French business eyes $38B submarine deal with Australia

Executives from French corporate giants Airbus, BNP Paribas, Thales and dozens more arrive in Canberra yesterday for meetings with top Australian government and business figures. France is up against Japan and Germany in bidding for one of the world's most lucrative defence contracts. A decision is expected within months, ahead of an Australian national election in which the deal and the jobs it will create is expected to be a key issue for the conservative government. The French visit, which includes top officials from France's state-controlled naval contractor DCNS, is part of a process of growing strategic and economic ties with Australia, said French Ambassador Christophe Lecourtier, and not limited to submarines.

"We're not just offering a submarine design, but also a broader alliance between our business communities, between our governments, to face some of the most tricky challenges of this century," he told Reuters.

Reuters reported last month that the competition was narrowing to a race between Japan and France, with Tokyo playing up its strategic support from Washington and Paris pushing the subs deal more on its merits for Australia's slowing economy.

Germany's TKMS is proposing to scale up its 2,000-ton Type 214 class submarine, while Japan is offering a variant of its 4,000-tonne Soryu boats made by Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

Tokyo was initially seen as the frontrunner, due to close ties between Japanese Prime Minister Shinzo Abe and former Australian Prime Minister Tony Abbott, who was ousted in a party coup by Malcolm Turnbull last September, and perceived support from Washington to build closer ties between two key Asian allies.

An Australian political source with decades of experience in the global arms industry said that the French visit reflects a desire to blunt Japan's perceived strategic advantage by flexing their economic muscles.

"My view is that the French aren't very confident against the Japanese from a strategic perspective," he told Reuters.

"The trick now is that you're not lobbying Defence, you're lobbying the various members of the NSC," he said, referring to the National Security Committee of Cabinet, which will make the final decision. TKMS Australia CEO John White poured cold water on the strategy, saying that if anything, it gave Germany more confidence in its position.

"We have a very strong German government and company presence in Australia with Siemens and MTU and Rheinmetal, so really ... we don't need to make those shows of visible sudden presence," White told Reuters.

"So it, if anything, gives us in the German camp a bit of comfort."