President Xi Jinping's anger is monumental over the recent creation of the AUKUS Alliance between the United States, the United Kingdom and Australia, which aims to stop China's expansionism in the Indo-Pacific. But President Emmanuel Macron's indignation is far greater. Paris has seen its geostrategic potential in the Pacific undervalued, while overnight it has discovered that billions of euros from a mega-contract for a dozen submarines have gone up in smoke.
As recently as 30 August, French Defence Minister Florence Parly and her Australian counterpart, Peter Dutton, met with French Foreign Minister Jean-Yves Le Drian and his Australian counterpart, Marise Payne. They praised the importance of the bilateral submarine programme, while confirming their desire to "deepen cooperation between their defence industries". But the exact opposite has happened.
The trilateral AUKUS pact led by Joe Biden has a strong industrial component associated with it that has seriously torpedoed and wounded France's core and expectations. Australia has unilaterally suspended its five-year-old government-to-government contract with France and its military shipbuilding industry. This has happened despite the fact that it was agreed that the submarines would be built at the shipyard of the Australian company ASC and that its national sector would receive more than 50% of the workload. The alternative now open is to "initiate a process of cooperation" with the United States to provide nuclear-powered submarines, according to Australian Prime Minister Scott Morrison.
The political and economic double whammy that Paris has received has hit its defence industry and national sense of grandeur hard. Directly affected is Naval Group, a European shipbuilding giant with around 18,500 employees, 62.49% of whose shares are owned by the French state and 35% by the technology group Thales.
The Australian government and the Naval Group shipyard -whose role is similar to that of Navantia in Spain- had agreed in September 2016 to build a dozen submarines at the Adelaide port facilities for a total value of around 30,000 million euros. With business expectations up to 2050, it was then described as "the contract of the century". However, the recent suspension of the deal changes the situation radically.
The so-called National Security Initiative unveiled on the evening of 15 September by US President Joe Biden - in the presence of Australian Prime Minister Scott Morrison and British Prime Minister Boris Johnson via telematic link - is a three-way commitment to confront the threats posed by China. However, its terms have come as a bitter pill to swallow for the Elysée Palace because of the huge blow to France's interests.
The French media have reported statements by French businessmen, politicians and authorities describing the suspension of the bilateral submarine project as a "mockery", a "huge slap in the face", a "blow", a "stab in the back" and even "high treason". Foreign Minister Jean-Yves Le Drian, speaking on France 2 television on Saturday evening, 18 September, accused the United States and Australia of "despising" France and provoking "a major breach of trust".
So much so that President Emmanuel Macron and his prime minister, Jean Castex, have recalled their ambassadors to Washington, Philippe Etienne, and to Australia, Jean-Pierre Thébault, for consultations. It is a decision that is intended to make clear the huge unease of the Elysée at a trilateral agreement that has been forged behind its back in secret. Recalling ambassadors for consultations is usually a step prior to breaking off diplomatic relations. But blood will not flow into the river. All parties have an interest in this not happening.
What will happen from now on? The respective legal offices will try to resolve the dispute in the best possible way. The Canberra authorities have estimated in a first approximation that the termination of their contract with Naval Group will cost the Australian coffers around 250 million euros. The mega-contract is structured in different multi-million euro contracts, also multi-million euro, but smaller and independent of each other. It is expected that both governments will submit to the International Court of Arbitration that they have agreed upon.
In Australia, it is expected that over the next 18 months, teams of senior officials, military and government officials, navies and companies from Washington, Canberra and London will work to finalise the type of nuclear-powered attack submarine that will take the place previously reserved for French submersibles.
A new design has to be ruled out, "because of the long development time and the risks involved in such a sophisticated submersible", confirm experts from the Spanish Submarine Force. Most likely, the Royal Australian Navy "will opt for the North American Virginia Block V class or a later version", giants 115 metres long and with a displacement of 10,000 tonnes.
They are likely to be built in the United States by the powerful conglomerate of General Dynamics Electric Boat, Huntington Ingalls Industries and Newport News Shipbuilding, which presumably derived significant workloads from the Australian industrial fabric.
As for the hitherto overrated Economic Intelligence organised by the French government, it has undoubtedly suffered a serious setback, as have its Foreign Intelligence Services. They failed to see the huge iceberg that was looming in front of them, and it is to be expected that their structures will undergo a major overhaul.
The head of Naval Group, weapons engineer Pierre Eric Pommellet, is hanging on by a thread, as the long-term viability of the company is in doubt. Aged 57, the second strongest man at Thales between 2017 and 2020 and at the helm of the shipyard since March last year, he was chosen for his "competence, good knowledge of the military naval sector, business and exports".
One of Pierre Eric Pommellet's first challenges was to put an end to differences between Naval Group and the Canberra government over disparate criteria, continued price increases on the submarine bill and the requirement to provide Australian industry with 60% of the project's workload. He travelled to Australia last February, went from meeting to meeting for several weeks and apparently succeeded. However, it has become clear that it was to no avail.
Naval Group's bid was the winner of an international tender based on a competitive evaluation process launched in early 2015 by the government of then Australian Prime Minister Tony Abbott. To meet the Royal Navy's requirements, the French shipyard had to convert the design of its nuclear-powered Barracuda nuclear-powered attack submarine - Suffren class - into a conventional diesel-electric submarine. The result was the Australian Attack class, with a surface displacement of 4,500 tons and a length of 97 metres, but whose combat system was the responsibility of the US corporation Lockheed Martin.
Competing for the cake were the German bid from ThyssenKrupp Marine Systems and the proposal from the Japanese consortium formed by the giants Mitsubishi Heavy Industries and Kawasaki Shipbuilding, which build the Japanese submarine fleet. On 26 April 2016 the Naval Group project was declared the winner and on 30 September the Canberra government and the French shipyard signed the contract for the Mobilisation and Design of the Future Submarine Programme, which was reinforced on 11 February 2019 with the so-called Strategic Partnership Agreement. All of the above has been to no avail.
Australia's submarine fleet consists of six domestically built Collins-class units. Based on the Västergötland design by the Swedish shipyard Saab Kockums, they have a displacement of 3,000 tonnes, are 78 metres long and are diesel-electric powered. The first was launched in August 1993 and entered service three years later. The latest was launched in November 2001 and has been part of the Australian Navy since March 2003. The Collins is scheduled to be relieved in the middle of the next decade.