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Nuclear weapons for Australia—not so fast

15 December 2017

In my new Quarterly Essay, I argue that Australia may have to rethink the acquisition of nuclear weapons in the post-American Asia which I believe is now upon us. Paul Dibb has recently made a similar point. I stopped well short of either advocating that we should take that step or predicting that we will, and I think Paul did the same. Even so, I thought what we’d each said in our different ways was rather bold.

But we were not bold enough to please Andrew Davies, who has gently but firmly reproved us for being coy, which suggests that he thinks we both really believe that Australia should go nuclear, but just are too timid to say so. Well I can’t speak for Paul, but for myself I’d like gently but firmly to correct that implication.

I do think that there’s a good deal of force in Andrew’s argument that it would make no sense to invest in the more capable conventional forces we’d need to resist a direct conventional threat from China without US support unless we also built nuclear forces as well, because conventional forces would be useless unless backed by a nuclear deterrent. That’s why I’ve argued that we’d need to look at the nuclear question closely. But I have three reasons for thinking it would be premature to try to decide right now whether that argument is correct and whether we should go nuclear.

First, we shouldn’t presume to know with certainty how nuclear forces will function in shaping strategic affairs in the decades to come in Asia. These weapons are extremely revolutionary and still only 72 years old. They have hardly ever been used. Everything we think we know about their strategic effects derives from the single ‘case study’ of the Cold War, which was framed by a specific and unique set of ideological, geopolitical and operational circumstances.

We don’t know how far the lessons we learned from that contest will hold good in the very different circumstances of Asia over coming decades, and we’ve hardly even begun to think about that question. So although, like Andrew and Paul, I think it’s likely that a nuclear-armed power could neutralise the conventional forces of a non-nuclear adversary by nuclear blackmail, I wouldn’t want to incur the costs and risks of building nuclear forces without thinking a lot more about that. That’s something we should start doing right now.

Second, it would be premature even to consider the nuclear question before we’ve decided whether to invest in the conventional forces needed to resist a military attack from a major Asian power. As Andrew rightly points out, there is a real choice to be made here. It would be perfectly legitimate to conclude that the risk of such an attack over coming decades is too low to justify the costs of building the conventional forces to resist it.

We can’t make that decision soundly until we know a lot more than we do now about both sides of the cost-and-risk equation: how big is the risk, and what conventional forces would be needed, at what cost? We’ve hardly even begun to explore all that, because for so long until so recently our defence and strategic community has been so unshakably certain that American primacy in Asia would last forever.

Some will no doubt be tempted to think that the whole question of conventional forces can be sidestepped by going straight to nuclear weapons instead. I think they’d be wrong. Noting the warning I just gave against jumping to conclusions about the strategic implications of nuclear forces, I think it’s very unlikely that they could serve as an alternative to conventional forces in Australia’s defence against nuclear adversaries. Their role would simply be to prevent an adversary deterring us from using our conventional forces by threatening a nuclear attack. So nuclear forces will do nothing for us if we don’t also invest in the conventional forces we’d need to win a conventional war.

Finally, even once we reach a decision on conventional forces, the decision on nuclear forces would remain to be made. Andrew suggests, I think, that that isn’t so. He seems to think there is only one choice to be made, embracing both conventional and nuclear forces, because if the risk of attack by a major power is high enough to warrant building the conventional forces needed to resist it, then it is high enough to warrant building nuclear forces too.

But for me a choice to acquire nuclear weapons would be a separate and very different step. I could easily imagine that one might conclude that while the risk of a major-power attack was high enough to justify the costs of building more capable conventional forces, it wasn’t high enough to justify the much higher costs and risks of going nuclear.

Those costs and risks have many dimensions. One is fiscal. The nuclear forces Australia would need to neutralise the threat from a nuclear-armed great power—essentially a ‘minimum deterrent’ force—would have to have very high-yield warheads and long-range delivery systems and be secure from preemptive attack. It would most likely need to look a lot like the British or French nuclear forces. That might cost us another 2% of GDP on top of the 4% that I’ve estimated the conventional forces would cost. Would the risk justify that spend?

Another dimension of cost is strategic. We’d need to be very sure that nuclear forces would on balance make us more rather than less secure. Every weapon is a two-edged sword, nuclear weapons much more than others. We’d need, for example, to be attuned to the likelihood that an Australian nuclear program would spur others to do the same, contributing to a spiral of proliferation which would increase the nuclear risks for all.

There’s also a moral dimension to the question. Building any military capability is a grim business, because we’re deliberately preparing the means to use lethal force to achieve political objectives. But the moral content of decisions about nuclear weapons is different from those involving conventional weapons, because their effects are not just quantitatively but qualitatively different. We shouldn’t lose sight of how horrific these weapons are, and we should remain very reluctant indeed to acquire them.

For all those reasons, I think a decision on nuclear forces would be, and should be, separate from, as well as subsequent to, a decision on conventional forces, and would only be justified if we believed the risk of attack was very high. I’m far from sure it is that high. Of course, if we decided it wasn’t, we’d then need to go back and revisit our choice on conventional forces as well.

Taking one for the team: the OPV split-build

20 November 2017

The government is expected to announce soon the successful bidder for Project SEA 1180, to replace the 13 Armidale-class patrol boats with 12 larger offshore patrol vessels (OPVs) to fulfil the maritime constabulary role, with a secondary role in military patrol and response. ASPI recently published my Strategic Insight report on the project.

Construction of the first vessel should commence in 2018 and the last vessel is expected to be delivered by 2030. The government has decided to build the first two vessels in Adelaide starting in 2018, with construction of the remaining 10 vessels to be transferred to Perth once construction of the future frigates has started in Adelaide.

This split-build process might strike the reader as an odd way of doing business. The explanation for the split-build (and the tight project schedule) is the government’s naval shipbuilding plan. The plan envisages establishing a long-term industry to build naval ships in Australia, and hopefully be competitive enough to export products and services. A key requisite of any industry is steady work and the government is using the OPV project to provide enough work to sustain a core naval shipbuilding workforce in Adelaide in the interval between completing the third air warfare destroyer and starting construction of the first frigate under Project SEA 5000.

I have argued that splitting the build has no benefit for the OPV project. Rather, it introduces inefficiencies into the construction process and increases the cost. Just because constructors can produce OPVs despite the inefficiencies doesn’t invalidate that observation.

Is the shipbuilding plan worth the additional risk that’s being assigned to SEA 1180 by the split-build? For the split-build to be a reasonable strategy, the benefits that flow from continuous construction in Australia would have to outweigh the costs to SEA 1180. ASPI and other commentators have discussed the merits of that argument—and of the economics of local shipbuilding more generally—a few times now and have raised several concerns.

First, while we don’t know the cost structures of the bids, it is very likely that naval shipbuilding in Australia carries a cost premium compared to the most efficient overseas construction. Any cost differential represents funds that could be spent on additional capability for the OPVs or something else in Defence (or schools, hospitals, or environmental adaptations for that matter). Inefficiency equals tangible opportunity cost.

Local construction might be defended on strategic grounds if it provides a sovereign capability to obtain or modify platforms and systems optimised to Australian requirements, or to sustain platforms and systems despite threats to timely international supply. But this chain of logic is undermined by the fact that most key sensors, combat management, communication, electronic warfare and weapons systems are imported even when ships are built in Australia. So much for sovereign capability. And, as a close ally of the US, Australia has identified a strategic need for interoperability, which militates against unique sovereign capability solutions. Australia’s alliance also facilitates preferred access to US defence technologies, which undermines the strategic necessity for a sovereign shipbuilding capability.

Another justification for local naval construction is national economic benefit in the form of high‑skill/high‑wage jobs and high technology. But that argument overlooks the opportunity cost of the resources diverted from other areas of the economy with higher rates of return on investment. The national shipbuilding plan was approved by government, but we don’t know if the decision was informed by an analysis of opportunity cost or whether an analysis was undertaken.

Some claim that naval shipbuilding could become efficient over the long term through exports. But exports are highly uncertain given the tightness of the naval export market. Australia (like other advanced economies) has relatively high wages, which put it at a disadvantage to lower wage-paying shipbuilders. Even the UK, with a splendid record of naval shipbuilding, has struggled to win export orders.

Australia’s fruitless collaboration with Malaysia on the joint offshore patrol combatant illustrates how a good proposal, commitment and intense effort from all levels can still be insufficient. Most countries, like Australia, tend to want to build their own vessels, irrespective of economic efficiency.

A variation on the export theme posits exports of both civilian and naval vessels. The civilian market has fewer tricky strategic and political factors that are beyond the shipbuilder’s control. However, even there, only Austal and Incat have shown sustained export success.

Overall, the justification for the risks of splitting the OPV build rests on the claimed virtues of the shipbuilding plan—but these claims rest on pretty arguable assumptions. Some of those concerns may be addressed in the promised defence industry plan (with a new sovereign defence industry assessment framework to replace the priority and strategic industry capabilities framework), and the defence export strategy. Given the cost to the defence budget, there should be keen public interest.

A G20 power ‘down under’: getting the balance right

12 November 2014

The debate about Australia’s place in the global geostrategic equation, as reflected in the different posts of Peter Jennings, Andrew Carr and Rod Lyon, is a fascinating and important one. Peter and Rod are right that Australia has a vested interest in a rules-based global order and that interest sometimes demands military contributions beyond Australia’s immediate neighbourhood. My sense though is that the criticism levelled at Andrew’s stance misses the point.

Most readers of The Strategist, I presume, understand the significance of Australia playing a prominent role as a good international citizen. Indeed, Australian defence white papers (DWPs) have repeatedly made clear that—to paraphrase—Australia’s primary responsibility is to protect itself, then its neighbourhood and finally, where possible, contribute to global coalitions further afield.

Australian prime ministers have tended to have a clear understanding of what that meant. Malcolm Fraser saw it allowing a niche engineer contribution to a UN force in Namibia. Bob Hawke followed through on Fraser’s plans for Namibia when the Cold War thawed in 1989. Paul Keating and his Defence Minister, Kim Beazley, responded to calls for intervention in Somalia and Rwanda. As Foreign Minister, Gareth Evans led the charge in seeking a peace agreement to break the impasse in Cambodia in 1993. But those interventions all took place when Australia’s neighbourhood was remarkably stable. Read more

Learning to act like a major power—Australia as a top 20 nation

30 October 2014

Just a few years ago a number of books were released which celebrated an ‘Australia moment’, where the nation was in ‘The Sweet Spot’. Today’s book titles, however, seem to run the other way, with one describing ‘how a great nation lost its way’. So let me therefore commend the ambition of Peter Jennings’ recent post on being a ‘top 20 defence player’.

While I strongly agree with the desire for a much more confident role for Australia, I have to wonder about the source of inspiration for Peter’s view. In Peter’s take, being a top 20 nation seems to mean doing the same things we currently do but with more resources. It could also be read as trying to emulate the US, but on a smaller scale. Hence the exhortations to take more of a global view and not to take our eyes off remote parts of the world less we need to jump back in. Read more

The cost of Defence: eighty million, two hundred & eighty-one thousand, three hundred & ninety-one dollars & seventy-eight cents per day

29 May 2014

Just as humour is good provided it’s funny, promises are good provided they’re kept. This year’s defence budget was about a promise; the Prime Minister’s election promise to boost defence spending to 2% of GDP within a decade.

I reported the headline figures for Defence the morning after the budget. Briefly, defence spending will increase by $2.3 billion next financial year to an all-time high of $29.3 billion amounting to 1.8% of GDP. On current plans, spending will remain more or less at that level in real terms for the next three years before increasing in the fourth. In a federal budget dominated by fiscal consolidation, it was as good an outcome for defence as could have been expected. Read more

How to buy a submarine, American style

12 May 2014

A couple of weeks ago the Pentagon announced that it had awarded a contract for another ten Virginia class nuclear attack submarines (SSNs). The headline price was US$17.6 billion, or about $1.76 billion per boat, and demonstrates a continuing reduction in unit cost of the Virginias as production ramps up.*

The development of the Virginia class is rightly seen as an exemplar of military procurement done smartly. Its development dates back to the mid-1990s, and followed on from the development of the Seawolf class, another exemplar of military procurement—but not of the good kind. The Seawolf grew out of Cold War requirements for an ultra-quiet but fast attack boat. Due to the noise generated by water flow around the hull and by the propulsion system, speed and quiet are generally an either/or proposition for submarines. Demanding both put the boat firmly on the path of conflict with Augustine’s Law VII: the last 10% of performance generates 1/3 of the cost and 2/3 of the problems.

A speaker at the recent ASPI submarine conference made the observation that ‘no system was too beautiful’ for the Seawolfs. In other words, pursuit of the highest level of performance was given priority above any thought of economical production. The result was inevitable; the Seawolf entered into an F-22-like ‘death spiral’ of higher projected unit costs and lower projected build numbers. In the end only three were built, versus 29 planned, as the 1991 cost estimate was close to US$5 billion per boat in today’s dollars. Read more

Free financial advice

25 March 2014

Over the past two decades, Defence has staggered from one budget crisis to the next, trying to afford the unaffordable.

Of the five White Papers issued between 1976 and 2009 for which ex post fact evidence is available, only the Howard Government’s 2000 effort was funded as planned. All the rest ended up delivering substantially less money than promised. To make matters worse, for most of the period in question, Defence was planning beyond its means anyway, by systematically underestimating both its acquisition and recurrent costs. Thus, even if promised funding had been forthcoming it would’ve been inadequate for the task. Defence’s plans were damned twice over. Read more

Reader response to ‘DMO: industry’s view not accurate’

11 February 2014

I know that my friend Mark Thomson was being somewhat tongue in cheek when sledging defence industry, but his put-downs (and defence of DMO) can’t go without a response. There’s a lot in his piece to demolish but let me start with this outrageous exaggeration:

I for one wouldn’t want to see a multi-billion dollar defence contract scribbled on the back of a restaurant napkin (or, perhaps more likely, a beer mat at a trade show).

Unfortunately, with this comment Mark seems to be channelling a view that’s gaining widespread currency within Defence: that industry is a bunch of liars, schemers and cheats always looking for ways to dud the Commonwealth. In my experience nothing could be further from the truth. During many years in industry, I’ve seen teams of highly motivated people working themselves to death—in two cases I know, literally—to deliver a product that’s often massively over-specified and required to be delivered in a ridiculous timeframe and with onerous commercial penalties for failure.

I’ve had quite senior people in Defence say ‘well, you shouldn’t have signed the contract in the first place’. This sort of out of touch arrogance typically comes from people who are salaried for life and have never experienced the real world, where staff lose their jobs if companies fail to win new work. Bureaucrats, people in uniform and—dare I say it—staff of think tanks, have rarely, if ever, faced the shock of being sacked. For those on the Government payroll, the sun rises and sets, the tides go in and out, the earth gently orbits the sun—and at the end of every fortnight there’s another taxpayer funded paycheck and another generous contribution to the guaranteed superannuation fund. Any ‘downsizing’ is done smoothly by natural attrition and most usually at the expense of contractors. Read more

Reader comment: the end of the road

17 December 2013

I read with interest the contribution of my colleague Patrick Walters regarding the end of domestic car manufacturing and its implications for Australian defence industry. My point is that if we had a healthy defence industry sector to begin with, the travails of another part of the economy—albeit a related one—would be of no concern. Given the size of our annual defence spend, the size of our industry sector is appallingly small, and in many other countries would be considered a national embarrassment. During the past decade, Australia has spent $24 billion just on FMS purchases (Super Hornets, C-17s airlifters, MH-60Rs naval helicopters etc) and our industry involvement via various global supply chains is something around $650 million—a pathetic 3%.

A folly of strategic proportions

17 October 2013

With a new government taking charge, the proposal to build a fourth Air Warfare Destroyer (AWD) has re-emerged. Unsurprisingly, the loudest voices are those with a vested interest, including shipbuilders and shipyard unions. So far, the public debate has focused on avoiding a shipbuilding ‘valley of death’ when the last AWD is delivered in 2019—without any serious discussion of whether a fourth AWD is a worthwhile investment. Much like the often-whimsical famine follies build around the time of the Irish Potato Famine, the goal seems to be to keep people in work irrespective of the intrinsic merit of the project.

When complete, the three Hobart-class AWDs currently in build will reinstate the broad area air defence capability lost when the last of the Navy’s DDG destroyers was decommissioned in 2001. At the risk of undermining the supposed analytic rigour of Defence’s force planning processes, the most likely reason we are building three AWDs is that we once had three DDGs. So it’s fair to ask what a fourth vessel would give us.

Hugh White has long argued that the utility of surface combatant has been eclipsed by anti-shipping missile technology, and Andrew Davies has questioned the protection of shipping argument often used to justify the AWD program. I have sympathy with both views, but let’s stipulate for argument’s sake that AWD are useful things.

All other things being equal, more capability is better than less. A fourth AWD would give us 33% more capability than a fleet of three. Given an effective and well-managed sustainment arrangement (which admittedly can’t be taken for granted given recent experience with other fleets), it would effectively assure the continuous availability of at least 2 ships and would make 3 ships available most of the time. While this would be a good thing, it would come at a cost.

Every dollar spent on a fourth AWD can’t be spent on other capability options. For example, why not expand the planned fleet of LHD amphibious vessels from two to three rather than increase the AWD fleet from three to four? A 50% increase to the LHD fleet might well be better than a 33% increase to the AWD fleet. As things stand, there’ll be extended periods when only one amphibious ship is available for tasking. But with the lion’s share of the amphibious ships being built in Spain rather than Australia, don’t hold your breath waiting for someone to make the case.

My point isn’t that we should build a third LHD. Rather, it’s an example of how a multi-billion dollar investment such as an extra AWD should be carefully considered in terms of the opportunity cost it imposes on potentially more cost-effective alternatives.

The ambitions surrounding a fourth AWD go beyond boosting the capacity of the currently planned fleet. It’s been put to me on several occasions that a fourth AWD provides a perfect opportunity for Australia to develop a Ballistic Missile Defence (BMD) capability by fitting the final vessel with the Aegis BMD system employing the SM-3 missile. While a single such vessel would inevitably be unavailable some of the time due to maintenance, it would allow Australia to ‘get into the game’ of BMD alongside the United States and Japan.

Given that the Aegis BMD system is only designed to intercept short to intermediate range ballistic missile threats, the argument for acquiring a naval BMD capability would most likely be based on protecting deployed Australian troops. Let’s hope our troops remain close to the beach, so that the intermittently available BMD-equipped AWD can be brought into an intercept position relative to the threat. Or, better still, let’s acquire the ground-based Patriot PAC-3 system, so that our troops have a measure of protection wherever they go. Of course, if we were really serious about BMD for deployed troops we’d want the PAC-3 system in any case, to create the layered protection intrinsic to an effective system even if geography allowed an Aegis BMD component to come into play.

To be honest, I don’t think that there’s a high priority for either a sea-based or ground-based BMD capability to protect deployed troops. If such a capability was halfway worthy of consideration it would’ve been seriously developed years ago. Instead, we’ve made do with a short-range air defence system employing the shoulder-launched RBS 70, which has zero capability against ballistic missiles and only a very limited capability against fast moving aircraft. Moreover, the latest Defence Capability Plan contains no projects to either improve our ground-based air defences or establish ground-based missile defences.

Of course, a fourth AWD with Aegis BMD would be a valuable contribution to a US-led coalition mission in North Asia—it’s no accident that Japan is the only country apart from the United States to have the system. But do we really want to structure our forces for fighting in North Asia? For a long time our strategy has been to use assets acquired for our own defence as the basis of contributions to coalition missions. What message would we send by changing course and explicitly developing capabilities for the sole purpose of fighting in North Asia?

Those points are open to further debate, and they have pros and cons in terms of capability and military options the ADF can provide to government. But so far, none of these issues have so much as seen the light of day in the debate over a fourth AWD. Instead, we’re being asked to spend something in excess of $2 billion in order to avoid the ‘valley of death’ between the end of the AWD program in 2019 and the commencement of the new submarine and/or Anzac frigate replacement program. But we don’t have a start date for either program, and a life-of-type extension looks to be on the cards for at least the submarines. As for the Anzacs, which are presently undergoing a major anti-shipping missile defence upgrade, a life-of-type extension warrants close examination to determine the most cost-effective way ahead—even if it’s not the preferred option of industry or Navy. Until plans firm up on the future frigate and submarine fronts, we don’t even know if a fourth AWD would be sufficient to close the gap in shipyard work.

More importantly, even if we had strong confidence that a fourth vessel would enable continuity of production, there’s no indication that the scale of savings would justify the additional cost of a fourth vessel. A recent paper from ASC Ltd says only around 20% of the cost of a warship is due to shipyard labour, which means that only 20% of the cost of producing a vessel can be impacted by the ‘learning curve’ and skills maintenance that continuity of production promises to deliver. So, even if continuity generated a 30% reduction in labour costs (being very generous), the resulting saving would only be a 30% x 20% = 6% reduction in cost of the initial replacement frigates. And for this we’re asked to build an entire extra vessel and then crew and support it throughout its decades of service.

In the absence of either a clear strategic rationale or plausible business case, a fourth AWD would be a folly of strategic proportions.

Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of the Wikimedia Commons.

Correction: an earlier version of this post linked to the potato famine of the 1840s rather than the earlier famine during which the folly in the illustration was built. The error was by the contributor.

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