Australia scrapped the $90bn submarine deal with France “for convenience”, the contractor Naval Group says, adding it “did not fail in its commitment” to the project.
The announcement that Australia was ditching the contract in favour of United States or United Kingdom nuclear-powered submarines as part of the Aukus pact has caused fury in France, which has described it as a “stab in the back”.
“The Australian authorities have terminated the contract for convenience thus acknowledging that Naval Group did not fail in its commitment,” the statement from Naval Group’s Paris headquarters said.
“The consequences of the termination of the contract for convenience are addressed in the strategic partnership agreement (SPA) signed in 2019.”
The comments come as a French official said Australia had made a fresh approach several days ago for a call between Scott Morrison and French president Emmanuel Macron. While France would “prepare seriously” for such a phone call, its position is that it will have to be a conversation of substance.
Since the SPA between Australia and Naval Group was negotiated there have been accusations of cost and schedule overruns.
The SPA is secret, but an auditor general’s report has revealed it contains “off ramps”, or “exit gates” – points at which Australia could withdraw from the contract in the event of poor performance. What is not clear is what happens if that withdrawal is because of a preference for a different deal instead of a failure by Naval Group to deliver specific outcomes.
Early on the morning of 16 September Australia time, Morrison, in a joint virtual address with US president Joe Biden and UK prime minister Boris Johnson, announced the switch to nuclear-powered submarines.
Defence minister Peter Dutton has said Naval Group’s Attack-class submarines were no longer suited to the nation’s operational needs, and that the government had been “upfront, open and honest” with France about its decision.
Last week Herve Grandjean, the French Ministry of Defence spokesperson, said Naval Group received an official letter from the Australian navy saying it was “extremely satisfied that performance of the French submarine was excellent” on the same day the cancellation announcement was made.
Under the SPA, Australia will pay a “break fee” to Naval Group, but company is also planning to seek further compensation.
“We have begun to analyse the financial and contractual consequences of this Australian sovereign decision for Naval Group,” the statement said.
“We are discussing this with the Australian authorities in a constructive mindset but it is too early at this stage to give any estimation [of costs].”
France beat Germany and Japan to win the submarine contract with a diesel-electric version of its existing nuclear submarine, the Barracuda. France has been open to the idea of converting back to nuclear power, and Dutton says that option was considered then dismissed in favour of a submarine developed under the Aukus aegis.
On Wednesday, the Nine newspapers reported that Malcolm Turnbull, who was prime minister when the contract with France was inked, said the current government should have considered the French nuclear option. It has “safety and non-proliferation advantages” over the UK and UK options, as the uranium used has a lower level of enrichment, he said.
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