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The agreement, dubbed Aukus, seeks to curb China’s growing military assertiveness in the region and was swiftly condemned by Beijing as a “geopolitical gaming tool”.
The pact was announced in a joint statement on Wednesday by Boris Johnson, US president Joe Biden and Australian prime minister Scott Morrison.
Mr Morrison said that officials from all three countries would draw up plans for assembling the fleet over the next 18 months. It will make the country the seventh in the world to have submarines propelled by nuclear power.
What are the terms of the deal?
The security agreement will let Australia build nuclear-powered submarines for the first time with the assistance of the UK and the US.
At a press conference on Thursday, Mr Morrison did not confirm whether Canberra would purchase British-built BAE Systems Astute class submarines or the Virginia class vessels constructed in the US.
The partnership ends Australia’s 2016 deal with French shipbuilder Naval Group to build it a new submarine fleet worth £29 billion to replace its more than two-decades-old Collins submarines.
Nuclear-powered - although not nuclear-armed - submarines will give the Australian navy the ability to operate undetected for longer periods underwater. They have also been used as the energy source on British and American submarines for several decades.
Alongside the construction of the submarines, Aukus will also cover artificial intelligence and cyber and quantum technologies.
It will be more focused on military capability rather than intelligence, which is already covered by the Five Eyes alliance that includes Canada and New Zealand.
Why has the deal been struck?
The US and its allies are looking for ways to push back against China’s growing power and influence in the Indo-Pacific region. They are particularly concerned by its military build-up, pressure on Taiwan and deployments in the contested South China Sea.
A joint statement by the three leaders said the deal will “sustain peace and stability in the Indo-Pacific region”. During a virtual press conference, they did not name China directly but referred to regional security concerns which they claimed had “grown significantly”.
It comes as Beijing has been rapidly expanding its military, surface fleet and aircrafts. Defence Secretary Ben Wallace said that the country now has “one of the largest armed forces on the planet”.
Boris Johnson has also claimed that the agreement will help to bolster Britain’s influence in the Indo-Pacific. During Prime Minister’s Questions on Thursday, he said the region was “a £9 trillion trade area in which the UK has an increasing diplomatic and commercial presence”.
What is China’s response?
Beijing reacted furiously to yesterday’s agreement, claiming it will severely damage regional peace and stability.
The Chinese embassy in Washington on Thursday accused the trio of being stuck in a “cold war mentality” and showing “ideological prejudice”.
Chinese Foreign Ministry spokesman Zhao Lijian said the three countries were “severely damaging regional peace and stability, intensifying an arms race, and damaging international nuclear non-proliferation efforts”.
“China always believes that any regional mechanism should conform to the trend of peace and development of the times and help enhance mutual trust and cooperation... It should not target any third party or undermine its interests,” he told a press briefing in Beijing.
Boris Johnson has denied that the agreement is an “adversarial move” against China, stressing that is “merely reflects the close relationship that we have with the United States and with Australia”.
There was also a warning that Aukus pact could make Australia the target of a nuclear strike by China following the security agreement, in an article in the Global Times, widely viewed as the mouthpiece of the Communist party.
How have other countries reacted?
The agreement has sparked fury in France, who have accused the Australians of betrayal because the alliance meant they scrapped a deal worth around £30 billion for Paris to provide 12 diesel-electric submarines.
French foreign minister Jean-Yves Le Drian told France-Info radio on Thursday: “It was really a stab in the back. We built a relationship of trust with Australia, and this trust was betrayed.”
British defence secretary Ben Wallace later said that he could “understand France’s disappointment”. He added: “”We didn’t go fishing for it (the deal), but as a close ally when the Australians approached us of course we would consider it.”
The EU, which is looking to strengthen its ties in the region, was also unhappy about the sudden announcement of the pact, claiming it was not informed in advance. This came on the day that it unveiled it’s own Indo-Pacific strategy.
“We were not informed about this project or about this initiative and we are in contact with the said partners to find out more,” European Commission spokesman Peter Stano said on Thursday. “And we will, of course, have to discuss this within the EU with our member states to assess the implications.”
Meanwhile, western allies in the Indo-Pacific have welcomed the move.
Japan said the three countries’ strengthening of security and defence cooperation was vital for peace and security.
Taiwan’s ministry of foreign affairs spokeswoman Joanne Ou also welcomed the pact. However, Britain on Thursday declined to fully commit to a military defence of the country if it is invaded by China.
Ms Ou stressed that the Aukus agreement “doesn’t imply that we are asking the UK to get involved in the conflict across the Taiwan Strait”.
“We are responsible for Taiwan’s national security, we are not asking the UK or any other country to fight on our behalf,” Ou added.