The AUKUS pact has sparked the creation of a potentially lucrative venture for US investors, as highlighted by the formation of the AUKUS Defense Investor Network. While the transfer of nuclear-powered submarines to Australia has dominated media attention, the second pillar of the pact is particularly appealing to private investors in the US. Launched in December, the AUKUS Defense Investor Network claims to represent over $400 billion in funds, bringing together venture capitalists from the US, Australia, and the UK.
Heather Jo Richman, the Silicon Valley-based chair of the US arm, emphasized the opportunities for US investors arising from Australia's possession of crucial rare earth materials and metals vital to the defense industry. Richman sees potential in US investors participating in mining and harvesting these materials, leveraging the significantly larger venture community in the US compared to the other AUKUS countries.
The network's chairs are affiliated with BMNT, a US-founded defense business employing startup methods to revolutionize collaboration between Silicon Valley and the US Department of Defense. Jamie Watson, chair of the Australian arm and CEO of BMNT Australia, boasts 30 years of experience with Australia's Defense Department.
The priorities outlined in the AUKUS pact include undersea capabilities, quantum technologies, artificial intelligence (AI), advanced cyber capabilities, hypersonic capabilities, electronic warfare, innovation, and information sharing. Richman highlighted AI, cyber, and quantum technologies as particularly attractive to US investors, noting the substantial investments in quantum technology emerging from Australia and the UK.
A PwC report from 2022, in collaboration with American and British chambers of commerce in Australia, underlines Australia's 4% share of total defense expenditure across AUKUS nations. While the report anticipates increased market access for Australian investors, it also raises concerns about benefits flowing predominantly to major multinational defense companies such as the seven major multinational defence companies: BAE Systems, Boeing, Lockheed Martin, Northrop Grumman, Raytheon, Rheinmetall and Thales. The report emphasizes the importance of providing certainty to small-to-medium enterprises, especially as advanced technologies like AI and quantum computing gain prominence in defense budgets.
Research associate Sophie Mayo from the United States Studies Centre highlighted the AUKUS-linked reforms in US export controls (International Traffic in Arms Regulations - ITAR) as a key facilitator for Australian investors. The ITAR reforms remove barriers to investment in sensitive technology, opening opportunities for greater US investment in Australian defense companies. Mayo cited Lockheed Martin's recent announcement of producing long-range missiles for the Australian army as a concrete example.
Additionally, AUKUS has spurred Australian start-ups, like The Whisky Project Group and Hypersonix Launch Systems, to secure contracts from a US defense program known as the Defence Innovation Accelerator. Despite these opportunities, concerns have been raised about the potential chilling effect on trade and collaboration with countries outside the AUKUS pact due to updated trade restrictions. A bill aimed at easing trade restrictions between AUKUS partners is currently under consideration in the Australian Parliament.
Will Australian companies actually benefit from AUKUS? Or will the money just flow straight into the pockets of multinational weapons manufacturers?
We now read that former ministers Joel Fitzgibbon and Arthur Sinodinos have embarked on an adventure together, co-chairing a business organisation aimed at taking advantage of the AUKUS defence pact.
The two are criss-crossing the country at events to promote the organisation, AUKUS Forum, and have events entitled “Unleashing the regional power of AUKUS” planned in Burnie, Launceston and Hobart in Tasmania, and in Bathurst and Broken Hill in NSW.
There is a strict media ban at all events — “no media, no cameras, no mobile phone filming”, invitations say — but neither former politician has been shy about plugging the forum on their social media channels.
“A great outcome that wilk [sic] drive Australian industry development and skills formation by creating a more seamless approach to tech transfer and information sharing with our close allies and partners, this is a moonshot for Australia, failure is not an option,” wrote Sinodinos in a recent LinkedIn post about an AUKUS announcement.
Sinodinos’ glittering CV includes roles most recently as Australia’s former ambassador to the US, former Liberal industry minister under PM Malcolm Turnbull and assistant treasurer under Tony Abbott, and before that prime minister John Howard’s chief of staff.
Fitzgibbon, a Labor defence and agriculture minister under Kevin Rudd, has said in one LinkedIn post that the AUKUS Forum is aimed at “maximising Australian industry participation in the AUKUS pact”.
The coalmining enthusiast and longstanding former member for Hunter has recently questioned whether Australia should embrace nuclear power, joining the “good people” of the World Nuclear Association at last year’s COP28 climate conference to call for a “sensible conversation” about allowing nuclear plants, as he put it in a LinkedIn post.
Fitzgibbon and Sinodinos were announced as the co-chairs of the forum in August. As Crikey reported last week, investors and businesses in all three AUKUS countries have been organising networks to take advantage of money-making and innovation opportunities enabled by the defence pact.
While pillar one of the pact — the transfer of nuclear-driven submarines to Australia — has received the most attention in Australian media, it’s the second pillar that’s most interesting to private investors. Pillar two enables information and technology sharing between the US, Australia and the UK, including by tearing down trade barriers.
The AUKUS partners hope to advance eight priority research areas through pillar two: undersea capabilities; quantum technologies; artificial intelligence; advanced cyber capabilities; hypersonic capabilities; electronic warfare; innovation and information sharing.
Sinodinos and Fitzgibbon have high-level connections through their former official positions. Sinodinos’ LinkedIn page features a picture of the then-ambassador alongside US President Joe Biden, and Fitzgibbon has posed for pictures with current Defence Industry Minister Pat Conroy.
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