Pearls and Irritations

Failed Australian purchase of advanced missile technology raises questions over the Albanese Government’s commitment to its sovereign defence plans, as China swoops in on the deal.

On 30 July, Australian arms company DefendTex’s exclusive right to acquire the financially troubled Brazilian missile manufacturer Avibras expired. DefendTex’s $200 million bid was dependent on securing a $70 million loan from the Australian Government’s semi-independent export credit agency, Export Finance Australia. By acquiring Avibras, DefendTex would have gained access to intellectual property, research and development, and manufacturing of multiple advanced weapons systems that are critical to Australia’s future defence needs. With funding having failed to materialise, this advanced weapons company is set to be acquired by the Chinese state-owned firm NORINCO.

DefendTex’s ambitious plans would have proved extremely useful in advancing the Government’s stated goals of acquiring new missile capabilities and developing a domestic missile manufacturing industry. Despite this, Deputy Prime Minister and Defence Minister Richard Marles has refused to comment on the issue. DefendTex chief executive Travis Reddy claims the company was unable to communicate with the Government at a ministerial level as its loan request with Export Finance Australia stalled. All of this raises many questions regarding the Government’s commitment to developing Australia’s defence capabilities quickly at a minimum cost to the taxpayer.

DefendTex is an Australian-owned company founded in 2014, based in Dandenong South, Victoria. Currently producing a variety of unmanned systems, body armour, and individually operated kinetic weapons, its acquisition of Avibras would have dramatically expanded its operations.

The planned acquisition was enabled by Avibras’s recent financial troubles. Despite being a major weapons manufacturer and a key recipient of funding from the Brazilian Government’s 53 billion Real (AUD$ ~14.3 billion) Growth Acceleration Program, Avibras is heavily in debt. The Brazilian Metalworkers Union, which represents unpaid workers at Avibras, reported that as of April 2023 the company was carrying 376 million Reals (AUD$ ~101.6 million) of debt.

Avibras’s missile systems make it relevant to the Government’s defence strategy embodied in the 2023 Defence Strategic Review and 2021 AUKUS trilateral security partnership. The firm’s Artillery Saturation Rocket System and its Tactical Cruise Missile are major competitors to the American-produced MLRS HIMARS and MLRS ATACMS systems respectively.

The Defence Strategic Review argued Australia must adopt a “strategy of denial” supported by the development of a “layered integrated air and missile defence (IAMD) operational capability,” and anti-access/area denial (A2/AD) system built on “long-range strike capability, undersea warfare and surface-to-air missiles”. The review specifically identified the HIMARS, popularised due to its success in the Russo-Ukrainian war, as a capability the Australian Defence Force should acquire. Avibras’s missile systems, if they had been acquired by DefendTex, could have provided a cheaper, domestically produced answer to Australia’s short and medium-range missile needs. It would also have provided an alternative to American-produced products that make the ADF reliant on foreign companies and militaries to service and operate their systems.

Discussion of Avibras’s potential to revolutionise Australian missile production and capabilities now, however, appear to be of little use. DefendTex’s exclusive acquisition rights have expired without successfully securing credit from Export Finance Australia, an organisation established to provide credit to companies pursuing deals in the Australian national interest that are unable to acquire credit in traditional financial markets. Export Finance Australia operates under the portfolio of the Department of Foreign Affairs and Trade, with DFAT’s head on its board.

With the apparent failure of DefendTex’s acquisition, Chinese state-owned firm NORINCO is reportedly set to complete a deal to acquire a 49% stake in Avibras. In stark contrast to the Albanese Government and Export Finance Australia’s aversion to facilitating a deal, the Chinese Government has been very active in aiding NORINCO’s bid. Beijing has opened a governmental dialogue with Brasilia which would closer integrate Chinese weapons systems with the Brazilian army. China has developed its A2/AD system extensively in recent years and, with access to Avibras intellectual property and research and development systems, it would be able to further hone its systems.

Rather than supporting the development of a sovereign missile manufacturing industry, the Albanese Government has focused on expanding relations with its AUKUS partners. Australian missile acquisitions have come from foreign companies, such as the purchase of 200 Tomahawk missiles and 60 Advanced Anti-Radiation Guided Missile – Extended Range from the US, as well as Spike Long-Range 2 anti-tank guided missiles from the Israeli Rafael Advanced Defence Systems. Domestic production is being carried out through Australian subsidiaries of foreign corporations, with Lockheed Martin Australia contracted to manufacture guided multiple launch rocket system missiles.

Canberra’s decision to rely on alliance partners to source missiles, rather than developing a sovereign defence capability, enhances the ADF’s inter-operability and its ability to operate alongside foreign militaries, but incurs a high cost. Beijing’s contrasting interest in facilitating an acquisition of Avibras shines light on how it has been able to quickly and cheaply develop an advanced A2/AD capability, while Australia invests billions to potentially acquire a similar system in the far future.

DefendTex’s acquisition of Avibras would have provided a cheaper domestic alternative to these foreign acquisitions. Export Finance Australia’s involvement in a loan agreement provided a clear vehicle through which the Albanese Government could have facilitated this deal in the national interest. This argument has already been articulated. Reddy claimed that, “If Export Finance Australia can loan $70 million as opposed to spending […] with US defence companies, Australia will be in a stronger position militarily within a shorter timeframe at a fraction of the cost,”.

Former Senator Rex Patrick stated “It just doesn’t make any sense […] This was a contingency saver for us in the event that something goes wrong with the US program. […] We could have obtained a capability. Now, we’re in a situation where it might be that a potential future enemy gains this capability,”.

This saga in Australia’s ongoing military reorientation demonstrates an unresolved contradiction in how the country strategically views itself. Successive governments have professed a desire to develop a self-reliant system of defence. Yet these same governments have, through the AUKUS nuclear submarine deal, centred the single most expensive weapons procurement in Australian history around an “apex predator” offensive weapons platform with spurious strategic value in terms of national defence. To see the AUKUS submarine program through, we will be reliant on the goodwill of distant allies, who have their own security concerns and submarine production delays, for decades to come. By failing to secure the ability to domestically produce this critical defensive weaponry, the Albanese Government has fallen behind in establishing a stable system of deterrence in Australia’s near seas, and given China a further edge in developing their own capabilities in the region.

Share and Enjoy !

SHARE TWEET SHARE COPY EMAIL PRINT