador to Australia," a spokesman for the foreign ministry said in a statement. "Australia values its relationship with France... We look forward to engaging with France again on our many issues of shared interest, based on shared values."

The abandonment of the ocean-class submarine project that Australia and France had been working on since 2016 constituted "unacceptable behaviour among allies and partners", the minister said.

"Their consequences affect the very concept we have of our alliances, our partnerships and the importance of the Indo-Pacific for Europe."

US State Department spokesman Ned Price said that France was a "vital ally" and that the US would be engaged in coming days to resolve the differences.

US President Joe Biden announced the new Australia-US-Britain defence alliance on Wednesday, extending US nuclear submarine technology to Australia, as well as cyber defence, applied artificial intelligence and undersea capabilities.

The pact is widely seen as aimed at countering the rise of China.

The move infuriated France, which lost a contract to supply conventional submarines to Australia that was worth A$50 billion (S$49 billion) when signed in 2016.

The French ambassador recalls from the US and Australia, key allies of France, are unprecedented.

France's envoy to Canberra said on Saturday that Australia has made a "huge" diplomatic error by ditching the French submarines.

"This has been a huge mistake, a very, very bad handling of the partnership - because it wasn't a contract, it was a partnership that was supposed to be based on trust, mutual understanding and sincerity," Ambassador Jean-Pierre Thebault told reporters in Canberra before returning to Paris.

Malaysia expressed concern on Saturday that Canberra's decision to build atomic-powered submarines could trigger a regional nuclear arms race.

"It will provoke other powers to also act more aggressively in the region, especially in the South China Sea," the Malaysian prime minister's office said, without mentioning China.

Beijing's foreign policy in the region has become increasingly assertive, particularly its maritime claims in the resource-rich South China Sea, some of which conflict with Malaysia's own claims.

France has made no effort to disguise its fury and on Thursday accused Australia of back-stabbing and Washington of Donald Trump-era behaviour over the submarines deal.

"It's really a stab in the back," Mr Le Drian said on Thursday. "We had established a relationship of trust with Australia, this trust has been betrayed."

France has also called off a gala at its ambassador's house in Washington scheduled for Friday.

The event was supposed to celebrate the anniversary of a decisive naval battle in the American Revolution, in which France played a key role.

'Extremely irresponsible'

Australia earlier shrugged off Chinese anger over its decision to acquire US nuclear-powered submarines, while vowing to defend the rule of law in airspace and waters where Beijing has staked hotly contested claims.

Beijing described the new alliance as an "extremely irresponsible" threat to regional stability, questioning Australia's commitment to nuclear non-proliferation and warning the Western allies that they risked "shooting themselves in the foot".

China has its own "very substantive programme of nuclear submarine building", Australian Prime Minister Scott Morrison argued on Friday in an interview with radio station 2GB.

He rejected French criticism that it had not been warned about the new deal, and said he had raised the possibility in talks with the French President that Australia might scrap the Naval Group deal.

Mr Morrison insisted he had told Mr Macron in June that Australia had revised its thinking.

"I made it very clear, we had a lengthy dinner there in Paris, about our very significant concerns about the capabilities of conventional submarines to deal with the new strategic environment we're faced with," he told 5aa Radio.

"I made it very clear that this was a matter that Australia would need to make a decision on in our national interest."

China claims almost all of the resource-rich South China Sea, through which trillions of dollars in shipping trade passes annually, rejecting competing claims from Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

Beijing has been accused of deploying a range of military hardware including anti-ship missiles and surface-to-air missiles there, and ignored a 2016 international tribunal decision that declared its historical claim over most of the waters to be without basis.

France's European Affairs Minister Clement Beaune said Friday that Paris was unable to trust Canberra in ongoing European Union trade deal talks following the decision, before the ambassadors were recalled.

Australian Foreign Minister Marise Payne, in Washington, said she understood the "disappointment" in Paris and hoped to work with France to ensure it understands "the value we place on the bilateral relationship and the work that we want to continue to do together".

France is about to take over the presidency of the European Union, which on Thursday released its strategy for the Indo-Pacific, pledging to seek a trade deal with Taiwan and to deploy more ships to keep sea routes open.