Update Country Report Maldives 16 Sep 2021

Event

Australia, the UK and the US announced a trilateral security partnership-to be known as AUKUS-on September 15th. It seeks to deepen co-operation in the Indo-Pacific region. As part of an effort to integrate security and defence capabilities, the UK and the US will provide nuclear-powered submarines to Australia, which will scrap its contract to procure French-designed conventional submarines.

Analysis

The partnership accentuates strategic fault lines emerging in Asia. China was not mentioned in the joint statement announcing AUKUS, but concerns about the country's approach in the South China Sea (and elsewhere) are the driving force behind the pact. The Chinese government will view the partnership with hostility and could seek deeper security co-operation with Russia. However, it may take succour from the tensions that the deal will spark among Western allies, notably between the US and Australia on one hand and France on the other.

AUKUS extends the "special relationship" between the UK and US to include Australia; the US has previously only shared its nuclear propulsion technology with the UK. The submarines will not be operational for several years, with the joint statement noting it would take 18 months to agree on a "pathway" for delivery. The arrangement means that Australia will abandon a US$90bn programme to acquire French submarines that signed in 2016 and appears at odds with previous declarations that the country was not interested in acquiring nuclear-powered submarines; this suggests that the US made it a precondition for AUKUS.

While it remains committed to remaining a non-nuclear-weapon state, Australia's shift to a nuclear submarine option risks undermining the international non-proliferation regime. Other countries could see sufficient cover in the deal to expand their own nuclear capabilities or to reject calls for disarmament.

The cancellation of the contract with France will hurt emerging co-operation between the US and the EU in the Indo-Pacific. The co-ordination set out under AUKUS, in areas such as cyber-technology and artificial intelligence, suggest that it will become the primary US-anchored security alliance in the region and may make co-operation under the Quadrilateral Security Dialogue and Five Eyes grouping less pressing.

Impact on the forecast

AUKUS will strengthen Australia's defence capability while, through deeper reliance on the US, reducing its strategic autonomy and confirming it as a focus in the region for China's ire. The development confirms a hardening geopolitical division in the region between camps anchored on the US and China that will remain disruptive for international business.