France wins Aussie submarine contract

Close regional partner Japan angry about missing out on $52b deal to build new fleet

SPH Brightcove Video
French naval contractor DCNS's new US$40 billion submarine contract with Australia provides a welcome boost for France's economy, and its president.
SPH Brightcove Video
France has beaten Japan and Germany to win a A$50 billion (US$40 billion) deal to build a fleet of 12 new submarines for Australia. It's one of the world's most lucrative defence contracts and the loss is a blow to Japan.
An image of the Shortfin Barracuda submarine to be built by France's DCNS Group for the Australian navy.
An image of the Shortfin Barracuda submarine to be built by France's DCNS Group for the Australian navy. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Australia's Prime Minister Malcolm Turnbull announced yesterday that a much-awaited A$50 billion (S$52.3 billion) contract to build 12 new submarines has been awarded to France, which edged out Germany and Japan to win one of the largest defence deals in the world.

The contract, won by France's state-owned naval contractor DCNS Group, will provide Australia with a new fleet of long-range 4,500-ton submarines.

But the deal angered Japan, which wants to start exporting military hardware following its move in 2014 to lift a ban on such sales imposed after World War II.

In unusually blunt criticism of a close regional partner, Japan's Defence Minister Gen Nakatani described Australia's decision as "deeply regrettable".

"We will ask Australia to explain why they didn't pick our design," Reuters reported him as saying.

Mr Turnbull was quick to reassure Tokyo that the decision would not affect ties between the two nations. He revealed that he had telephoned his Japanese counterpart, Mr Shinzo Abe, to assure him that he remained committed to their strong relationship.

"Both Prime Minister Abe and I, and our respective governments, and I believe our respective nations, are thoroughly committed to the special strategic partnership between Australia and Japan, which gets stronger all the time," he told reporters.

The new fleet of submarines will replace Australia's ageing Collins class fleet and will have longer range and endurance and improved stealth characteristics.

To be called the Shortfin Barracuda, the submarine will be a conventionally powered version of DCNS' nuclear-powered Barracuda submarine.

Insisting that the decision followed a highly competitive bidding process, Mr Turnbull said the new fleet would be built in South Australia and create about 2,800 jobs. The submarines are due to enter service in the 2030s.

"The recommendation of our competitive evaluation process of the panel, the Department of Defence, the experts who oversaw it, was unequivocal - that the French offer represented the capabilities best able to meet Australia's unique needs," he said.

"This is securing the future of Australia's navy over decades to come."

Mr Turnbull made the announcement in South Australia and made little attempt to hide the benefits for the state, which is set to be a crucial political battleground in the coming federal election, expected in July.

"These submarines will be the most sophisticated naval vessels being built in the world, and they will be built here in Australia, built in Australia with Australian jobs, Australian steel, Australian expertise," Mr Turnbull said.

"We do this to secure Australia, to secure our island nation, but we do it also to ensure that our economy transitions to the economy of the 21st century."

Australia has been increasing its defence spending in recent years, with a particular emphasis on its navy - a development seen by most analysts as an attempt to "insure" against the growing military might of China.

The United States had reportedly signalled that it supported Japan's bid as a way to increase military cooperation between Canberra and Tokyo and to offset China's growing assertiveness in the South China Sea.

Japan's anger over Australia's choice was probably heightened because reports said former prime minister Tony Abbott had reached an informal agreement with Tokyo on the deal. Mr Abbott was subsequently ousted by Mr Turnbull last September.

Several defence analysts in Australia said France's bid appeared to be best suited to Australia's military requirements, but Japan's bid would have delivered "strategic" benefits.

Still, most expect that Canberra will now be busy seeking to mend relations with Tokyo.

"We need to take the initiative now to assure the Japanese that a close strategic partnership is about more than submarines," Professor Rory Medcalf from the Australian National University told Fairfax Media.

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A version of this article appeared in the print edition of The Straits Times on April 27, 2016, with the headline France wins Aussie submarine contract. Subscribe