Axed French sub deal to cost Australia close to €4 billion

AFP - [email protected]
Axed French sub deal to cost Australia close to €4 billion
French President Emmanuel Macron visits an Australian naval base in 2018. Australia is to reimburse France for backing out of a deal to buy French-made submarines. (Photo by ludovic MARIN / POOL / AFP) / POOL SOLELY FOR BEST IMAGE AND ABACA

Australia is to pay France compensation after backing out of a deal to buy submarines from Naval Group - a defence manufacturer, in which the French government is the majority shareholder.


Australia will be forced to pay up to €3.7 billion to exit a submarine deal with France in favour of acquiring nuclear-powered US or British models, officials admitted Friday.

Last year Australian Prime Minister Scott Morrison tore up a submarine deal with France's Naval Group, instead opting for nuclear-powered alternatives as part of a landmark security agreement with Washington and London.

On Friday, under questioning from an opposition senator, defence officials revealed the scuppered French deal came with a hefty price tag.


"So taxpayers will be up for $5.5 billion [AUS $] in submarines that don't exist?" senator Penny Wong asked at a hearing in Canberra.

"The final negotiated settlement will be within that price," Defence Department deputy secretary Tony Dalton replied.

Dalton said the exact amount was still unclear as negotiations with Naval Group were ongoing.

Finance Minister Simon Birmingham defended the decision to ditch the French deal as "necessary for decades to come".

"There's no shying away from the fact that we knew there were serious consequences," Birmingham said.

"The changed strategic environment in the region meant that the option that had previously been chosen was not going to meet the best needs for Australia in the future."

Morrison previously said the decision to opt for nuclear-powered submarines was driven by changing dynamics in the Asia-Pacific region, where China is increasingly asserting its claims to almost the entire South China Sea.

The switch caused fury in Paris, with French President Emmanuel Macron accusing the Australian leader of lying about the future of the contract initially worth Aus $50 billion (€34 billion).

In December, a study released by the Australian Strategic Policy Institute said the nuclear-powered submarine programme would cost more than US $80 billion (€72 billion) and take decades to complete.


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