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Politics

France outbids Japan, Germany for Aussie sub deal

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This illustration shows the Shortfin Barracuda Block 1A submarine, designed by France's DCNS specifically for the Royal Australian Navy, which intends to buy 12 of the vessels. The image was released to Reuters on April 22.   © Reuters

 SYDNEY -- Australia has chosen a French government-affiliated shipbuilder as its partner to build a fleet of submarines. The country had also been weighing Japanese and German bids.

     The decision to go with DCNS was announced by Prime Minister Malcolm Turnbull in Adelaide, the state of South Australia, where the bulk of the submarines will be built.

     The contract, valued at 50 billion Australian dollars ($38.5 billion) for designing and construction, calls for building 12 next-generation submarines to replace Australia's Collins-class fleet of six subs.  It is Australia's biggest defense equipment procurement deal on record.

     The French proposal, Turnbull said, was able to meet Australia's unique needs. The prime minister had earler informed French President Francois Hollande of the decision by phone.

     Japan pushed hard, hoping win what would have been its first major deal since restrictions on weapons exports were relaxed. Its bid was based on the Japanese Maritime Self-Defense Force's Soryu-class submarine, built by Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

     DCNS has built nuclear subs for the French navy and diesel-powered underwater craft for Malaysia, India, Chile and Brazil. This experience helped to sway the Australian government's decision, analysts say.

     Turnbull informed Japanese Prime Minister Shinzo Abe of the decision by phone on Monday.

     Japan had stressed that it is the only country with the experience of building 4,000-ton-class conventional submarines sought by Australia. Former Australian Prime Minister Tony Abbott showed strong interest in Soryu subs, which promise long cruising distances and silent running.

     Faced with strong calls for the creation of domestic jobs, Australia began selection procedures in February 2015, soliciting bids from Japanese, German and French defense contractors. Participants included ThyssenKrupp Marine Systems of Germany.

     The Japanese government adopted three new principles on the transfer of defense equipment and technology in 2014, permitting arms exports under set conditions. It had hoped a deal would reinforce its strategic collaboration with Australia in the face of China's rapid naval expansion.

     But analysts say the Japanese proposal was less attractive than the French and German bids, which promised to make the submarines in Australia and create jobs.

     It was the first large-scale contract Japanese defense contractors have ever sought.

     MHI President Shunichi Miyanaga visited Australia in February, and Chairman Hideaki Omiya did so in March. Both talked to Australian government officials and other people concerned with the project.

     On April 15, MHI announced a plan to set up an Australian subsidiary. But it was too late; MHI had fallen behind its French and German rivals, who began preparations more than a year ago.

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