The spotlight is once again on Australia and whether it will conduct freedom of navigation operations (FONOPS) in the South China Sea. The debate has been revived as a result of remarks made by the recently retired long-standing Australian government bureaucrat Dennis Richardson, and by the visiting US Senator John McCain, followed by Malcolm Turnbull’s robust speech at the IISS Shangri-La Dialogue in Singapore on 2 June.

South China Sea FONOPS was also highlighted in late May after the USS Dewey conducted a manoeuvring drill in the waters adjacent to Mischief Reef in the South China Sea. Mischief Reef is a coral reef in the centre of the Spratly Islands that has been claimed and occupied by China and been subject to considerable expansion through China’s artificial-island-building activities. The Dewey practised a man-overboard scenario consistent with its freedom of navigation. The exercise was typical of US FONOPS in waters that aren’t considered to be a part of the territorial sea of the nearby country, and sends a clear signal that the US doesn’t respect any claims China may make to territorial sea or any other form of maritime entitlement in and around Mischief Reef.

The US has been conducting FONOPS in oceans and seas around the world since 1979. They have had two primary purposes. The first is to protect the mobility of US forces and to ensure that they can move freely between oceans, which has been critical for the maintenance of US naval hegemony. The second is to make clear that navigational rights and freedoms can be enjoyed by all countries consistently with the law of the sea. Importantly, in its very first decision in 1949, the International Court of Justice affirmed that the right of innocent passage applied in the territorial sea to all ships, including warships. The US’s conduct of FONOPS in the South China Sea sends an important signal to China that those navigational rights cannot be easily interfered with.

The situation in the South China Sea is made more complex because of the contested claims to the islands, rocks and adjacent maritime areas. In 2016, a UN arbitral tribunal handed down a ruling in favour of the Philippines that dismissed China’s ‘nine-dash line’ maritime claim to much of the South China Sea and held that much of the disputed seas fell within the Philippines’ 200-nautical-mile exclusive economic zone. While the tribunal didn’t make any rulings on the territorial disputes over the islands and rocks scattered throughout the region, it did conclude that none of those features generated a maritime zone in excess of a 12-nautical-mile territorial sea. The tribunal unanimously ruled that Mischief Reef wasn’t an island and didn’t generate any maritime entitlements such as a territorial sea, and that it was therefore a feature lying within the Philippines’ exclusive economic zone. China has consistently rejected the validity of the tribunal and didn’t participate in any of the proceedings. It has flatly dismissed the 2016 award, which it considers to be non-binding.

The recent actions of the USS Dewey only seek to reaffirm the tribunal’s ruling that Mischief Reef doesn’t generate a territorial sea or any other maritime entitlement and that US warships are perfectly entitled to conduct naval exercises in the waters adjacent to the reef. China has responded to the US with ‘stern representations’, which again is consistent with the Chinese position that it has a legitimate claim to Mischief Reef, and that it can claim an adjacent territorial sea.

Australia now has an opportunity to take a firm stand and back up the US. Australia has been a strong supporter of the international law of the sea and was an active player in the negotiation of the 1982 UN Convention on the Law of the Sea. Both Australia and China are parties to the convention, along with 164 others, and respect for the law of the sea and freedom of navigation are fundamental to Australia’s trade prosperity. While Australia has also reminded China of the importance of honouring the rule of law and the 2016 award, those words need to be backed by actions—which, in the case of any potential Australian FONOPS in the South China Sea, would be entirely consistent with international law.

China’s position on freedom of navigation by foreign warships remains a minority view that Australia should be actively challenging, lest it become the de facto legal position. Given the current regional security concerns throughout Southeast and East Asia, Australia wouldn’t wish to be constrained in its naval movements in coming to the aid of regional friends and allies because of China’s position on warship navigation through the South China Sea. Australia has a national interest in seeking to resolve any ambiguity about the freedom of navigation of its warships, and joining the US in FONOPS would stake out a clear and firm Australian position.

 

As discussed recently on The Strategist, rumour has it that construction on the Future Frigate program is now unlikely to start in 2020. If true, that’s not a bad thing for completing the systems engineering required to be able to move confidently to the build phase, but it’s certainly going to cause headaches for the management of the shipyard workforce.

A glance at the graph below shows why. (Thanks to Mark Thomson for the data. He’ll say more about this topic in the forthcoming ASPI budget brief.) Even if there’s no change to the start date of the frigates after all, there’ll still be less than a thousand jobs in the nation’s naval shipyards in the next few years. That compares to over 2,000 working on Air Warfare Destroyers (AWDs) at the start of 2016 and the almost 2,500 expected to be employed when the Future Frigate program is in full swing. A two year delay to the frigates will collapse the number down to a few hundred at most in 2020–21.

Source: Treasury 2016 Budget Booklet ‘Our National Economic Plan’, ASPI annotations in red

That’s unlikely to be a palatable outcome for government. Avoiding the ‘valley of death’ in shipyard jobs was the reason behind moving to a 2020 start date in the first place. And it’s why we have the unobvious decision to split the build of Navy’s Offshore Patrol Vessels (OPVs) over two sites, Adelaide and Henderson WA. Any move in the frigate start date will have the government looking for an alternative strategy for keeping at least a middling amount of shipyard work going in Adelaide.

To see what that might look like, it’s worth going back to the 2014 RAND Corporation report (PDF) on Australia’s naval shipbuilding enterprise, released before the Australian government announced its ‘$89 billion shipbuilding strategy’. That report offered (unconvincing) options for retaining some of the workforce over this period: start future frigate construction before 2020; bridge the gap with OPVs (or patrol boats); or build a fourth AWD. They argued that the additional costs arising from a split build of OPVs would be more than offset by savings from not having to train a new workforce.

If there’s a need for a Plan B, it’s possible that the government might be tempted to build more of the OPVs in Adelaide. But that’s necessarily at the expense of work in Western Australia, and that will have its own political costs. Or they could even commission work in the yards that isn’t currently programmed (or needed).

We think that there’s a better option than further distorting the OPV plan or confecting busy work. The contract for the Hobart-class AWDs included an option for a fourth vessel, though there was no Navy requirement for it. The notion of a fourth AWD slowly faded away, and the number of Future Frigates quietly increased from a notional eight to a program of nine. We wouldn’t suggest that the government force a ship on RAN that it doesn’t need. The Future Frigate program has an anti-submarine warfare (ASW) emphasis and it makes sense to bolster the Navy’s ASW capability given a region increasingly full of submarines.

But submarines aren’t the only regional security threat. We think there’s a fairly robust argument for acquiring a fourth AWD aside from the industrial benefits of continued ship production. Ballistic missile defence (BMD) is a live topic, thanks to continuing North Korean missile tests. If Australia is looking to do more to help the US, Japan and South Korea defend against North Korean ballistic missiles, the most useful capability the ADF can expect to contribute in the near future is a BMD-capable warship. As a bonus that would provide a measure of defence against anti-ship ballistic missiles, which are emerging as a threat to surface vessels.

The three AWDs in the process of delivery are equipped with the US-made Aegis combat system. Newer builds of Aegis have an optional BMD module, but Australia’s three won’t be upgraded to be BMD capable until the mid-2020s (if then). As detailed in an ASPI report last year, an upgrade to the newest version of Aegis (Baseline 9), including the BMD module, might cost about US$125m per vessel (plus the cost of BMD-capable missiles). But, more significantly, the upgrades could take each vessel out of service for an extended period.

A fourth AWD could deliver the RAN a BMD capability in the early 2020s, with no disruption to the availability of the first three. It might even be possible to fit BMD to the third vessel currently under construction. Depending on availability of long lead-time items, Australia could order two sets of Aegis Baseline 9 and BMD systems and install one set on the third AWD rather than the outmoded Baseline 8 system that will be replaced in a few years anyway. There’d be an additional cost in the short term, but would avoid the cost of upgrading it later. Australia could add BMD to the third AWD regardless of whether there’s a fourth AWD, but two BMD ships are better than one, since one has to be offline at times for maintenance.

A fourth AWD would provide more jobs in South Australia than the split OPV build will. And, as a bonus, all of the OPVs could be built in Western Australia, with no disruption to the build due to moving sites. Remember, you read it here first.

Mike Carlton is now distinguished by his own efforts with the pen as an able chronicler of the Royal Australian Navy, in two World Wars and in the brief interregnum of peace, 1919–1939. In both triumph (First Victory) and tragedy (Cruiser) Carlton charts the fortunes of the Australian Navy with a thoughtful eye and careful judgement.

Carlton’s skills—together with his empathetic assessments of our naval traditions—are again prominent in his new book, Flagship: The Cruiser HMAS AUSTRALIA II and the Pacific War on Japan which details not only HMAS Australia’s Pacific War but that of HMAS Canberra and HMAS Shropshire, the flagship’s sister ships in battle, as well.

Carlton originally came to attention as an oft provocative and frequently witty commentator with Fairfax Media and Sydney Radio. A man of the Left, controversy dogged him and a stint in London appeared to have been welcome to both Carlton and his critics. But his real contribution to Australian culture is to be found in his naval histories which hopefully will continue to be forthcoming.

Flagship is an impressive book in a number of dimensions, from the establishment of the strategic context confronting Australia during the inter-war years to life aboard the cruiser, both in the Officers’ Wardroom and well below decks, through to wartime action from the Solomons to the Philippines.

Carlton moves briskly and purposefully, with a clear determination to tell not only the story of Australia and her sister ships, but of the RAN at that point in our military history when imperial reliance upon Britain evolved into the challenge of alliance with the emerging power of the United States. If a single point on the chronology of our strategic history can be defined, then that actual moment was PM John Curtin’s open letter to President Franklin Delano Roosevelt in December, 1941, where the nation’s leader looked candidly to America for the future of Australian security.

The fall of Singapore in February 1942, together with the Japanese bombing of Darwin, merely underlined Curtin’s real and justifiable fears and the accuracy of his immediate perspective, as the country faced an existential threat.

Australia’s faith had been placed in the British base at Singapore, with promises as late as 20 March 1939 from British PM Neville Chamberlain, to PM Joseph Lyons to the effect:

‘In the event of war with Germany and Italy, should Japan join in against us it would still be His Majesty’s Government’s full intention to despatch a fleet to Singapore. If we were fighting against such a combination never envisaged in our earlier plans, the size of that fleet would necessarily be dependent on (a) the moment when Japan entered the war and (b) what losses if any our opponents or ourselves had previously sustained.

It would, however, be our intention to achieve three main objects

1. the prevention of any major operation against Australia, New Zealand or India;

2. to keep open our sea communications;

3. to prevent the fall of Singapore.’

Carlton points out that the commitment was hollow. The Admiralty was already secretly sounding out the cautious Americans on the prospect of US intervention against the Japanese in the light of an Asia–Pacific War breaking out. Bear in mind, that as of July 1937, Japan had already launched an invasion of China, seeking to build further upon its brutal occupation of Manchuria.

The Lyons government clearly recognised the peril of the times. HMAS Australia was a critical part of our naval response. In an eerie precursor to later Australian strategic debates, PM Lyons told the Parliament:

‘The first line of security against invasion is naval defence, with the army and air force supplementing and cooperating. If the enemy attempts aggression and must be resisted, it is far preferable to fight him away from our shores than when he is seeking to land on our coasts or has actually established himself in our territory….’

Note the reference to the supplementary role of air power. Tragically, that doctrine led to the deployment of inadequate Wirraways as front-line fighters, a mistake never to be repeated by Australia. It also led to the sinking of Force Z in Malayan waters in late 1941.

Carlton’s narrative is elevated by references to the heroes and the hopeless of the times; to the courageous and cowardly and the dedicated and drunk, be they Australian, British or American. Nonetheless, the names of very distinguished Australian naval figures, from Admirals to Able Seamen, emerge with great credit. The truly famous names—Collins and Crace; Dechaineux, Farncomb and Rankin, among others, are appropriately acknowledged just as the RAN has honoured them for their service.

The best military history is written in a form which could easily translate into a novel. Carlton is a great fan of Patrick O’Brien’s novels of the Royal Navy during the Napoleonic Wars. Flagship reflects that inspiration, particularly in the battle scenes from Savo to Leyte and Lingayen, not to mention the account of the Japanese midget submarine raid in Sydney Harbour in May 1942.

The author laments the fact that there may never be an Australia III, to continue the line of her illustrious predecessors. He muses on that as HMAS Canberra III (an LHD) is commissioned in 2014 at Garden Island.

The end of the line of HMAS Australia might have been reached, but if it’s not, the new realities of the Australian strategic context mean that HMAS Australia III, might not be one of Mike Carlton’s beloved cruisers but may well be a submarine.

Diversifying choice of fuel supplies can have a real impact on naval operational capacity, in addition to managing the costs sustaining capability.

This month there’s been lots of naval talk about alternative fuels when the USS Stethem, an Arleigh Burke class destroyer, arrived alongside Fleet Base East, Sydney.

Since Australia signed a statement of cooperation agreement with the US Navy in 2012 to share information on alternative fuels for naval aviation, surface and subsurface platforms, the RAN has progressed from testing one Seahawk helicopter during RIMPAC four years ago, to three warships that took more than 4.5 megalitres of blended alternative fuel from US oilers during RIMPAC that concluded early this month.

During RIMPAC 2016, one of the US Navy’s carrier strike groups deployed using alternative fuels, including nuclear power for the carrier and a blend of advanced biofuel made from beef fat and traditional petroleum for its escort ships. The USS Stethem was part of the group that included the three RAN vessels.

The RAN must maintain interoperability with the USN as it moves towards the introduction of alternative naval fuel to meet its Great Green Fleet energy initiative, which outlines the USN’s commitment to source 50% of fuel from renewable sources by 2020.

The USN are now trialing a synthetic diesel that’s 100% neat alternative fuel, which is the final step in reducing reliance on fossil fuels. In May, Australia’s Chief of Navy, Tim Barrett, approved the use of USN sourced alternative fuel blends for RAN ships diesel as a direct drop in replacement fuel for RAN ships manufactured via the USN approved pathways.

Technical constraints for the two current pathways for producing RAN diesel from synthetic crude require that it must be blended with at least 50% of diesel produced from fossil crude to meet Navy standards. In a related development last month, Queensland Premier Palaszczuk signed a Statement of Cooperation with the Deputy Under Secretary of the US Navy, Tom Hicks, which lays out the framework for discussions on research, development, supply and sale of advanced biofuels.

In addition to extending existing scientific development into bio-fuels, the agreement is likely to accelerate an innovative industrial opportunity for Queensland to become both a significant domestic producer of biofuels and a refueling station for the US Navy’s biofuel fleet, if it becomes available and in the quantities the USN needs.

The Queensland government is very aware of the local economic benefits that would come from that partnership. All this is good stuff and we should applaud it. But it raises the question about the ADF’s long-term plans for energy security and resilience policies.

The 2014 Defence Energy Integration Framework begins to highlight the strategic realities of maintaining the ADF’s supply chain into the longer term. It acknowledges, for example, that energy is ‘critical for Defence missions’ and that ‘Defence’s need for sufficient quantities of the right energy at the right time to be able to conduct operations is a significant and exploitable vulnerability’. And it notes the potential for renewables to provide cost-effective, reliable energy.

But it’s unclear who in Defence at a senior level is really looking at long-term issues of fuel supply chains and what pathway Defence is following. (Perhaps the name change from ‘Strategic Fuels’ to ‘Fuels Services’ Branch in Defence underlines this point.)

Of course Defence on its own won’t shape the energy market, even though it spent $524 million on fuel in 2014/15 (PDF), (just under 60% Air Force; 33% Navy and the residual to Army). Defence use of liquid fuels is a drop in the ocean of the nation’s overall fuels consumption (industry and mining are much bigger users).

But Defence can certainly look harder at changing its demand for energy to ensure the ADF becomes more energy independent, as well as looking at the supply issues raised by organisations such as the RAN’s Seapower Centre, the NRMA and Engineers Australia.

The RAN understands the interoperability issues associated with the USN moving to alternative fuels and it’s made significant progress in ensuring our ships and aircraft are certified to use USN sourced blends. But it’s not as clear that Defence has understood the justifications that have led the US departments of Defense, Agriculture, and Commerce to spend in excess of US$1 billion to assist industry to develop alternative fuels.

The US is concerned about reliance on fossil fuels sourced from foreign countries, the effects on the domestic economy on reliance on imported products, and the potential for domestically produced fuels to revive struggling rural economies by giving farmers new business options. Use of renewable fuels can offset growing global carbon emissions, and so the environment and future generations can benefit too.

Broader than Defence, it’s intriguing that Australia doesn’t appear to have the same concerns with reliance on imported fossil fuels sourced from foreign countries with a much higher exposure to imported liquid fuels. The 2015 Energy White Paper was published without National Energy Security Assessment and therefore it’s based on the 2011 NESA.

It was a modest step in the right direction when the government indicated in June this year that’ll achieve IEA stockholding compliance (90 days of our prior year daily net oil imports) by 2026. All this underlines the possible option of Defence setting an ambitious target in terms of moving towards alternative fuels, by announcing they’re ready to receive cost competitive blended products.

We now have some answers about the project that will eventually deliver our next generation submarines. The French company DCNS will be our international design partner and the submarines will be built in South Australia. There are also many things we still don’t know, such as how the government-owned ASC company will be restructured as we move ahead with the concurrent design and build of the submarines and three different types of surface vessels.

No doubt the French team will be rejoicing today. They should make the most of it. As the American commentator on defence acquisitions Norman Augustine once pointed out, things never look as good for the winning contractor once the euphoria of the initial announcement has worn off. Once we get into the nitty gritty of contract negotiation and then—worst of all—actual project delivery, all sorts of heartaches will eventuate. Like all major projects, there will be cost, schedule and probably capability issues that arise over the decades that the project will take.

But DCNS in 2016 has some advantages compared to Kockums, the Swedish designer of the Collins class submarines, when the winner of the Collins tender was announced back in 1987. The new project is starting with a higher baseline of domestic industrial capability and a more sophisticated national understanding of what it takes to build and support a fleet of submarines, which should make Australia a smarter buyer (which is admittedly a mixed blessing for a contractor). But we’re also aiming to produce a larger and more sophisticated submarine than the Collins, which pretty much guarantees unexpected technical problems.

In all likelihood the problems will be manageable, and we’ll ultimately field a world class submarine—just as we did with the Collins class. But managing expectations and the public perception of the future submarines will be almost as challenging as any technical problems encountered. When those inevitable problems arise, the government of the day will need to carefully explain to the public what’s going on, with the aim of avoiding the politicisation of the project that plagued the Collins endeavour. The ‘dud subs’ label of the early 2000s, which the Collins hasn’t still hasn’t shaken off today, was a consequence of an unhappy mix of technical problems in the project and the politics of the day, with the subs being seen as the baby of then Labor leader Kim Beazley.

There will be many Australian governments, probably formed by both major parties (and possibly an uncertain mix of other parties in either house) between now and when the final project report is filed sometime after 2050. That’s why bipartisan support is important. In that sense, it’s a good thing that the government has avoided the politically divisive option of a hybrid build which would see the first one or two boats built overseas before the build moved to Adelaide.

A hybrid build probably offered some advantages in terms of schedule. In particular, if the first couple of boats could be delivered as the first couple of Collins retired, we might’ve been able to avoid a potentially expensive life of type extension program. Building the first of class here might preclude that possibility. But by announcing that all twelve would be built here, at least removes the temptation for the Opposition to turn an offshore component of the build into an election issue. In the bustle of a campaign, a carefully explained rationale can easily be shouted down. If the future submarine starts life with both major parties on board, that can only be helpful.

The government also has some work to do managing the unsuccessful bidders. The Germans will be bitterly disappointed, and they thought they had a great story to tell about digitising Australia’s shipyards. But ultimately for them, it was a commercial opportunity among many around the world—albeit one of the bigger ones. They’ll move on and bid for work elsewhere.

Japan is more problematic, and a significant downside of this decision is the likely impact on Australia-Japan relations. The Abbott government created a difficult situation by entering into negotiations with Japan as a potential sole-source supplier. Encouraged by Australia’s apparent keenness, Prime Minister Abe of Japan has expended considerable political capital in obtaining enough domestic support to make the export of a submarine possible.

The fact that the deal with Japan won’t go ahead after the Japanese government was dragged into a competition it was clearly uncomfortable with is bad enough. Finding out that they had lost out through a leak in the Australian media only rubbed salt into the wound. In the longer term, that shouldn’t matter too much—the same geopolitical factors that have driven Australia and Japan closer over the past decade will mean that normal relations will be restored. But harm has been done in the short term, and Australia will need to be alert to Japanese sensitivities.