Pearls and Irritations

The impressive US Congressional Research Service (CRS) has just released another batch of independent analyses of the daunting challenges the Pentagon – especially the US Navy – face in meeting the demands to upgrade significantly its force capabilities in the Indo Pacific. All of which is now confronted by the extraordinarily chaotic legislative environment occasioned by the Republican shenanigans over the House Speaker’s position.

With special implications for Australia among these CRS papers is “Navy Virginia-Class Submarine Program and AUKUS Submarine Proposal: Background and Issues for Congress – September 25, 2023”. It provides detailed non-partisan briefing material for the US Congress on the whole AUKUS Submarine deal as it begins to wend its way through the US legislative system. It also presents the most informed public source coverage of the pros and cons of the project – free from the layers of political spin to which we have been subjected.

Its length defies quick summary and raises more questions than it answers. But it is a real trove of information about the continuing gyrations being performed by the various stakeholders and a veritable primer for anyone trying to comprehend the expanding myriad of complexity now confronting the deal. The following offers a few key points which should be priorities for public discussion in Australia rather than the all too usual “gotcha” trivia like the recent headlines about travel costs for those Australians already involved in the AUKUS program.

Costs

Understandably given the time span of the project and its galaxy of stakeholders, the CRS analysis adds little precision to forecasts of its likely overall costing. “Who will pay whom and for what?” is truly mind blowing – and growing:

• In the first phase, how many Virginia SSN’s will Australia actually buy from the US and what types will these be ? The paper states that the current plan is for two existing Virginias (early style which are considerably smaller than the Virginias now under construction) with 20 years existing life span and one new boat (with 33 year life span) off the future construction line. It poses serious questions of how the actual sale costs will be calculated – for example, based on the 73 operational years lost to the USN by their transfer to Australia or on a portion of the costs of new replacements for those transferred? It also flags the possibility that several more may be required to fill the gap before the totally new British based boat enters service for the RAN.
• on top of which for the Virginias other costs will include:
  • a substantial but not yet determined Australian grant/investment (?) into the US commercial submarine construction industry to assist it to increase its capacity to meet the higher USN annual demand for additional submarines to replace those sold to the RAN.
  • already agreed in principle – but not yet determined – Australian payment of all “transfer” fees involved in getting the Virginias into service with the RAN. Does this include the significant costs of training for RAN personnel embedded into USN and RN boats and support areas (with relocation costs et al) over twenty years or so? And payments to USN and RN for actual training?
  • construction of maintenance and support facilities (including supply chain for spares etc which have proven very difficult for the USN in its own experience with the Virginias) in Adelaide for the boats bought from the US. Presumably these will require contracts with USN and the two US companies that build the SSN’s and provide major maintenance work for the USN?
  • not insignificant infrastructure enhancement at Stirling in WA to accommodate rotation of USN and RN submarines soon to fill the gap until RAN has its Virginia’s in service. The USN will likely have not only Virginias (probably larger submarines) and the RN will have Astutes. This will include running costs. Does Australia charge USN and RN?

And so the list will go on in the 2^nd phase with the development of the joint British Australia design of the new submarine – but even more complicated presumably with triangular costing arrangements. British PM Sunak has been quick out of the blocks to megaphone the centrality of the UK in this phase – not only announcing huge contracts with BAE for UK construction costs but also with Babcock’s for its design and Rolls Royce for its engines. While the CRS paper also highlights the critical role US technology transfer will play in this part of the project. How much do we and the UK have to pay to the US – the same for each of us or dependent on the number each builds? How much will Australia have to pay the UK? What about the likes of BAE who probably would also expect to get its Australian subsidiary ASC the major construction project in SA?

Capability

The CRS analysis reports serious concerns among some in Congress, in senior USN positions and the commercial sector about Australia’s capacity to build and operate the submarines at the requisite level as well as maintain the tightest security around the US technology involved. In a recent interview with US Naval Institute News, RAN chief Vice Admiral Hammond volunteered that the largest, long-term challenge is to establish the workforce to handle the nuclear reactor for the boats planned for the RAN.

“The professional journey that we’re on is about lifting our skills around nuclear power. The rest of the submarine piece we’re pretty much good on. You can put a bunch of Australians in the front half of Virginia-class submarines tomorrow, give him a couple of weeks and I reckon they can dive it, fight it, surface it very effectively….The big lift is making sure that we can manage and steward the nuclear ocean piece you can’t fake that you’ve got to earn the trust [from your partners]…..I think if we’re serious about developing a sovereign nuclear submarine capability, then in time, definitely all parts of the ecosystem (ed. AUKUS Submarine project) should be built and operated by Australians, in Australia. That should be the aim, but we don’t need this all at once.”

Typically for politicians, leaders in all three partner countries have been quick to conjure up huge numbers of jobs they project will be generated for each country from the whole project with very little hard evidence. On top of which, the original AUKUS briefing from the White House announced that “Australia intends to send hundreds of workers to United States and United Kingdom shipyards, and scientists and engineers to United States and United Kingdom technical facilities, for specialised skills training and to gain the experience required to build and sustain nuclear-powered submarines.” Just how this will evolve and how it will be costed has still largely to be revealed. To take just the “hundreds of shipyard workers”, presumably most if not all will be employees of the commercial shipbuilders in Adelaide not of Defence or the RAN and will need placement in US or UK commercial shipyards. The complexity and costs of this sector will pose nightmares for the auditors!

Controls

The CRS paper also focusses welcome light on the critical issue of the control and command of both sets of the new submarines which has been attracting increasing interest here despite the tactical fix which diverted discussion of it at the recent ALP conference. In so doing though it leaves even more questions unresolved. While the paper sets out the arguments for Congress to pass the enabling legislation for the AUKUS submarines it also rehearses at some length concerns that the transfer of Virginias to the RAN could:

• reduce the overall capability of the USN to fulfil its overall role of containing China:

“Australia might not involve its military, including its Virginia-class boats, in U.S.-China crises or conflicts that Australia viewed as not engaging important Australian interests. Australian Defence Minister Richard Marles in March 2023 reportedly confirmed that in exchange for the Virginia-class boats, Australia’s government made no promises to the United States that Australia would support the United States in a future conflict over Taiwan. Virginia-class boats are less certain to be used in a U.S.-China conflict over Taiwan, or less certain to be used in such a conflict in the way that the United States might prefer, if they are sold to Australia rather than retained in U.S. Navy service.“

• prevent adequate expenditure procurement in other key areas of the Australian Defence budget.
• for which it canvassed a number of options including maintaining the submarines in the USN and undertaking the roles designed for the RAN boats leaving Australia to concentrate on other force options.

The paper also announced the formation of another addition to the acronym menu – Submarine Rotational Forces West (SURF-Wes!) to manage the stepped up rotation of USN and RN submarines through Stirling in WA in the interim period before the RAN has its Virginias.

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