Australia is pouring billions into US and UK submarine industries while both countries struggle to meet their own naval needs. The risk is that AUKUS leaves Australia without the submarines it was promised.

A classic Ponzi scheme relies on early investors putting up hard cash to sustain a structure built on non-existent or undeliverable assets. The scheme survives only as long as capital keeps flowing and no participant calls time on the underlying insolvency.

Peter Briggs

AUKUS Pillar 1, Australia’s plan to acquire nuclear-powered attack submarines (SSNs), is displaying all the classic hallmarks of such a scheme.

Australia is acting as the banker. Canberra has already committed non-refundable upfront cash transfers: US$3 billion directly into the US public shipyard infrastructure and £2.4 billion (A$4.6 billion) into the UK nuclear submarine enterprise (specifically expanding Rolls-Royce’s reactor facility at Raynesway and BAE Systems at Barrow-in-Furness). In addition, Australia is funding massive infrastructure upgrades at HMAS Stirling to support the forward-basing of US and UK rotational forces (SRF-West), giving Washington a fully serviced forward operating and maintenance base at zero net cost to US taxpayers.

Yet, despite Australia filling the coffers, neither partner in this scheme can deliver their required share. The problems go far beyond funding.

In the United Kingdom, defence spending is beset by severe structural shortfalls, with the Ministry of Defence Equipment Plan facing a multi-billion-pound black hole. The Royal Navy’s submarine service is operating under extreme pressure, constrained by ageing Vanguard-class SSBNs and chronic out-of-water maintenance bottlenecks.

Against this backdrop, as I have written in P&I, the design schedule for SSN-AUKUS is slipping. Without a firm, frozen design baseline and delivery schedule, the timeline for building these complex platforms is drifting further into the future. Australian capital is acting as an emergency life-support system for the UK nuclear design and industrial base, helping keep BAE Systems and Rolls-Royce afloat, while the British defence budget teeters on the edge of insolvency.

The UK cannot deliver its part of the bargain

Across the Atlantic, the US shipbuilding pipeline offers no prospect of near-term relief. US yards are currently delivering Virginia-class submarines at an underwhelming cadence of 1.1 to 1.3 hulls per year, far short of the 2.0 Virginias plus one Columbia-class SSBN per year required (equivalent to 5.0 SSN units per year).

With the delivery of the final two Block IV Virginia-class boats (USS Massachusetts and USS Idaho), standard 7,800-tonne submarine construction ends. The introduction of Block V, incorporating the 84-foot Virginia Payload Module (VPM) and adding 2,400 tonnes of displacement, requires 30 per cent more hull work per boat. As build times expand and US shipyards prioritise the nation’s top defence priority, the US$120 billion Columbia-class SSBN program, the delivery rate of Virginias is more likely to slow than speed up.

While the US Navy lists an on-paper force of 48 SSNs as of October 2026, the operational reality is vastly different. Six hulls are effectively written off from deployable strength: USS Connecticut remains locked in a multi-year structural rebuild, while five 688i Los Angeles-class hulls designated for Service Life Extension Programs (SLEP) have suffered severe depot-level delays and are alongside.

Subtracting these inactive platforms leaves an active fleet of ~42 hulls, translating to just 14 to 16 deployable SSNs on any given day. Under US statutory law (10 U.S.C. § 10431), no US president can transfer three to five second-hand Virginia-class hulls to Australia if doing so degrades US operational readiness. With US Pacific Fleet requirements demanding 18 to 20 hulls alone, the assumption that Washington will hand over frontline SSNs in the 2030s is a fantasy.

The US cannot deliver its part of the bargain

Meanwhile, Australia is coming under increasing scrutiny from Washington over delays and complex land-tenure and statutory bottlenecks in establishing the Henderson Defence Precinct in Western Australia. Visiting US Navy leadership and Pentagon officials have made it clear that if Australia cannot construct certified consolidation and docking infrastructure in time, US statutory conditions for transferring Virginia-class hulls cannot be met, threatening Australia’s essential stop-gap capability until the UK-designed SSN-AUKUS arrives.

While Washington gains a free forward base at Stirling with intermediate-level maintenance capabilities, paid for by Australian taxpayers, and London receives billions to subsidise its domestic nuclear supply chain, Australia is taking on all the downside risk.

Every participant in AUKUS knows the mathematical model is broken. Neither Washington nor London has any political or financial incentive to call time on the agreement; both benefit immensely from Australian cash and forward-basing facilities. In Canberra, the government now ‘owns’ the policy, trapped in a political consensus that demands ‘kicking the can down the road’ while asserting that all is ‘full steam ahead’.

Australia cannot deliver its part of the bargain

Exposing AUKUS as an insolvent plan must not be confused with abandoning Australia’s requirement for a potent submarine capability.

Australia is an island nation reliant on vulnerable maritime trade routes. As I argued in P&I in March 2025, we undeniably require a modern, highly capable submarine force, preferably nuclear-powered, to provide effective regional deterrence and operate in high-threat anti-access environments. Nuclear propulsion offers matchless speed, endurance, stealth and survivability that no conventional force can duplicate over Indo-Pacific distances.

However, locking Australia’s strategic future into a failing tri-party Ponzi scheme guarantees the exact opposite: the loss of our submarine capability as Collins ages out and promised foreign hulls fail to arrive.

Rather than doubling down on a plan that cannot deliver, it is time for Australia to muster the political courage to call time on AUKUS Pillar 1. We must urgently establish credible, actionable alternatives, exploring realistic fallback options with alternative international partners who have proven conventional/hybrid nuclear designs. We must preserve our national submarine capability before the cost in time, taxpayers’ funds and opportunity cost in the defence budget runs aground, leaving Australia stripped of capability, funds and its undersea defence.

https://johnmenadue.com/post/2026/10/aukus-pillar-1-is-running-on-australian-cash-and-undeliverable-promises/

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