Aukus: the industrial challenges of delivering a new defence pact


The last time the US came together with Britain and Australia to combat aggression in the Pacific was more than 70 years ago when the three nations fought against Japan.

When US President Joe Biden meets British Prime Minister Rishi Sunak and Anthony Albanese, the prime minister of Australia, at a naval base in San Diego on Monday they will do so with a new potential foe in mind: China.

The three leaders will unveil the results of an 18-month negotiation under the Aukus defence pact to provide Canberra with nuclear-powered submarines as part of a wider push to counter Beijing’s growing military might.

The submarine deal

Australia, which currently operates a fleet of six Collins class boats powered by diesel-electric generators, will become only the seventh nation in the world to operate nuclear submarines.

The plan, which will have three main stages, will try to bridge a capability gap for Australia in the 2030s after its Collins boats come out of service and before the deployment of the Aukus boats around 2040.

The agreement promises jobs and technology-sharing across the three countries over several decades. Independent estimates put the costs of building and supplying at least eight submarines over 30 years as high as A$125bn.

Yet the industrial and operational challenges to deliver on the pact are immense.

Production capacity

All three countries will need to invest heavily to upgrade their defence industrial base. US and British shipyards are already working flat out on domestic orders. Worker shortages and strained capacity is a big concern for Aukus.

“It’s not about any nation buying more weapons platforms off another, it’s about building the industrial capability of all three countries,” Pat Conroy, Australia’s minister for procurement, told the Financial Times last month after visiting Britain’s Barrow-in-Furness shipyard where BAE Systems builds Royal Navy submarines.

Britain is already investing heavily in its submarine business just to meet existing demands. The Barrow workforce is increasing from 10,000 to 17,000 to fulfil both the Dreadnought programme, which carries the UK’s nuclear deterrent, and the next generation of attack submarines.

In the US, General Dynamics Electric Boat, which makes the nuclear-powered Columbia- and Virginia-class subs, employs just less than 20,000 people. The US group has 17 Virginia-class submarines in a delivery backlog stretching out to 2032.

Submarine design and propulsion

The next-generation Aukus submarines will be jointly developed and built between the UK and Australia, according to people familiar with the agreement.

This would be a “hybrid platform” with a “pragmatic design” based on a variant of the UK’s next generation of nuclear submarines, called the SSN (R), that is due to replace Britain’s current Astute-class submarines.

British industry’s design work remains at a stage where it can still include Australian input in developing the vessel. The Aukus variant has been nicknamed SSN Aukus.

BAE Systems and Rolls-Royce, which builds the reactors for all Royal Navy submarines, have been involved in the talks on the UK side, while General Dynamics and Westinghouse have been involved from the US. 

Rolls-Royce is seen in prime position to provide the propulsion system. The company is building the advanced PWR3 reactor to be deployed on Britain’s Dreadnought submarines, which carry the nuclear deterrent.

US content in the form of weapons and combat systems will be extensive, including Lockheed Martin-made Tomahawk cruise missiles and MK48 torpedoes.

Investment costs

Estimates by analysts at London consultancy Agency Partners suggest that if Aukus is based on a modified Astute- or Virginia-class submarine, the average cost of each new boat could be between A$5.5bn and A$7bn. 

Adding the cost of weapons and combat systems, through-life support and training, as well as the necessary investment in production facilities in Australia, could see the total cost of the programme rise to A$125bn. 

A “big part of the cost of Australia building this boat themselves, alongside the investment in production facilities, is the learning curve”, said Nick Cunningham, analyst at Agency Partners.

Given the long lead times, analysts said any potential bonanza for defence contractors will be some way off, with much depending on which company secures lead positions.

Nevertheless, Aukus could offer a lifeline for Britain’s submarine enterprise, which has historically been dogged by cost overruns and delays. Some experts believe it could have as big an impact as the UK’s agreement with Italy and Japan to build the Tempest fighter jet. “It gives you 25-plus years of visibility,” said Francis Tusa, editor at Defence Analysis.

Technology transfer issues

America’s closely guarded nuclear-propulsion secrets are at the heart of Aukus’s first pillar, which governs the submarine deal. US officials are optimistic that a way has been found to share these with Australia.

But concerns remain over Aukus’s second pillar — which envisages co-operation on artificial intelligence, hypersonic weapons and undersea capabilities.

These hurdles relate to technology transfer requirements under the International Traffic in Arms Regulations, and a classification called NoForn that bars information sharing with non-US nationals.

Australia’s capability gap

With Aukus not likely to enter service before 2040, the three nations have agreed on a two-stage process to bridge the capability gap.

Washington has agreed to deploy several of its Virginia-class submarines to Australia, manned with an American crew, to help with training.

The US will also sell Canberra as many as five Virginia-class submarines as a stop-gap. Concerns remain about the capacity of US yards to take on the extra work.


Share post:


More like this

World Bank warns global economy at risk of lost decade of growth

The global economy is in danger of suffering a...

America’s Housing Markets: Home Prices Fall in the West and Rise in the East

In an unusual pattern, the 12 major housing markets...

iPhone 15: eSIM-only in more countries this year

Apple began its switch to eSIM-only iPhones last year...

We're initiating a position in this retailer as a turnaround play

Calling up this sneakers and athletic wear retailer from...