AUKUS from Where We Stand: Structural Risk, Industrial Fragility and the Price of Strategic Momentum

 

Large defence programs rarely fail because of a single bad decision. They falter because early assumptions harden into political commitments, financial transfers precede technical certainty, and alliance politics substitutes for rigorous national debate. Australia’s nuclear-powered submarine program under AUKUS increasingly displays each of these characteristics.

From the perspective of naval industrial capacity and defence economics, the question is no longer whether AUKUS is ambitious. It is whether Australia has anchored its most expensive military undertaking in partner systems that are themselves under acute strain.

Recent analysis by the United States Congressional Research Service has sharpened these concerns. The CRS is a substantial institution, employing around 600 staff with an annual budget approaching AUD 200 million, tasked with supplying Congress with independent policy research. Its latest assessment of the Virginia-class nuclear submarine program and Australia’s planned acquisition of three to five of those vessels is sobering.

The Virginia-class project began in 1998 with a production objective of two submarines per year. Since 2022, output has fallen to roughly 1.1 boats annually. Under the AUKUS framework, US yards would need to raise that rate to approximately 2.33 per year to satisfy American naval requirements while also supplying Australia.

That industrial ramp-up is not occurring at the pace required. In April 2025, the US Navy itself reported that it had not observed the expected acceleration in Virginia-class production necessary to meet strategic plans. Yet Congress has already appropriated billions of dollars in submarine industrial-base funding to support this expansion.

How many billions, precisely, remains unclear in the public record. Nor has the Pentagon published details of a review of AUKUS initiated in June 2025 amid concerns that the United States should not export submarines while struggling to meet its own force levels. Press reporting in December indicated that the review’s conclusions were rewritten to align with President Donald Trump’s enthusiasm for the pact, an episode that highlights how exposed the project is to shifting presidential priorities.

For Australia, that volatility matters. It means that delivery schedules, production targets and even political commitment are subject not only to engineering realities but to electoral cycles in allied capitals.

Inside America’s Submarine Factory

The CRS report also illuminates deeper inefficiencies inside the US naval shipbuilding system. Virginia-class submarines are constructed at two commercial yards, one operated by General Dynamics Electric Boat in Connecticut and the other by Huntington Ingalls Industries in Virginia. Between them sits a sprawling industrial network of around 16,000 suppliers scattered across all fifty states, along with numerous laboratories and research facilities.

From an economic standpoint, such geographical dispersion creates political resilience and industrial inertia rather than efficiency. Suppliers in every state cultivate congressional defenders. Contracts become immune to consolidation or radical restructuring. The CRS itself notes that work is divided between the two prime yards in a way that produces an approximately equal split in profits.

It does not specify what those profits amount to. Yet the logic of the system is transparent. A supplier footprint stretching across the entire federation locks congressional support into place. The military-industrial complex is not an abstraction. It is a production architecture designed to be politically indispensable.

Australia has already injected significant funds into this structure. In early January 2026, press reports revealed that Canberra quietly transferred another AUD 1.5 billion to the United States as a non-refundable AUKUS down payment, bringing total Australian payments for US submarine industrial capacity to around AUD 4.5 billion. These funds are not for completed submarines but to support American shipbuilding capability more generally.

The discretion surrounding these payments is striking. Large defence deals are normally accompanied by ceremonies, ministerial statements and symbolic photo opportunities. In this case, silence prevailed. That suggests official recognition that sending billions overseas without contractual certainty of delivery is politically sensitive.

The British Problem

The United Kingdom’s contribution to AUKUS presents an even sharper dilemma. Australia is committing approximately AUD 4.6 billion to support British submarine production as the two countries prepare to co-develop a new AUKUS-class nuclear boat for delivery in the late 2030s or early 2040s.

Retired UK Rear Admiral Philip Mathias, formerly a director of nuclear policy within the British Ministry of Defence and a submarine commander, has warned that the Royal Navy’s nuclear fleet is in a parlous condition, characterised by extremely low operational availability. He has publicly stated that Britain’s capacity to fulfil its part of AUKUS is in serious doubt.

The irony is acute. Britain currently has only one operational nuclear-powered attack submarine, HMS Anson, which is now being dispatched to Australia to meet AUKUS rotational requirements. It is difficult to imagine a clearer sign of strain within a fleet supposedly positioned to underpin a decades-long international production partnership.

Strategic Momentum Versus Strategic Necessity

Defenders of the program advance two central arguments. The first is that Australia has already committed too much to change course. The second is that the Virginia-class submarine remains the most capable platform of its type in the world.

Neither argument answers the more fundamental question of whether Australia ever conducted a sufficiently broad strategic assessment before committing itself.

Australia does indeed rely heavily on maritime trade routes through the South China Sea and the Strait of Hormuz. Yet dozens of other trading nations share the same vulnerability without choosing nuclear submarines as their principal hedge. China, frequently invoked as the primary justification for the program, depends on those sea lanes for its own exports and imports.

Moreover, while Beijing poses a serious strategic challenge, it has struggled to impose maritime control even around Taiwan, located roughly 130 kilometres from the mainland. Australia lies several thousand kilometres further south.

These realities do not negate the need for naval power. They do, however, complicate claims that nuclear submarines represent the only credible answer to Australia’s security environment.

What was notably absent from the political process was a wider debate about alternatives. Whether submarines were needed at all in their current number. Whether resources might have been better directed toward fuel security, climate resilience, industrial self-sufficiency or diversified civilian manufacturing capacity. Whether a narrower maritime strategy could deliver deterrence at lower financial and strategic risk.

Instead, the national conversation collapsed into a technical argument about propulsion systems and supplier nationality. Diesel versus nuclear. French versus American. The decision itself emerged suddenly when then prime minister Scott Morrison announced AUKUS with minimal prior public discussion, leaving the opposition politically constrained to endorse the pact.

Secrecy and the Narrowing of Policy Space

All defence programs involve classified material. Yet excessive secrecy carries its own strategic cost. It concentrates decision-making authority in the hands of a small circle of ministers, officials and advisers, reducing the diversity of views that historically has protected states from catastrophic procurement errors.

Military history is crowded with examples of vast programs driven forward by institutional momentum long after their underlying assumptions had eroded. AUKUS now risks drifting into that category.

Australia is committing tens of billions of dollars to foreign shipyards whose own governments are struggling to meet domestic requirements, whose industrial bases are fragmented and whose political leadership is subject to abrupt reversal. It is doing so without enforceable guarantees of delivery and with limited public disclosure of review processes conducted overseas.

From the standpoint of defence economics, this is not merely a question of alliance management. It is a question of opportunity cost. Every dollar committed to overseas nuclear construction is a dollar unavailable for domestic industrial diversification, energy security, infrastructure resilience or climate adaptation, all of which bear directly on national security.

Starting from Here

If Australia were designing its defence posture from a blank page, few analysts would recommend beginning with binding financial commitments to two strained foreign shipbuilding systems while surrendering negotiating leverage in advance.

Yet this is where Australia now stands.

Strategic momentum has replaced strategic optionality. Political prestige has become entangled with program survival. And the sheer scale of sunk costs creates pressure to proceed regardless of warning signs emerging from Washington and London.

From the perspective of armaments economics, that is the most dangerous moment in any procurement cycle. It is the stage at which states persist not because the evidence has become stronger, but because the cost of admitting error has grown too high.

The gravitational force now keeping AUKUS on track may have less to do with strategic necessity than with the classic sunk-costs fallacy that has haunted defence procurement for generations.

It is difficult to escape the conclusion that this momentum owes less to sober strategic recalibration than to the gravitational pull of weapons industry interests that profit from escalation, continuity and ever-expanding procurement far more reliably than any doctrine grounded in common sense.