Preface: The Indo-Pacific's Most Expensive Promise Wavers
In February 2026, one of history's most ambitious defense agreements faces serious challenges. The US Congressional Research Service has included in an official report the analysis that "not selling Virginia-class submarines to Australia is also an option." This $368 billion Australian dollar agreement was designed as a key pillar of China deterrence, yet questions about its feasibility are being raised from within the United States itself.
Chapter 1: What is AUKUS?
Birth of the Agreement
AUKUS (Australia-UK-US) is a trilateral security partnership signed in September 2021 by Australia, the United Kingdom, and the United States. The most essential component is "Pillar 1," under which Australia acquires conventionally armed, nuclear-powered submarines (SSNs). Australia was set to become the first non-nuclear weapons state in history to possess nuclear-powered submarines.
Why Nuclear-Powered Submarines?
The difference between diesel and nuclear-powered submarines is stark. Diesel submarines must periodically surface to recharge batteries, while nuclear submarines can operate underwater for months. They also hold overwhelming superiority in range and speed. For operations across the vast Indo-Pacific, such capabilities are essential.
Timeline and Scale
The original plan was as follows:
Phase 1 (2032-mid-2030s): The US sells 3-5 Virginia-class submarines from its fleet to Australia. This transitional period allows the Royal Australian Navy to accumulate experience operating nuclear submarines.
Phase 2 (2040s-2060s): Eight SSN-AUKUS class submarines, jointly designed with the UK, are built domestically in Australia.
Total cost is estimated at A$368 billion through the mid-2050s. This is the largest single defense project in Australian history.
Chapter 2: The Shock of the US Congressional Report
"Not Selling is Also an Option"
A report released by the US Congressional Research Service in January 2026 has shaken AUKUS's fundamental premise. Instead of selling Virginia-class submarines to Australia, the report presents a "division of labor" scenario where the US retains ownership and operates them from Australian bases.
The core logic is this: In 2023, the Australian government, through Defense Minister Richard Marles, clearly stated that "Australia has made no promises to the United States that Australia would support the United States in a future conflict over Taiwan." If a crisis erupts in the Taiwan Strait, Australian-owned submarines would depend on the Australian government's decision whether to deploy. However, if US-owned submarines operate from Australian bases, they can be immediately committed to combat.
The report analyzes: "Selling three to five Virginia-class SSNs to Australia would thus convert those SSNs from boats that would be available for use in a US-China crisis or conflict into boats that might not be available." "This could weaken rather than strengthen deterrence and warfighting capability in connection with a US-China crisis or conflict."
The US Navy's Submarine Shortage Problem
There's a more fundamental problem. The US Navy itself lacks submarines. Currently, the US Navy needs 66 attack submarines but actually possesses only 49—just 74% of its target.
Build rates are even more grim. The US Navy has ordered Virginia-class submarines at a rate of two per year, but actual construction has been limited to 1.1-1.2 boats annually. The backlog of unbuilt submarines keeps growing. To supply Australia as well, 2.33 boats per year would need to be built—impossible with current capacity.
US Legal Constraints
US Congress has already passed relevant legislation. Before any submarine can be sold to Australia, the President must certify that "relinquishing this submarine will not degrade the United States undersea capabilities." Given the current situation, it's questionable whether any president could make such a certification.
Chapter 3: Historical Context — How Well Have Alliance Promises Been Kept?
The French Submarine Contract Cancellation
AUKUS's birth itself was controversial. In 2016, Australia signed a A$90 billion contract with France's Naval Group to build 12 diesel-electric submarines. However, in 2021, Prime Minister Scott Morrison unilaterally cancelled this contract and announced AUKUS. France was furious, temporarily recalling its ambassador to the US and triggering a serious diplomatic crisis.
The Morrison government's decision to scrap the French submarine deal championed by former Prime Minister Malcolm Turnbull was justified on the premise of "a better alternative." But now even that "better alternative" faces questions about its feasibility.
Turnbull's Criticism
Former Prime Minister Turnbull has consistently criticized AUKUS. Regarding this report, he pointed out that "the Australian government seems to be engaged in an exercise of denial."
"The Aukus deal is a very attractive one for the Americans because they get a submarine base and dockyard at Australia's expense in Western Australia, and they do not have any obligation to sell any Virginia-class submarines to us unless their navy can spare them. If the US say 'there are no subs for you Australia', it is not reneging on the deal: that is the deal, that is what Australia signed up to. That's why it's always been a bad deal for Australia."
Comparison with the F-35 Case
Looking at past weapons transfer cases between allies, there's little room for optimism. In the F-35 stealth fighter program, the US promised technology transfer to partner nations, but the actual core technology transferred was limited. Partner nations paid enormous costs, but access to the most sensitive technology remains controlled by the US.
Chapter 4: Stakeholder Analysis
America's Calculation
Cost-Benefit Analysis: From the US perspective, AUKUS isn't "win-win"—it's "all-win" for America. The US secures a forward base in Western Australia at Australian expense, while submarine sales depend on US Navy needs. It's a structure where assets deployable in a Taiwan contingency are secured while costs are passed to the ally.
Domestic Politics: In the Trump administration championing "America First," giving submarines needed by the US Navy to an ally is a political burden. Congressional criticism is substantial.
Australia's Dilemma
Security Gap: Australia's existing Collins-class diesel submarines are scheduled for retirement starting in the mid-2030s. If Virginia-class submarines don't arrive on time, a "capability gap" emerges. During this gap period, Australia could effectively have zero underwater capability in the Indo-Pacific.
Sunk Costs: Hundreds of billions of dollars have already been invested in AUKUS preparations. HMAS Stirling naval base expansion in Western Australia, personnel training, and nuclear waste management infrastructure are all underway. It's come too far to turn back now.
Political Risk: Defense Minister Marles has promoted AUKUS as "the largest defense investment in history." If the US fails to provide submarines, this would be a devastating political blow to the Albanese government.
China's Perspective
China has criticized AUKUS from the start as "Cold War thinking" and "triggering regional arms races." If AUKUS fails, China would tout it as evidence of "unreliability in US alliances." Paradoxically, AUKUS's failure could strengthen China's strategic narrative.
Chapter 5: Scenario Analysis
Scenario A: Proceeds as Planned (Probability: 25%)
Prerequisites:
- Dramatic improvement in US shipbuilding productivity (2 boats/year → 2.33)
- Continued support from US Congress and administration
- No rapid deterioration in US-China relations
Evidence:
- President Trump's "full steam ahead" statement
- Pentagon review passed in September 2025
- Australia's continued investment
Weaknesses:
- US shipbuilding productivity hasn't improved in 15 years
- Submarine sale decisions will be made by a future president after 2032 (not Trump)
Scenario B: Delays and Scaling Back (Probability: 45%)
Prerequisites:
- Major delays in Virginia-class sales (2032 → 2040s)
- Reduced quantity (3-5 boats → 1-2)
- SSN-AUKUS construction also delayed
Evidence:
- Structural limitations of US shipbuilding
- US Navy prioritizing its own needs
- Historical precedent: chronic delays in weapons transfer programs
Outcomes:
- Australia's "submarine gap" extends 10+ years
- Massive additional costs
- Alliance trust damaged
Scenario C: Alternative Division of Labor (Probability: 20%)
Prerequisites:
- US retains ownership while operating submarines from Australian bases
- Australia bears base operating costs
- Both nations claim AUKUS continues through "reinterpretation"
Evidence:
- Alternative presented in US Congressional report
- Maximizes US interests
- Australian political establishment may accept for "face-saving"
Historical Precedent: During the Cold War, the US "stationed" nuclear weapons in NATO allies but retained control (nuclear sharing arrangements). A similar model could apply to submarines.
Scenario D: Agreement Collapse (Probability: 10%)
Prerequisites:
- Explicit US withdrawal or Australian exit
- Serious deterioration in bilateral relations
- Pursuit of alternative procurement (France, Japan, domestic development, etc.)
Evidence:
- Extreme scenario, but precedent exists with French submarine contract cancellation
- Possibility of sudden political environment changes
Chapter 6: Investment Implications and Industry Impact
Defense Sector
Beneficiary Companies:
- General Dynamics (GD): Prime contractor for Virginia-class submarine construction. With AUKUS delays, may concentrate on US Navy orders instead.
- BAE Systems: UK-side builder for SSN-AUKUS. Long-term impact limited.
- Huntington Ingalls Industries (HII): Virginia-class co-builder. Similar position to GD.
At-Risk Companies:
- Australian defense SMEs: Dependent on AUKUS-related subcontracts. Direct hit from delays/scaling back.
Rare Earths and Critical Minerals
AUKUS delays could increase pressure on Australia to diversify its defense industry. Investment in long-range missiles, drones, and cyber capabilities may increase for domestic defense enhancement. This could lead to increased demand for rare earths and critical minerals within Australia.
Currency and Bonds
Increased AUKUS uncertainty is a short-term negative factor for the Australian dollar (AUD). Defense spending increases plus submarine supply uncertainty may be perceived as fiscal risk.
Conclusion: Questions About the Nature of Alliances
The AUKUS controversy isn't simply about weapons transactions. It raises fundamental questions about the nature of alliances.
If alliances form to counter "common threats," what happens when both sides perceive threats differently? The US sees China in the Taiwan Strait as the most urgent threat, but Australia hasn't promised to join the fight. This gap is AUKUS's structural vulnerability.
As former PM Turnbull put it, if "the US not giving submarines isn't breaking the promise"—because that's the deal—then what exactly has Australia gained? Is it investing $368 billion to build a forward base for the United States?
Over the coming years, whether AUKUS actually materializes will be a touchstone for the credibility of the Indo-Pacific alliance system. We will witness whether the simple truth that "a promise is a promise" applies to geopolitics—or whether agreements can always be "reinterpreted" in the face of national interests.
This article was written based on information available as of February 6, 2026.
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