Some interesting financial figures have come out of AFR’s “AUKUS
export rules possible ‘Trojan horse’ for bad actors” of 7 Sep 2023 by a US
author
at https://www.afr.com/world/north-america/aukus-export-rules-possible-trojan-horse-for-bad-actors-20230907-p5e2mt
eg:
1. ““Obviously, we were grateful that the Australians want to invest [donate] $US3 billion…”
Pete Comment
Apparently the Australian donation is 3 billion US dollars, not Australian dollars as I previously assumed. US$3 billion = A$4.7 billion.
The Australian Government's decision to not publish details of Australia's donation to the highly profitable US arms industry should concern Australian taxpayers. Details of the dollar currency and over what period should be published.
This is also noting that Australia's donation will not make much of a difference to US submarine building - an industry that needs 10s of US$Billions to pay 10,000s of extra workers to double or triple production of Virginias (currently only 1.1 Virginias on average are being produced per year).
See the enormity of the US Navy Virginia shortfall on pages 50 and 17 indicated here. Many in the US Navy, Congress and the US Government see 3 to 5 Virginias to Australia as making the shortfall worse.
After the US was burnt in relaxing sensitive technology export controls to Canada, many Americans also have security concerns about Australians having access to tightly held US submarine, including reactor, secrets. This information flow reluctance could come to haunt us as Australia, without extensive nuclear reactor industrial base experience, is hoping to operate highly complex Virginia reactors.
and
2. “The Congressional Budget Office estimates that each new [Virginia] submarine could cost between $US6.2 billion ($8.7 billion) and $US7.2 billion, materially higher than the US Navy’s $US5.6 billion estimate.”
Pete Comment
$US7.2 billion = A$11.3 billion that Australia may need to pay per Virginia at today’s prices?
One wonders what 10 years of (say) 3% US cumulative inflation would do to US costs in terms of upfront purchase prices, spares, major upgrades, derusting and repairs for the first refurbished but scarce Virginia in 2033?
1 comment:
There is not much we can do about the exchange rate, which might turn around again over time.
However it is inexcusable if we are not preparing the AUKUS budget in outturn dollars, i.e. allowing for inflation during the construction period. Inflation in USA now is quite high. If you have 4% to 5% inflation over an 8 year construction period that $6 billion Virginia costs you $8 billion by the time it is launched.
Those Dutch long range SSKs are starting to look quite attractive if this gets any worse. At $3 billion each you could buy a squadron of F35s with the change.
I calculated that over a thirty year life you also spend another billion dollars extra on the twice as big crew of the Virginia (130 vs 60).
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