Australia on Saturday unveiled a massive compensation deal with French submarine maker Naval Group, putting a financial end to a dispute that has soured relations between Canberra and Paris for nearly a year.
New Australian Prime Minister Anthony Albanese said the French company had agreed to a “fair and equitable settlement” of 555 million euros, for the breach of the gigantic contract of 56 billion euros, which had caused a diplomatic crisis between Paris and Canberra last fall.
In September 2021, then-Australian Prime Minister Scott Morrison suddenly ended the French contract that had been in preparation for ten years. The head of government announced that his country would buy American or British nuclear-powered submarines, a major change for a country with weak nuclear capabilities.
Scott Morrison then drew the wrath of French President Emmanuel Macron who accused him of deception and recalled his Australian ambassador in protest.
Relations between France and Australia being restored
Relations between the two countries remained frosty until the election in May of centre-left Anthony Albanese. Since coming to power, he has rushed to mend strained relations with France, New Zealand and Pacific island nations who blamed the previous Conservative government for its slow pace on climate change.
“We are restoring a better relationship between Australia and France,” said Anthony Albanese, saying he was “looking forward to responding to President Macron’s invitation to me to come to Paris for the first opportunity “.
Billions of dollars lost
In total, the failure of the contract for French submarines will have cost 2.4 billion dollars to Australian taxpayers, specified their Prime Minister, without them being able to derive any benefit from it.
The submarine contract is the centerpiece of Australia’s defense strategy against China’s growing influence in the region under Xi Jinping’s presidency. Nuclear-powered submarines could allow Australia to operate more stealthily and deterrently from China.
It is not yet known what strategic decision Australia will take
But there is great uncertainty about when Australia will actually be able to own these devices. The first American or British submarine is unlikely to be in service for decades, leaving a void for Australia with its aging fleet.
The choice of supplier will have significant economic impact and strategic implications, closely linking the Australian Navy to that of the chosen nation.
Former defense minister and current opposition leader Peter Dutton said this week he had decided to source supplies from the United States, an unusual revelation given the sensitivity of the ongoing negotiations.
The current government has insisted that no decision has yet been made.