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Can AUKUS survive? Background, Problems and Policy Recommendations |
| September 5, 2025 |
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Peter WardResearch Fellow | pward89@sejong.org
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The AUKUS submarine agreement between Australia, the United Kingdom and United States is looking increasingly vulnerable to a wind of change that is wafting through Washington. Signed in secret in 2021, backed by three leaders who have all subsequently lost elections or faced forced retirement, the agreement has proven to be resilient thus far, but there are signs that things may be about to change.
The AUKUS agreement was designed to ensure and strengthen Australia’s maritime security amidst the growing threat posed by China. The Biden Administration sought to bring Australia closer into the Indo-Pacific network of US allies as it sought to counter China’s rise, while Australia sought nuclear propulsion technology for its next fleet of submarines and to get out of an agreement with the French Naval Group that Canberra had become increasingly concerned about. Finally, the United Kingdom wanted to expand its Indo-Pacific Tilt in the wake of Brexit, building up its presence in the region.
There are four components to the agreement: (1) the stationing of US naval nuclear-powered submarines at a base near Perth in Western Australia, (2) the provision of training and preparations for Australia’s acquisition of US Virginia-class submarines in the early 2030s, (3) the provision of 3~5 US Virginia-class submarines, and (4) the construction of a new nuclear-powered attack submarine, the SSN-AUKUS, using US nuclear-propulsion technology, alongside the UK.
It is components three and four of the agreement that appear to be increasingly under strain, particularly the provision of US Virginia-class submarines. This Sejong Focus considers why and then discusses the implications for South Korea and what South Korea might do to help its allies deal with the problems they currently face. -
Australia is a middle power and has a vast coastline and territorial waters that it has sought to protect with a medium-sized surface navy and a small fleet of six submarines. After the withdrawal of the UK east of Suez in 1967, Australia felt increasingly forced to take care of its own security and also develop its own defense industrial capabilities.
During the Cold War, its submarine capabilities were provided by the UK, however. And the Falklands War demonstrated how perilous this could be for Canberra when maintenance work on their Oberon class was delayed to prioritize UK capabilities. This led the Australian government to seek its own sovereign submarine capabilities with the development of the diesel-powered Collins class that entered service in the 1990s.
This concern for sovereign capabilities remains upmost in Australian strategic planning, even if it does mean that Australian naval capabilities are produced and sustained at a substantial premium relative to world market prices in the munitions sector. These concerns also mean that the Australian government has sought to collaborate with foreign producers while ensuring that much of the submarine construction and all of its sustainment occurs domestically.
The decision to replace the Collins class was fraught with delays. Multiple governments decided to defer the decision because of costs and budgetary priorities, meaning that the Collins was in service for around thirty years before a successor submarine was confirmed. Meaning that the submarines lifetimes will have to be extended beyond that initially anticipated in their design. This life of type extension is both risky, expensive and difficult, and is currently ongoing.
The replacement was considered over a decade, and ultimately the Australian government in 2016 selected the French Naval Group to provide a diesel-version of its nuclear attack submarine. Initially, nuclear submarines were considered too costly and unnecessary for Australia’s defense. Hence Naval, which produces nuclear submarines for the French navy, and was prepared to provide the same technology to the Australians, agreed to provide a ‘downgraded’ version to meet Australia’s needs.
There has been a debate within the Australian defense community about the future of the country’s submarine capabilities since the 2000s, with some advocating for a nuclear submarines given their superior speed, their endurance, and stealth relative to diesel submarines.
However, it was not until 2021 when the Australian government decided that it needed nuclear submarines. Problems with the Naval group, cost overruns, delays and the growing conviction that China was a strategic threat and that Australia needs to have the capability to hit Chinese territory or threaten to do so in order to counter the Chinese maritime threat.
Given the problems with the Naval contract, the Australians decided to seek nuclear submarines from an alternative supplier. There are not that many options, however, aside from France, with China and Russia being off limits for obvious geopolitical reasons, and India being relatively distant from Canberra in political terms. Thus it is not all that surprising that Australia decided to work with its close allies in the US and the UK.
What was surprising about the AUKUS agreement was just how extensive and deep a defense arrangement it yielded. The United States made substantial concessions to Australia in agreeing to provide nuclear propulsion technology, which it had only previously provided to the United Kingdom. It also agreed to provide between three and five US Virginia-class submarines to Australia – a boat that it has never previously exported.
The Australian navy was to also host US nuclear submarines at a base in Western Australia, HMAS Stirling, and the US navy would begin training of Australian submariners to man US Virginias in preparation for their transfer in the 2030s.
The arrangement also entails the design and construction of SSN AUKUS submarines in both Britain and Australia, with both countries utilizing their shipyards, and while using common design contractors. From Australia’s perspective, this would allow it to acquire its own sovereign nuclear submarine capability, while from the United Kingdom’s, it would allow for cost sharing for one of the country’s most expensive weapon systems (aside from the SSBN program).
The United States secured a base of operations for its submarines near China that is not within range of China’s anti-ship warfare systems, and a further complication to any strategic thinking inside China regarding war planning over Taiwan and maritime operations in the South China Sea. At the same time, Australia also pledged considerable investments in US naval shipyards designed to boost their output, and through AUKUS it has become an even closer ally of the United States.
Given this coincidence of interests between the three sides and the deep history of shared culture and values, the emergence of the AUKUS agreement appears less surprising. However, the costs and other structural issues that the three countries now face, it is not clear whether certain aspects of the agreement will survive the second Trump administration. -
Shipbuilding
The current Under Secretary of Defense for Policy, Elbridge Colby is perhaps the most talked about and perhaps the most influential man to hold his position for decades. In the first Trump administration, he served as Deputy Assistant Secretary of Defense for strategy and force development and pushed hard for reorienting US defense posture toward China.
Colby is a prominent member of the so-called ‘prioritizer faction’ of foreign policy advisors and officials around US President Trump. This group believes that the US lacks the necessary resources to fight wars on multiple fronts and sustain a posture that gives equal focus to Europe, the Middle East and East Asia. They see China’s rise as fundamentally threatening to US supremacy and to global security, and seek to concentrate US military resources in East Asia to counter what they see as Chinese expansionism and revisionism.
On the surface, this would be potentially encouraging for Australia, given its role in US Indo-Pacific strategy. But Colby ordered a review into AUKUS upon taking office in April 2025, and has previously been highly critical of AUKUS because of the major problems faced by US shipyards in sustaining the existing nuclear-powered submarine fleet, and the slowness with which they build new submarines.
According to the Congressional Research Service (CRS), currently the United States has 48 nuclear-powered attack submarines, SSNs, with force levels falling from 52 in 2016. The number operationally ready has also dropped to just 32 (from 39 in 2016). SSNs are crucial for a future war against China in that they provide the United States with a stealthy and fast weapons platform that has superior endurance.
Currently, US naval shipyards continue to produce far fewer SSNs than those ordered by the US Defense Department. And even with an Australian investment in US shipyards of $3 billion, the maintenance backlog and the slow ship construction is due to longstanding structural problems with the US shipbuilding industry. Hiring is difficult given alternatives, there is a lack of semi-skilled workers, and the capital base of industry is old and shipbuilding methods far behind the leading shipyards of South Korea and other states in East Asia.
The Congressional Budget Office (CBO) predicts that US SSN fleet numbers will continue to fall to 47 by 2028 before rebounding, if US naval shipyards can meet their targets. To meet its overall shipbuilding targets for the 2030-2054 period, shipyard output would have to increase by 50% on current levels for submarines, surface combatants, and amphibious warfare ships. This is a dramatic increase and will require big increases in spending.
Colby has said on multiple occasions that he opposes AUKUS because he does not believe that SSNs given to Australia would be at the disposal of the US Navy in the event of a Taiwan contingency. In other words, while both countries seek to deter China and halt any expansionary moves that it may have, Colby does not trust that Australia will necessarily subordinate its own perceived national interests to US war aims in the event of a Chinese invasion, blockage or other contingency regarding Taiwan.
Colby’s skepticism may be driving US government policy, and the structural issues with the US shipbuilding industry belie simple solutions. While money would likely help, the size of the industry relative to demand and the lack chronic lack of funding over the past thirty years has created the current problem, which is unlikely to be solved in the space of a few years.
His views are now becoming received wisdom in Washington. US Admiral Daryl Caudle, former commander of United States Fleet Forces Command and commander of Naval Submarine Forces, told his Senate Confirmation hearing to serve as the next chief of naval operations said that the US would not transfer the SSNs it has committed to Australia without a 100% improvement in its shipbuilding rates.
This appears very unlikely at the time of writing, and the DOD may decide to cancel the transfer of SSNs well before the date. But there is another alternative, continue with the current plan and cancel at a later date.
Australia’s position and UK problems
Australia itself is not unified over the issue. While the current government remains committed to AUKUS, there are growing calls from within Australian society, including among former prime ministers like Malcolm Turnbull to reconsider the agreement. This does not mean that Australia will abandon it under the Albanese government, but the costs, strategic demands, and logistical issues associated with it will put it under greater strain in the coming years.
The cost of the program is projected to be $239 billion (USD) over 30 years. This includes three US Virginias, five Australian SSN-AUKUS submarines, and all the infrastructure and other costs associated with sustainment. That’s equivalent to almost $30 billion (USD) per submarine. This appears less steep a cost when annualized at $8 billion (USD), though this is still over 20% of the defense budget which was around $37 billion (USD) in 2024-25.
Once investments have been made, the sunk costs may make it difficult to turn back, but the other non-financial opportunity costs associated with the agreement may yet endanger it further.
First, the US has been putting pressure on all of its allies to increase defense spending, not least NATO countries who have been forced to agree to increase defense related expenditures to 5% (3.5% on core defense and another 1.5% on related infrastructure). Currently, Australia spends around 2.3% of GDP on defense, so this would imply a 50% increase in the budget (assuming some creative accounting around the other 1.5%) – about $18 billion (USD) increase, in other words.
That would help pay for AUKUS, but also require another $10 billion annually for other outlays. A significant sum that would likely cause significant friction in the relationship with the United States, though it is unlikely on its own to result in a break with the United States.
Second, the current Labor government remains avowedly supportive of the AUKUS arrangement and has now been in office for over three years. Given there large majority in parliament, there is a good chance they could be in power for the next six years, and they are generally considered to be less pro-American than their opponents. Hence, if even this government loses power to their opponents, the cross-partisan consensus is liable to hold.
The current government does, however, does want to improve relations with China, especially given the long-standing, deep trade relations between the two countries, and this may strain ties with Washington. A Canberra looking to improve ties with Beijing will be seen as less reliable in Washington and may make fulfilling elements of the AUKUS partnership more difficult.
That said, it would appear far more likely that the US would fail to fulfill its part of the AUKUS bargain because of industrial capacity problems than due to strains in the US-Australia alliance.
Third, the other major component of AUKUS as a military industrial project – the construction of SSNs in Australia, is potentially under threat. At the beginning of the year, the Infrastructure and Major Projects Authority (now the National Infrastructure and Service Transformation Authority) adjudged the building of reactor cores for the AUKUS SSNs to be “unachievable”. These cores and the other design work will be being performed by British contractors who are currently largely focused on the UK’s sovereign at-sea nuclear deterrent, meaning that AUKUS SSNs may be delivered late.
Given the state of Australia’s Collins-class boats, there are growing fears of a significant capabilities gap, not just because the US may renege on promises to provide three Virginia-class SSNs but also because the AUKUS SSN may not arrive on time. Potentially leaving Australia without sovereign submarine capabilities for years, at a time of growing geopolitical tensions.
Some observers in Australia are calling for the country to consider alternative options like renewing the French arrangement that was canceled in 2021 to make way for AUKUS. Under such a deal, the Naval group would be contracted to provide SSNs (rather than diesel submarines). But this as yet remains a fringe view, and the chances of France agreeing to such an arrangement after what happened in 2021 do not appear all that likely – without significant reassurances and probably some concessions on content and production requirements (less Australian content in the final boats). -
Certain parts of the AUKUS agreement may soon be on the chopping block. The Trump administration is currently reviewing the portion of the agreement that pertains to the transfer of US Virginia-class submarines, and unless the US is able to significantly increase its construction of submarines, then it may decide that it cannot transfer those it has previously promised Australia.
Others have called for investment in alternative capabilities like Autonomous underwater vehicles, including those manufactured by South Korean firms. This is probably not actually an either/or, and South Korea could definitely help to supplement what Australia has available in the medium term with the addition of UUVs. This may allow Australia to partially offset any capability gap, though UUVs generally have highly limited range compared to nuclear submarines.
Beyond this, South Korea could act as a supplier of last resort for some of the components and even for some of the submarines that Australia needs in the coming years. the Collins class life of type extension is to be handled by non-South Koreans. But South Korea is a rapid producer of submarines (currently diesel only), and if Australia does not receive its promised US Virginias, or if the Trump administration decides to renege on this promise, South Korea could produce diesel-powered ones to help fill Australia’s capability gap. It could also partner with Japan, which is also a major producer of diesel-powered submarines, or other European providers to give Australia a conventionally powered alternative to US Virginias to fill the potential capabilities gap the country may face post-2030.
There is also the prospect of South Korea producing its own nuclear-powered submarines. There are growing calls within South Korean military circles for South Korea to do so, and if South Korea can develop some of the technologies required, then a partnership between it and the AUKUS countries to fulfill the needs of all four countries will potentially save all four a great deal of money, but also ensure that Australia, the UK and the United States can fulfill any capability gap they may see open up in the near future.
There is also genuinely new and exciting prospect for the make American shipbuilding great again agenda that could open the way to an even more ambitious alliance between South Korea, the United States, and the other AUKUS countries. South Korean investments in US shipbuilding and potential partial or full construction of US naval ships, including US Virginia-class submarines, in South Korean shipyards could help to ease the backlog of US shipyards.
A broader alliance framework that expands AUKUS to encompass South Korea and perhaps other Indo-Pacific allies of the US who also have shipyards like Japan could help ensure that Australia does not have to worry about the capability shortfall and gap that it may soon face. It could also help the US realize its rather overly ambitious shipbuilding plan, and help to protect South Korean security from the growing threat of North Korea’s naval expansion and its burgeoning SLBM programs.
| Preface
| Background
| Major Problems
| Prospects and Implications
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
