Japan loses bid to build submarines for Australia

By Todd Crowell

TOKYO

Once considered a slam duck certainty for Japan, Australia has surprisingly awarded a multi-billion dollar contract to build submarines for its navy to a French company.

At issue was one of the largest foreign armaments sales in recent years and the first major test for Japan since its cabinet lifted in April 2014 a long-standing ban on exporting arms under its pacifist constitution.

Canberra was seeking to buy around a dozen new submarines under a contract of A$50 billion ($38 billion) to replace its Collins-class fleet built in Australia in the 1990s under license from Sweden.

The winner in a three-way bid was the French national Builder Directions des Construction Naval Services (DCNS), who will model the new subs on France’s Baraccuda class submarines, just entering service.

Tokyo had based its bid on its Soryu-class submarines, often described as the best conventionally powered submarines in the world.

The French Barracuda is nuclear-powered but the Australian subs will be converted to diesel propulsion.

“This decision was driven by DCNS’s better ability to meet Australian needs than the Japanese submarines,” Australian Prime Minister Malcolm Turnbull said in announcing the decision Tuesday.

There were arcane technical details that went into the winning bid, but politics played a large part too, according to analysts.

Japanese Prime Minister Shinzo Abe had courted Turnbull’s predecessor Tony Abbott, who was said to favor the sale to Japan but was ousted by Turnbull in September of last year.

Abbott had touted the Japanese submarine sale as having strategic considerations for security in Asia that would not be duplicated by the other bidders, the French and a German company.

During his administration, Japan and Australia signed a defense cooperation agreement.

The strategic argument, however, did not motivate Turnbull. Once Abbott was replaced, Japan became just one of three bidders to be determined by the usual technical criteria and cost specifications.

The Japanese side had been ambiguous about whether the watercraft would be built in Australia, while DCNS not only promised to build them at the Australian navy shipyard in Adelaide, but to buy local for virtually everything except some very specialized components.

Moreover, the economy of South Australia state is hurting with the closing of the last automobile factory there, and the French proposal promised to provide many local jobs.

Turnbull -- who faces a difficult general election as early as July 2 -- repeatedly alluded to “Australian steel” and “Australian jobs” in making his announcement.

It may be that the Japanese bidders got out-hustled by a bidder vastly more experienced in the international arms market.

DCNS has built submarines for nine other countries’ navies, whereas the Japanese bidders, Mitsubishi and Kawasaki, have only sold to the Japanese government.

In retrospect, it appears that the Japanese defense establishment was only lukewarm for the pending deal.

The two bidders are already committed to building 11 submarines for Japan and don’t have that much spare capacity.

Moreover, the navy was not happy about sharing some of the secrets of the Soryu’s stealth technology with a foreign state, even a country that is a near ally and also a treaty-bound ally of the United States.