The Trump administration's AUKUS review set off a political storm, but it doesn't mean the deal is dead

Australia Broadcast Center

a day ago

News that the Trump administration is reviewing AUKUS broke like a wave over Australia this morning.
Defence Minister Richard Marles has responded with determined calm, saying Australia has known about the review for "weeks" and that it was perfectly "natural and understandable" for the new administration to "look under the hood" of the submarine pact.
The review won't necessarily sound a death knell for AUKUS and there are plenty of experts who say it delivers enough benefits to the United States to ensure its survival.
But it has provoked a storm of controversy and speculation, with defenders of the project taking to the battlements and sceptics declaring it will offer a golden opportunity for the government to escape a pact that is shaping as a strategic catastrophe for Australia.
And there are also plenty of signs the Trump administration is happy to use the review to twist Australia's arm on defence spending — putting the prime minister in an awkward position ahead of an anticipated meeting with Donald Trump.
At this stage, details are scant.
A Pentagon official says the US wants to make sure the plan aligns with Mr Trump's "America First" agenda, ensuring "the highest readiness of our service members" and "that the defence industrial base is meeting our needs".
It will be led by senior official Elbridge Colby, who has been a high-profile AUKUS sceptic — although he has sounded more open to the initiative since taking office.
Still, Mr Colby warned during his confirmation hearings that the US would only be able to sell nuclear powered submarines to Australia under AUKUS if the US managed to ramp up submarine production to meet its own critical needs.
Put simply: if the US Navy is facing a nightmare scenario, like a war in the Taiwan Strait, then it might prefer to have those additional submarines under its direct control, instead of under the command of another country that might choose to steer clear of the fight.
Under the AUKUS agreement, Washington will only begin to transfer second-hand Virginia-class submarines to Australia if it can first lift its local production rate of nuclear-powered boats to at least two a year by 2028.
Currently, American shipyards are producing around 1.2 nuclear-powered attack submarines per year but will need to hit a target production rate of 2.33 before any can be sold to Australia.
Analyst Euan Graham from the Australian Strategic Policy Institute says the administration will "need to be convinced that the short-term loss to the US Navy's submarine order of battle is worth the longer-term gains from basing and maintenance and greater interoperability".
"Support from the US Navy and Congress will be critical," he said.
But the administration will also face real costs — not least to US credibility — if it pulls the plug.
US analyst Richard Fontaine says all three countries have "absorbed financial and diplomatic costs to get to this point" and "walking away would amount to a strategic setback and devastate ties with Australia".
That might explain why some Australian officials and politicians insist they are quietly confident Mr Trump and his key lieutenants will not abandon AUKUS.
Questions around the US industrial base and grand strategy might dominate the review, but the process is not happening in a vacuum.
The Pentagon says it will use the review to make sure "allies step up fully to do their part for collective defence".
In the past few months, both US Defence Secretary Pete Hegseth and Mr Colby have publicly demanded that Australia dramatically lift defence spending.
The message seems clear.
Nobody in the US is saying outright that AUKUS could face the chop if Australia refuses to play ball.
But by directly linking the two issues, the Trump administration seems to be flagging that it is happy to use AUKUS as leverage.
Unsurprisingly, some Australian MPs are predicting Mr Trump will demand the Albanese government commit to pour more money into the US submarine industrial base.
It is still not certain if Anthony Albanese will sit down with Mr Trump on the sidelines of the G7 meeting in Canada next week, for their first face-to-face meeting.
But if they do, it is certain AUKUS and defence spending will be at (or near) the top of the agenda.
And the Trump administration's decision to apparently leak — or let slip — news about the review just days before the meeting shows they are happy to put the acid on Australia.
If AUKUS does get scrapped, Australia will be left with a very hefty bill and nothing to show for it.
Under the AUKUS deal, Australia last year began making a series of multi-billion-dollar payments to the United States and United Kingdom to help boost submarine industrial production in both nations.
Earlier this year, the government made a $768 million down-payment to the US as part of an overall pledge of $4.7 billion, to help secure the transfer of second-hand Virginia-class submarines here in the 2030s.
Australia is also scheduled to pay $4.6 billion to the UK to help support the eventual construction of a new SSN-AUKUS fleet, but the government and defence have been reluctant to admit these contributions have a no-refund clause if the submarines do not arrive.
That is not the only sunk cost. As Greens senator David Shoebridge points out, Australia is also "spending $1.7 billion of taxpayers' money to build a US nuclear submarine base that will be operational by 2027 just off Perth".
Ever since former prime minister Scott Morrison tore up Australia's submarine deal with France in favour of the AUKUS nuclear option, the ambitious deal has dominated the Defence Department's future planning and efforts.
Despite concerns about the direction of AUKUS under the Trump administration, Mr Marles dismissed calls to develop a fallback plan in case the US reneges on the pact.
If the AUKUS deal was to collapse, Australia's options to acquire submarines, conventionally powered or nuclear, are extremely limited.
France would be reluctant to resume the now-scrapped Attack-class program with Australia, while Germany, which was overlooked in 2016, has indicated its submarine construction yards already have full order books.
Australia could potentially return cap-in-hand to Japan, more than a decade after a handshake deal between former prime minister Shinzo Abe and then-prime minister Tony Abbott was made to buy that country's Soryu-class submarines.
But the reality is that if AUKUS does fall through, Australia will be facing a yawning capability gap, with no obvious replacement for our dependable but rapidly ageing Collins Class submarines — all at a time when we're facing the most perilous strategic landscape in decades.