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AUKUS: The Most Important New Security Alliance (Part II)

Understanding AUKUS - Pillar II

In our previous geopolitics post, we discussed the new security construct known as AUKUS, which is a security partnership between the governments of the United States, the United Kingdom, and Australia, designed to “promote a free and open Indo-Pacific that is secure and stable.”

We covered how each of these nations have complimentary geopolitical and defense industrial incentives to pursue the AUKUS collaboration, as well as delivered a deep dive on Pillar I of AUKUS, which refers to the agreement between AUKUS members to help sustain production capabilities of nuclear-powered attack submarines for the Royal Australian Navy.

Pulling off something as monumental as AUKUS will not happen without massive government spending and significant commercial sector contracting and investment. All three nations will be highly reliant on the defense industry to make the goals of AUKUS a reality. Consider this:

  • Australia has agreed to make an AUD$1.5 billion ($1 billion USD) investment for early priority works at the naval base in Western Australia that will host AUKUS nuclear submarines. These infrastructure enhancements will ensure the safe and secure rotational presence of United Kingdom and United States nuclear submarines, beginning in 2027. Australia is also building a new nuclear-powered submarine construction yard at Osborne Naval Shipyard in Adelaide so that in the future Australia will be able to build its own submarines. In total, Australia has committed at least AUD $18 billion ($11.7 billion USD) in infrastructure upgrades across Southern and Western Australia over the next decade. In the first two years of AUKUS, Australia has received $1.6 billion in U.S. defense contracts, which is enabling unprecedented growth in the Australian defense industry.

  • The United States will invest $11.4 billion USD in its submarine industrial base across the five-year defense budget period starting in 2025. This investment will help increase the production rate of Virginia class submarines, all in an effort to meet emergent US Navy requirements as well as U.S. commitments under AUKUS.

  • The United Kingdom also announced last year that it would inject GBP £3 billion (almost $5 billion USD) into its own nuclear industrial base that will help to deliver the “Built in UK, sent to Australia” nuclear submarine program. Subsequently, Rolls-Royce has announced that it will double the size of its Derby UK factory site to support the delivery of the UK and Australian programs, which will include building all of Australia’s nuclear reactors. BAE Systems will be building the main structural components of the AUKUS submarines.

In today’s piece, we will examine the other side of this collaborative effort, called AUKUS Pillar II, which is focused on cyber capabilities, unmanned systems, artificial intelligence, quantum technologies, hypersonic missiles, and additional undersea capabilities.

Importantly, Pillar II technologies will not be solely generated through secure, government-driven programs like those in Pillar I, but instead come from open, commercial R&D processes. This means that the private sector is likely to see billions of dollars of inflow on the back of this initiative. Where is the money going though? Let’s dive in and find out.

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