Since the Australia-United Kingdom-United States (AUKUS) agreement, it is becoming clear that the acquisition and operation of eight nuclear-powered submarines will take decades and is estimated to cost Australia between $70 and $171 billion. In the span of 30 days in March, Australia has already had to make tough funding decisions, announcing $10 billion for a new submarine base on Australia’s east coast while disclosing the cancellation of a $1.3 billion purchase of General Atomics MQ-9B Reaper unmanned aerial vehicles (UAV). The Royal Australian Navy should consider leasing older Los Angeles-class submarines from the U.S. before committing to a more expensive purchase.
Although AUKUS makes it possible for Australia to acquire a nuclear-powered submarine from the U.S. or U.K., there is no easy way for Australia to fund the manufacturing of either U.S. Virginia or U.K. Astute-class submarines. The U.K. stopped producing the Astute’s nuclear reactors, and the U.S. does not have the excess capacity to increase the production of Virginia-class submarines. In addition, the U.S. and the U.K. do not have excess Virginia or Astute-class submarines to lease to Australia.
The U.S. has up to 28 active Los Angeles-class submarines for the Royal Australian Navy to potentially lease while Australia’s shipbuilding industry figures out how to build its submarines. On the other hand, the U.K. only has two remaining Trafalgar-class submarines to lease, falling short of the required eight submarines. If not leased to Australia, the Los Angeles-class submarines being replaced by new Virginia-class submarines will be decommissioned, some before the end of their original 30-year service lives.
Moreover, to borrow the Royal Navy’s terminology, the Los Angeles-class submarines are basically ‘paid off.’ Australia would pay the U.S. an approximate $250 million for an Engineering Overhaul, or Engineering Refueling Overhaul if the reactor requires refueling, to extend the boats’ service life for at least another ten years. Subsequently, Australia gets a cheaper modern submarine than a $3.45 billion Virginia-class submarine, a $3.16 billion for a new Astute, or $4.5 billion to extend the service life of Australia’s six diesel-powered Collins-class submarines.
Unlike the U.K.’s Astute and Trafalgar-class boats, the Los Angeles-class already has the U.S. weapons and combat systems Australia wants, particularly the combat system that the RAN submariners already use in the Collins-class. This is important because incorporating U.S. systems in a foreign submarine design, such as Australia’s original intent with France’s Barracuda-class submarine, increases the risk of incompatibility, delayed schedules, and cost overruns. There is no better way for the Royal Australian Navy to stay on budget and schedule than to acquire a submarine that is already built.
Finally, leasing, instead of buying, nuclear-powered submarines means that Australia can avoid the headache of paying for the scrapping of the submarine, and the disposal of its reactor, at the end of its service life. Leasing also allows Australia to only pay for the years it operates the submarine, sending it back to the U.S. for disposal and avoiding the extra cost. Although it is hard to discern the cost of dismantling in the U.S., the U.K. spends approximately $112 million to dispose of each of its nuclear-powered submarines. The U.S. will pay the fee whether the sub is leased or rusting while tied up to a pier.
The question is whether the U.S. Navy is willing to part with its Los Angeles-class submarines. Seeking to grow its fleet of submarines, the U.S. Navy relies on its older submarines to sustain its number of operating boats while the U.S. shipyards struggle to increase the production of Virginia-class submarines. Therefore, the U.S. Navy may not be as enthusiastic about Australia’s quick and cost-effective option to lease Los Angeles-class submarines.
The U.S. also benefits from leasing its older Los Angeles-class submarines. If the U.S. gets into a war with China, Australia has modern nuclear-powered submarines to contribute to the fight. If Australia declines to join the battle, the U.S. can always repossess and recommission these leased submarines, fly in a crew, and sail away from Australia with a fully armed and operational submarine that Australia kept fully functional. The alternative is for the U.S. to continue paying for a functioning modern submarine tied up to a pier, rusting away while waiting for disposal.
Leasing submarines from the U.S. does not prevent Australia from developing its submarine manufacturing industry and building its new submarines. However, given the uncertainty of costs and schedules, a leased submarine is an affordable option that provides the Royal Australian Navy the platforms to train until the Australian submarines are built.
Andy Cichon is a retired United States Naval Officer, who has served in various ships and staffs, including as Air Warfare Project Manager at the Royal Australian Navy’s Australian Maritime Warfare Centre, and in the Chief of Naval Operations’ staff for the U.S. Navy’s international engagement with Australia, China, Taiwan, South Korea and Vietnam. He works for SAIC as a civilian war gamer at the U.S Navy’s Tactical Training Group Pacific. His views are his own.