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Written by Pablo Martín Duprat
Edited by Ruben Pfeijffer and Thomas Courtier
Australia sits at the centre of the Indo-Pacific region, a dynamic strategic environment that is home to the world's third largest Exclusive Economic Zone. The country’s economic growth is based on international trade and the export of goods, particularly natural resources. The distance and relative geographical isolation of Australia means that it relies heavily on shipping lanes for its economic security, especially when shipping accounts for 99% of Australia’s total merchandise trade by mass. Depending on the threat, these sea lines of communication are vulnerable to disruption, and Australia's small population of just over 25 million is incapable of sustaining a navy large and strong enough to protect its economic interests in the Pacific Ocean, let alone the wider Indo-Pacific region.
This is why Canberra has had close alliances with global maritime powers throughout its recent history; which have evolved from the cancelled 2016 French-Australian submarine deal (worth 57 billion euros) to the recent trilateral security partnership between Australia, the United Kingdom, and the United States (under the nomenclature AUKUS). But while this recent lateral move has inflamed relations between the European Union and Australia, Canberra’s rationale is both immediate and complex.
Growing perception of Chinese threat
The 2020 Defence Strategic Update states that the drivers shaping Australia's strategic environment identified in the 2016 Defence White Paper not only persist but have even accelerated faster than anticipated. Australia now faces an environment of increasing strategic competition between the US and China; the introduction of more capable military systems enabled by technological change; and the increasingly aggressive use of diverse grey-zone tactics to coerce states under the threshold for a conventional military response.
The main driver for this increased tension between China and Australia is a direct by-product of growing strategic competition between China and the United States. Naturally, Australia is concerned about China's active pursuit of greater influence in the region, seeking to exert influence through actions that undermine the stability of the rules-based global order, which is the post-WWII status quo that is based on the promotion of democracy, free trade, and market economy and that constitutes the basis of Australia's security.
Although Australia's largest economic partner is China, accounting for around 40% of its exports and 25% of its imports in 2019, Beijing's increasingly assertive posture poses a threat to Australia's economic security. Chinese military build-up of its blue-water navy and missile capabilities, along with the step-up in its ‘Grey Zone’ activities such as the use of paramilitary forces, militarization of disputed territories and the use of political and economic influence for coercive means directly threaten Australia's seaborne supply lines.
This increasing strategic concern held by the Australian government was the rationale behind Canberra's decision to ditch the agreement it had signed with Paris in 2016 for twelve diesel-powered versions of the French nuclear-powered Barracuda-class submarine.
Allies, not just ships
Canberra considered the issue of buying submarines not in the light of a simple trade deal, but as a method of also acquiring an additional ally within the region. France simply did not fit this profile, being considered by Australia as incapable and unwilling to assist Canberra in the event of a major conflict against Beijing. However, the United States proved a better candidate as the two countries are bound together by not only a deep degree of political and cultural cooperation, but through similar geopolitical objectives within the region.
Brokered through the aid of the United Kingdom, Australia was able to successfully tie itself in as part of the United State’s vision of deterrence across the Indo-Pacific region under the AUKUS deal, which entails the planned construction of eight nuclear-powered submarines worth between 44 to 73 billion euros.
Revival of the nuclear debate in Australia
The AUKUS submarine deal has reignited the debate around the desirability of a civilian nuclear program. While in Australia it is currently illegal to build or operate a nuclear reactor (apart from research purposes like the OPAL reactor), the Royal Australian Navy will operate several nuclear-powered vessels which will require highly enriched uranium to function. So, if the navy can power submarines on nuclear energy, pressure will build up for Australia to reconsider its ban on civil nuclear energy, in particular through the development of small modular reactors, and thus accelerate the path to becoming a zero-carbon economy.
Another aspect related to the operation of nuclear-powered vessels by the Royal Australian Navy will be the repercussions it has on New Zealand, a long-standing ally of Canberra. Currently, Wellington has a zero-nuclear zone policy which prevents nuclear weapons and also nuclear-powered ships from entering into its territory. New Zealand Prime Minister Jacinda Adern, while welcoming the new trilateral agreement in the Indo-Pacific, stated that her country would continue to apply its no-nuclear policy, showing a rift between two very close allies.
Less (to zero) strategic autonomy for Australia
AUKUS proves to be a landmark deal as the United States has only shared its submarine technology with the United Kingdom since the signing of the 1958 US–UK Mutual Defence Agreement. However, it seems there is no current intention to build the nuclear reactors for said submersible vessels in Australia.
While this situation might help prevent a flare-up of nuclear proliferation in the wider Indo-Pacific region, it will make Australia heavily dependent on the United States and the United Kingdom for the daily running and maintenance of its nuclear submarine fleet. As a result, a complete alignment of Australian policy decisions with American interests is highly expected.
AUKUS shows that Canberra has reassessed the threat level posed by China and has chosen to reduce its room of manoeuvre on the international stage over the need to ensure its maritime security.
Future EU-Australia Free Trade Agreement now at risk?
The EU was Australia's third largest trading partner in 2020, after China and Japan and before the US. However, after Canberra's decision to cancel a 57 billion Euro submarine contract with France, the EU, in solidarity with Paris, questioned whether it should continue free trade talks with the country. The cancellation of the contract with Naval Group angered France, which accused both Australia and the United States of stabbing it in the back, prompting the Élysée Palace to recall its ambassadors from both Canberra and Washington (but interestingly not from London).
The timing of the AUKUS announcement was also not ideal for Brussels, as it was announced on the same day in which the EU had scheduled to unveil its Indo-Pacific strategy; which ended up being eclipsed by the trilateral new partnership instead. A new round of talks between the EU and Australia will reportedly take place in February 2022, but if both parties do not manage to put in place measures to build back the lost confidence and to channel the frustration, the Free Trade Agreement will be a highly unlikely future scenario.
About the author: Pablo Duprat
Pablo Duprat comes from Argentina and currently attends two master programs, one remotely in Strategic Intelligence at Universidad Nacional de la Plata and the other one in Relazioni Internazionali at Università degli Studi di Milano. Pablo is passionate about international security, geopolitics and future scenarios.