Any decision to build Australian subs overseas unlikely until late 2016

The likely mild nature of Australia's next Tuesday May 12, 2015 Federal Budget will prove an indicator that the Abbott Government wishes to avoid decisions that might alienate voters. Abbott's idea to "Build submarines overseas" will  increasingly become a decision to be delayed.

The Abbott Government originally planned to make a decision in early 2016  on who (Japan, France or Germany) would build Australia's future submarine and where (mainly in Australia or mainly overseas). Early 2016 was the earliest period after the stages of the Competitive Evaluation Process (and see) were completed and also after part publications of the 2015 Defence White Paper and associated Force Structure Review.

It is likely that the Abbott Government will only make a decision AFTER the next Federal Election (likely in late 2016) that the submarines will be built overseas. 

Considerations are:

- The May 12, 2015 Federal Budget [watch this space] is already shaping up to be mild, risk averse and sensitive not to alienate too many of Australia's 16 million voters. This is because the Coalition Government's austere May 2014 Budget made the Government rapidly unpopular with  average voters. If Abbott were to declare a submarine policy that effectively meant that $20 Billion of Australia's declining revenue would be sent to Japan to buy Soryus this would be very unpopular. 

- The next Election by law must be held on or before January 14, 2017. However Governments rarely call elections in December or January as this causes voter resentment (too close to the major holiday period in Australia). An election in the southern hemisphere Spring ie. September, October or November 2016, is more likely.

- South Australian voters will become increasingly sensitive about shipbuilding job losses (or lack of growth) prior car factory job losses fully impacting. South Australian car factories have closed in the last few years including 1,000 job losses from the Mitsubishi factory closure in 2008 and General Motors Holden in South Australia is due to close by late 2017 with 1,600 job losses. 

Abbott would be mindful that a decision to build the submarines overseas might just lose him the 2016 Federal Election. Not only the Navy, workers and unions but many business leaders in Australia’s manufacturing sector prefer “Build in Australia”. Meanwhile, the submarine issue may influence votes definitly in South Australia but also in Victoria and NSW (both are also involved in submarine builds). The Labor Party Opposition's “Build Submarines in Australia” may prove increasingly attractive.

Hence, only after a September 2016 or October 2016 Election, is a definite Federal Government decision on any overseas build likely.

Pete

Comments on What Appears to be a Soryu Sale Press Relaease

The Soryu lobby (Japan of course but to an extent the US) issued what amounts to a Soryu Press Release (see below) on January 20, 2015. This was possibly to influence any statements Australian Defence Minister Kevin Andrews was expected to make during his visit to the Australian Submarine Corporations (ASC) submarine facility in Adelaide on January 22, 2015. As it turns out Andrews said little memorable other than the Australian Government had made no submarine selection decision.

COMMENT

After some positive feedback (with pertinent information) from Japanese commenters I'm toning down the title and some of my comments in the post. The "Soryu Press Release" is a Japan Times article of January 20, 2015. The article/Press Release:

- would have been mostly written by and cleared by the Japan Ministry of Defence.
- there is the exaggerated implication that Australia is privileged to be allowed to receive such a Japanese technical achievement.
-  but nevertheless Japan may not carry out the standard industrial task of revealing to Australia key technical secrets. This withholding of secrets may include those behind the Soryu's  potentially dangerous Lithium-ion battery (LIB) see "Japan...has yet to decide which secrets to share".
- that the US is in favour of the Soryu export to Australia for the US's own strategic and financial reasons
- makes the standard claim that is Australia is happy to work in strategic alliance with Japan and the US over Japan's interest in contested islands in the East China and South China Seas. Australia has been very cautious in not being drawn into Japan-China cofrontations in those seas
- basically Japan's Soryu pitch is that Australia is strategically obligated to buy the Soryu..

There is some recognition by Japanese commentators that Australia will incur major economic costs by sacrificing much of its ship-submarine building industry. However these  commentators under-rate the opposition and rift in Prime Minister Abbott's own governing Party with increasing feeling against submarines being built in Japan. Instead there is increasing support across the` political spectrum and within Australia's Navy favouring construction of the submarines in Australia.

The risks for Australia of being Japan's first major defence customer are ignored.

An incentive for Japan is, of course, is Australia's money to offset Soryu 2 (Lithium battery) development costs.

 The article/pitch/Press Release is below - with string  http://www.japantimes.co.jp/news/2015/01/18/national/stealth-tech-no-given-in-japanese-sub-deal/#.VL3UDUeUen8 :

"Stealth tech no given in Japanese sub deal

BY REIJI YOSHIDA

Retired Vice Admiral Masao Kobayashi commanded Japan’s submarine fleet from 2007 to 2009. In a recent interview in Tokyo with The Japan Times, when asked to explain one of the country’s most tightly guarded military secrets, he seemed reflective.

Kobayashi pointed to the ceiling lights in the quiet interview room and said: “Take those fluorescent lights, for example. Any fluorescent light generates sound.”

Other than our voices, there were no other sounds in the room.

“Fluorescent lights generate extremely small vibrations. We take anti-vibration measures for every single light in a submarine,” he said.

Japan’s engineers have painstakingly worked to minimize the vibrations given off by the multitude of components in submarines to prevent even those undetectable by the human ear from being picked up by the super-sensitive sonars of enemy subs and sonobuoys from anti-submarine aircraft, Kobayashi said.

Noisy components include fans, pumps, motors and fluorescent lights. Some are carefully muted with vibration-damping rubber, he said.

“The quiet submarines we have today are the result of numerous long, patient efforts,” Kobayashi said.

The Maritime Self-Defense Force’s submarines are not nuclear-powered but have a reputation for being ultra-quiet.

Now Australia, seeking to build a new fleet of large, long-range submarines, seems keen on acquiring Japan’s latest Soryu-class subs, or at least their technology.

If the deal goes through, the top-secret submarines will become the first major pieces of military hardware Japan has authorized for export since the administration of Prime Minister Shinzo Abe lifted the decades-long blanket ban on arms sales last year.

Vice Adm. Robert Thomas, commander of the U.S. Navy’s 7th Fleet, reportedly said Oct. 24 in Tokyo that then-Australian Defense Minister David Johnston was very interested in Japan’s Soryu-class subs.

“I talked to him about it four years ago and I said: ‘You want to find the finest diesel-electric submarine made on the planet — it’s made at Kobe works in Japan,’ Thomas was quoted as saying by Bloomberg News.

The U.S., which has close but separate security pacts with Japan and Australia, probably wants Australia to buy Japanese submarines because it would greatly strengthen their strategic military ties, Kobayashi said.

Deeper Japan-Australia military cooperation would help ease the heavy burden on the U.S. fleet, which is busy decommissioning many of the nuclear-powered attack submarines it built during the Cold War, he said.

“The U.S. rapidly built many Los Angeles-class nuclear submarines during the Cold War. Many of them are being decommissioned now,” Kobayashi said.

“I think the U.S. wants to create a strategic triangle of Japan, Australia and the United States. That’s probably a factor behind” the apparent U.S. nod to Australia’s proposal to Japan, he added.

Japanese defense officials are thought to be pleased for the same reason Washington is. They want to deepen strategic military ties with Australia.

“Australia would make a good partner for cooperation. There are no major diplomatic problems between the two countries other than whaling,” a senior Defense Ministry official said on condition anonymity. Australia opposes Japan’s annual whaling expeditions.

Japan has just started receiving the submarine specifications sought by Australia but has yet to decide which secrets to share, two senior defense officials said.

Japan soon plans to use lithium-ion batteries to drive the motors in its latest Soryu sub, making them even quieter. Australia is believed to be interested in this advance, the officials said.

But advanced lithium-ion batteries are one of Japan’s top military secrets, one warned.

“(Exporting) them would be a rather sensitive issue. We’d need to study if it’s really appropriate for an outside party (to have that technology),” the Defense Ministry official said.

In Australia meanwhile, opposition lawmakers and trade unions are strongly opposed to procuring Japanese submarines because it could considerably undermine the domestic defense industry and reduce jobs in South Australia.

Joint development might be an option, the two Japanese officials said, noting that nothing concrete has been officially proposed.

Teruhiko Fukushima, a professor at the National Defense Academy in Yokosuka, Kanagawa Prefecture, who is an expert on Australia, said Prime Minister Tony Abbott seems eager to procure the subs to bolster Canberra’s military ties with Japan and the United States.

“Abbott should be considering a Japan-U.S.-Australian alliance as a kind of insurance” against the recent rise of China’s powerful military, Fukushima said.

“The introduction of Soryu-class submarines would be a plus to strengthen that alliance,” he added.

“If the Abbott administration survives the next election and wins a second term, there will be a greater chance that Soryu-class submarines will be introduced in Australia,” he said.

Last June, Australia and Japan conducted “two-plus-two” talks between their foreign and defense ministers.

In the joint statement that followed, Australia expressed “strong opposition to the use of force or coercion to unilaterally alter the status quo in the East China Sea and the South China Sea,” an apparent warning to China to not aggressively press its territorial claims in those areas, which include the Japan-controlled Senkaku Islands, which China and Taiwan also claim. China calls the uninhabited islets Diaoyu and Taiwan calls them Tiaoyutai.

Fukushima also said that on Nov. 26, 2013, only three days after Beijing declared the establishment of an air defense identification zone over the East China Sea that included the Senkakus, the Abbott administration summoned the Chinese ambassador in Canberra to express its concerns after the ADIZ drew strong protests from Tokyo and Washington.

“There is no doubt Abbott puts great emphasis on the relationship shared by Japan, the U.S. and Australia,” Fukushima said.

But he also noted that China is Australia’s No. 1 trade partner and that the public would never approve of political actions that could seriously damage those economic ties.

“The best way for Abbott is to strengthen the Japan-U.S.-Australian relationship while maintaining good economic ties with China at the same time. Australia would never turn its back on the Chinese market,” he said." ENDS

Pete

Australia's Future Submarine - Swedish vs German Claims

This article, Saab Story: Sweden's New Submarines, June 10, 2014, http://www.defenseindustrydaily.com/saab-story-swedens-new-submarines-024760/ appears to have been inserted by Saab and maybe the Swedish Government to understandably increase the chances that Australia's future submarine will be designed and partly built in Sweden. Japan's Soryu propulsion system is of course being considered by Australia and US input, or at least Lockheed Martin's, has for years been considered for the combat system. All may be even more complicated and multi-country than the Collins' deals 1980s-2000s. 

The article however seems to avoid the issue that if TKMS still owns Kockums (as indicated here http://www.kockums.se/en/ ) then TKMS through Kockums retains many intellectual property rights that Sweden-Saab assumes are Sweden's rights. Intellectual property like the Stirling engine may be used in Australia's future submarine. But who owns the the intellectual property rights to the Soryu's Stirling engine and separately does Germany mostly own the licensing rights to the Soryu's diesel? Sweden-Saab? Germany-TKMS-Kockums as it applies to Japan? Where do Japan's submarine builders, Mitsubishi and Kawasaki, stand?  It all needs to be clarified by German, Swedish, Japanese and Australian lawyers, businessmen and politicians. See also "The reported Swedish solution would buy [Australia's] ASC" below.

Here are the relevant parts of the article which is on the Defense Industry Daily website http://www.defenseindustrydaily.com/saab-story-swedens-new-submarines-024760/ :

Saab Story: Sweden’s New Submarines

Jun 10, 2014 18:46 UTC by Defense Industry Daily staff

.... In order to field their next-generation design, however, Sweden may have to do something unusual: partner with other countries…

....The A26 will be equipped with an air-independent propulsion (AIP) supplement to its diesel-electric systems,...

...The A26′s AIP system will be Kockums’ Stirling, which also equips Sweden’s 3 Gotland and 2 Sodermanland Class submarines, Singapore’s Archer Class Sodermanlund variant, and Japan’s Soryu Class.

...April 14, [2014] Saab to buy Kockums. Saab AB and ThyssenKrupp Industrial Solutions AG sign a non-binding Memorandum of Understanding concerning the sale of the Swedish shipyard ThyssenKrupp Marine Systems AB (formerly named Kockums), including its Malmo, Karlskrona, and Musko operations, to Saab AB.

“Both parties agree that during the negotiations phase, the integrity and the operating ability of ThyssenKrupp Marine Systems AB must be safeguarded. The transaction will be subject to regulatory approval. The negotiations between Saab AB and ThyssenKrupp Marine Systems AB are at an early stage and more information will follow.”

There’s a major backstory here. Sweden’s FMV effectively raided TKMS’ offices in Malmo “to take sensitive technological equipment,” but FMV says that since “…it was a transfer of defence material, belonging to FMV, all information regarding the transfer is classified as secret”. It’s generally believed that they came and took the A26 submarine’s plans, as well as a complete Stirling Air-Independent Propulsion system, which are technically owned by the Swedish state. [does Germany-TKMS agree it is legally owned by Sweden?].  A country that believes time is of the essence, and doesn’t want what it perceives as a hostile corporation to have leverage from holding state materials, might be inclined to move swiftly. The very fact that this happened speaks to how badly relations between Sweden and TKMS have deteriorated. 

April 12, [2014]: Australia. The Collins Class was built around a Swedish design, and News Corp Australia says that Saab and the Swedish Government have been engaged in secret talks around a new joint submarine effort. That proposed approach may have the potential to cut through many of the dilemmas faced by Australia’s government, and Sweden’s as well....

The reported Swedish solution would buy [Australia's] ASC, and embark on a fully cooperative joint design for Sweden and Australia’s next submarines. Australia would receive a design that’s explicitly built for Australia’s needs – a necessary compromise for Sweden, whose needs are different. It’s also worth noting that the Japanese Soryu Class propulsion system which is attracting so much interest from Australia’s Navy is part Swedish. From industry’s point of view, making ASC part of Saab removes any conflict of interests with a foreign firm that acts as the project lead, creating both development jobs/skills, and production work. From the politicians’ point of view, a program that includes Sweden and Australia offers the added security of shared risk, and shared acquisitions.

Sweden is looking to re-establish an independent submarine industry (q.v. March 26/14), and their challenge will be buying enough talent, building an equivalent production workforce, and designing the new sub within Sweden’s budgets. Australia offers Sweden a development partner, and a workforce with good experience...."

PETE'S COMMENT

This whole matter still seems a political and legal mess or challenge, at least. If TKMS looks like it would lose Australia's future tender to build Australia's future submarine then TKMS will construct legal intellectual property right obstructions to make it very difficult for Saab to smoothly win the tender.

Pete 

Australian submarine selection, GMH closing, defence spending

Part of the Australian Submarine Corporation's complex, Adelaide, South Australia (Image from http://www.hassellstudio.com/cms_images/389_26-07-2011_5562.png )

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Most public interest generally focusses on a submarine's military technology, attributes and functions. Submarine technology, tactics and their missiles are cool. But below the surface are other pivotal matters including domestic industrial policy, jobs, international relations and government budgeting.

The December 10-11, 2013 announcement that General Motors Holden (GMH) will close its Adelaide factory in 2017 (Adelaide's Mitsubishi car factory closed in 2008) will impact on Australia's submarine selection. Adelaide is the capital of the ship-submarine building state of South Australia. South Australia relies on manufacturing more than other Australian states because South Australia has smaller mining, energy and agricultural resources than most states. Australia's federal government may well find it necessary to direct more funding, in the shape of defence spending, to South Australia, for jobs, economic growth and ultimately votes.

The Adelaide based Australian Submarine Corporation (ASC) is Australia's largest domestic defence company (as distinct from foreign owned Boeing and Lockheed Martin). From the 1980s to the 2000s ASC (working with Kockums and other foreign corporations) built the six Collins Class submarines. ASC is now involved in the expensive and extensive maintenance of the six Collins - see http://www.asc.com.au/en/Programs/Submarines/ .

ASC's main current defence construction activity is building the three Hobart Class Air Warfare Destroyers (AWDs) - also see http://www.asc.com.au/en/Programs/Ships/ .  

Timing

The closure of GMH in Adelaide in 2017 may impact not only on the Federal and South Australian states determination to that the future submarines be constructed domestically but also impact on the timing of future submarine project - SEA 1000
http://www.defence.gov.au/dmo/id/dcp/html_dec10/sea/Sea1000.html . As things stand it appears that many of the decisions for SEA 1000 might not be made until 2020, if not later. South Australian workers, businessmen and voters may well object to this timing. An earlier decision that might involve the ASC concurrently performing substantial work on a future submarine, as well as completing the AWDs, may be necessary.

Pete