Cautious U.S. gives Japan the edge in bid for Aussie sub construction

Greg Sheridan, THE AUSTRALIAN
25 January 2016
Serious doubt that Washington will be willing to provide the U.S. Navy’s most advanced combat systems to Australian submarines if they are built by Germany or France is emerging as a trump card for Japan in the three-way battle to construct the new boats.
Australian officials at the most senior level believe Canberra could experience significant difficulty getting the most advanced U.S. combat systems for between eight and 12 new submarines unless Japan wins the lead role in the project, which is expected to cost more than $50 billion.
The German manufacturers have countered this view by pointing out that Germany is a member of NATO in good standing and that numerous German-built subs have elements of American weapons systems.
The Australian has been told the Americans harbour significant doubts about the German ability to protect critical defence technology from Chinese industrial espionage. The Americans accuse the Chinese of stealing a great deal of defence technology, mainly through cyber-espionage techniques.
The new submarines – which will replace the six Collins-class boats – were raised in discussions with Malcolm Turnbull on his trip to the U.S. last week.
They figured especially in his discussions with the U.S. Pacific Commander, Admiral Harry Harris, and a number of other senior U.S. military figures in Hawaii.
While the official Washington position is one of neutrality among the rival bids, senior Americans both in uniform and in suits have confirmed the overwhelming U.S. preference for Canberra to choose the Japanese option. The Americans are committed to providing their most advanced combat system to a Japanese-built submarine.
A senior American outlined to The Australian the reasons for Washington’s preference for the Japanese Soryu submarine to be the replacement for the Collins.
First, the U.S. military’s assessment of the three design options is that the Soryu would offer the best capability to Australia. The Americans are looking to their allies to bolster an overall alliance capability, and in Asia that means primarily Australia and Japan.
A comprehensive, Pentagon-commissioned review of U.S. policy in Asia conducted by the Centre for Strategic and International Studies concluded last week that given China’s massive military expansion and the stringent cuts to the U.S. defence budget, “at the current rate of U.S. capability deployment, the balance of military power in the region is shifting against the U.S.”
The U.S. remains overwhelmingly more powerful militarily than China but because it has to simultaneously project force around the world, in a time of heightened tension or conflict it would be stretched within Asia.
Second, the Americans believe the Soryu would offer the best interoperability between Australian and American submarines and between Australian and Japanese boats.
Third, they believe a Japanese option would greatly enhance “trilateral strategic cooperation” between the U.S., Japan and Australia. Enhancing such cooperation is a policy objective in all three capitals.
Finally, because Beijing is very much opposed to the Japanese option, Washington believes a defeat for Japan would be seen as a humiliation of Tokyo and a -diplomatic and strategic victory for Beijing.
It is a critical feature of Canberra’s plan that the new submarines have an American combat system. Australia and Britain are the U.S.’s two most intimate military allies and a certain amount of the highest-end defence technology is provided that is not given to other allies.
The combat system on the Collins-class subs, which have to be phased out of service from the second half of next decade, is among the most advanced in the world on any submarine, and has many points of resemblance to the combat system on the American Virginia-class nuclear submarines.
The Collins can fire on enemy ships at a range of tens of kilometres and possesses extraordinarily sensitive and powerful sensor and surveillance technology.
The Americans will work with Canberra to make a success of whatever sub is chosen but there are likely to be differences about what technology they would finally offer to one choice as opposed to another. They will remain officially neutral and will not directly lobby the Prime Minister or Defence Minister Marise Payne.
Sources close to the recent talks between the Americans and Mr. Turnbull suggested Washington’s official line on the submarine battle was that the U.S. respected whatever decision Canberra made and that the decision had a “strategic dimension.” The use of the term “strategic dimension” is code for the strong U.S. preference for the Japanese option.
President Barack Obama, Defence Secretary Ash Carter and other senior U.S. officials who make public pronouncements on the issue are determined not to interfere in the Australian process, and not to offer any hint the U.S. was putting pressure on Australia to choose the Japanese option.
This is a genuine and good-faith decision by the Americans not to interfere in an internal Australian process, but at the levels below cabinet they will have frank discussions with Australian officials and military personnel about their preferences.
The Turnbull government is due to announce the winner of the contest between the Japanese, the Germans and the French in the middle of the year. However, sources suggest to The Australian that instead of announcing one clear winner, Canberra may “downsource” the selection to two contenders, who will be asked to go through another round of concept development and costing.
This is because when the process goes down to just one preferred supplier, Canberra would lose much leverage over ultimate cost and even capability.
Sources close to the process suggest, for example, that the Japanese would not have come round to the idea of building the submarines in Australia, which was not their first preference, had it not been for the presence of the German and French alternatives in the process.
Although the Japanese have not exported a submarine before, many big Japanese companies have deep expertise and experience in foreign direct investment, offshore production and technology transfer.
Sources also suggest the optimistic costings being bandied about publicly – that eight submarines could be built for as little as $15 billion – are extremely unrealistic and unreliable. The building and maintenance costs of the subs will be well in excess of $50bn.
Figures such as this were starting to scare the public so the cost of maintaining the subs throughout their life, which is where the majority of the costs come in, are now routinely left off the public cost estimates for the project, which will be the biggest defence project in the nation’s history.
More generally, the costs being quoted in public today are thought by some insiders to be not much better than meaningless at this stage, in part because the German and French subs do not yet exist.
The French proposal involves converting a nuclear sub into a conventional sub, a massive engineering and design task. The German option involves an equally radical and massive upscale of a much smaller conventional sub. This is because Australia needs its subs to travel vast distances and operate in widely differing oceanic environments.
The Soryu would also need substantial modification from the sub the Japanese currently use, but sources close to the project note it is at least already the right size.
Some analysts believe the submarines are the single most important military capability Australia will possess, especially at a time of growing maritime tensions and increasingly contested waters in Asia.
The CSIS analysis of the U.S. rebalance to Asia describes the Australian subs as a “vital capability” and points out that “further delays in decision making” could risk serious gaps emerging in Australian capability. This reflects widespread concern in the strategic communities in Australia and the U.S. about the escalating costs of keeping the ageing Collins-class boats in the water.