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the very salty note of the end of the submarine program for Australia

Prime Minister Scott Morrison’s decision to abandon the Franco-American submarine program could cost up to 5.5 billion Australian dollars, or 3.7 billion euros. This is the maximum amount of this very high bill that Australia will have to pay for submarines that will never exist or for wind… Questioned by an opposition senator this Friday, April 1, officials Australian defense officials have indeed revealed that the abandonment of the contract comes with this high price.

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“So taxpayers will have to shell out $5.5 billion for submarines that don’t exist? » asked opposition senator Penny Wong during a hearing in Canberra and who is in the middle of an election campaign. “The final negotiated settlement will be within this price,” Defense Department Assistant Secretary Tony Dalton replied, saying the exact amount was not yet clear as negotiations with Naval Group were ongoing.

From a source familiar with the matter, “we are on much lower amounts for the part of Naval Group”. It is still too early to give the breakdown between Lockheed Martin, the management of the Australian program and the shipyard where the twelve submarines were to be built in relation to the amount advanced, still being negotiated. “If the Australians negotiate well, the amount could approach 5.1 or 5.2 billion Australian dollars”, we say to La Tribune. Finance Minister Simon Birmingham defended the decision to abandon the deal as “needed for decades to come”. And to add: “It has to be admitted that we knew the consequences would be significant.”

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How do we arrive at such an amount?

What are we talking about exactly? The termination of the contract by the Australians automatically triggered a chapter of the Strategic Partnership Agreement (SPA) signed between France and Australia at the launch of the Attack class program. It follows a number of obligations. In this context, Naval Group is in the process of negotiating with Australia the cost of the work that remains to be carried out until the program is definitively stopped. The naval group must still contractually deliver hundreds of works such as models or steel samples to properly close the program at the end of June, we explain from a source familiar with the matter. Since the launch of the program in 2016, Australia has already paid 840 million euros, including 300 million in 2021, to Naval Group.

At the same time, Naval Group, like all the other partners in the program, is negotiating with the Australians the costs of demobilization and the costs of termination, such as the dismissal of the 300 Australian employees and the costs associated with all its suppliers and service providers. A sequence of negotiations that the Australians want to complete before the end of their fiscal year, at the end of June. This is also the case for Lockheed Martin, the management of the Australian program and the shipyard where the submarines were to be built. It is these three actors who will raise the bill to dizzying amounts.

The “contract of the century” to the scrap

As a reminder, Australia terminated the contract with France in September 2021, which was based on twelve submarines developed and designed by Naval Group as part of the ocean class program “Future Submarine Program”. An order estimated at 56 billion euros over 50 years, nicknamed the “deal of the century” when it was signed in 2019.

“The decision we made not to continue with the Attack-class submarines and to take another path is not a change of mind, it is a change of need,” the Australian prime minister said, noting that it is driven by changing dynamics in the Asia-Pacific region, where China is increasingly asserting its claims to nearly all of the South China Sea.

This reversal had angered Paris, President Emmanuel Macron accusing the Australian leader of having lied about the future of this contract. Especially since, a few days before the announcement, various French ministers and their Australian counterparts had underlined the importance of the program for future submarines. The French State had seen nothing coming, which also represented a failure for intelligence as well.

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A more expensive but more suitable project

Australia ultimately preferred to build nuclear-powered submarines using American and British technology. It has in fact created a new security and defense partnership within the framework of which Washington and London will help it acquire nuclear-powered submarines. This new partnership (called “AUKUS”) will be based on information sharing and increased technological and industrial integration in the field of defence.

According to a study published last December by the Australian Institute of Strategic Policy, the AUKUS program will cost more than $80 billion and will take decades to become operational. It should nevertheless, according to this study, give Australia a significant advantage in its ability to deter aggression.