France, Australia play down tensions over submarine deal

MUNICH (Reuters) - France and Australia reaffirmed their commitment to a A$50 billion ($34 billion) submarine deal on Friday, seeking to defuse tensions after French shipbuilder Naval Group raised concerns over the capability of Australian contractors.

Australia signed a production contract with Naval Group in February 2019 for a fleet of 12 attack-class submarines, ending a two-year wrangle over one of the world’s most lucrative defense deals.

Australia had selected the French firm as its preferred bidder in 2016 ahead of other offers from Japan and Germany. However, final contracts were delayed amid reports of cost blowouts and production delays.

The project was again under scrutiny this week when Naval Group’s Australia boss John Davis told The Australian newspaper he had concerns over the capability of local contractors, and suggested Australian businesses could fail to secure half of the value of the total contracts.

Those comments were met with anger by Australian Defence Minister Linda Reynolds, who said in a statement she would hold “Naval Group to account for the commitments they signed on for”.

Reynolds met with France’s Armed Forces Minister Florence Parly on the sidelines of the Munich Security Conference on Friday to discuss the spat.

The two said in a joint statement they had reaffirmed their full commitment toward the program, its calendar and the ramping up of Australian industrial capacity.

“We agreed on a follow-up process at our level for the implementation of the program on a quarterly basis this year with a meeting in France in April and another in Australia in mid-year,” the two said.

Australia’s 12 new submarines are at the center of its plan to significantly expand its military to protect strategic and trade interests in the Asia-Pacific region. The first of the new submarines is scheduled to be delivered in the early 2030s and the final vessel during the 2050s.

An official aware of the issue said the project was still in its early stages and it was strange to make an assessment on local firms.

“There is nothing to suggest Australian partners can’t do this and work is being done to help them. Everything is being done so that the a large part of the engineering is done in Australia,” the official said.

($1 = 1.4890 Australian dollars)

Reporting by John Irish; Editing by Mark Potter