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By:uk.reuters.com
How France sank Japan's $40 billion Australian submarine dream
How France sank Japan's $40 billion Australian submarine dream
In 2014, a blossoming friendship between Australian Prime Minister Tony Abbott and his Japanese counterpart Shinzo Abe looked to have all but sewn up a $40 billion submarine deal. Then French naval contractor DCNS hatched a bold and seemingly hopeless plan to gatecrash the party.
Almost 18 months later, France this week secured a remarkable come-from-behind victory on one of the world's most lucrative defense deals. The result: Tokyo's dream of fast-tracking a revival of its arms export industry is left in disarray.
Interviews with more than a dozen Japanese, French, Australian and German government and industry officials show how a series of missteps by a disparate Japanese group of ministry officials, corporate executives and diplomats badly undermined their bid.
In particular, Japan misread the changing political landscape in Australia as Abbott fell from favor. The Japanese group, which included Mitsubishi Heavy Industries (MHI) (7011.T) and Kawasaki Heavy Industries (KHI), (7012.T) also failed to clearly commit to providing skilled shipbuilding jobs in Australia. And Tokyo realized far too late its bid was being outflanked by the Germans and particularly the French, the sources involved in the bid said.
France, on the other hand, mobilized its vast and experienced military-industrial complex and hired a powerful Australian submarine industry insider, Sean Costello, who led it to an unexpected victory.
Japan's loss represents a major setback for Abe's push to develop an arms export industry as part of a more muscular security agenda after decades of pacifism.
"We put our utmost effort into the bid," the head of the Ministry of Defense's procurement agency Hideaki Watanabe said after the result was announced on Tuesday. "We will do a thorough analysis of what impact the result will have on our defense industry."
By the end of 2014, Japan was still comfortably in the driving seat thanks to the relationship between Abe and Abbott, which had begun soon after Abbott's 2013 election and strengthened quickly.
Japan and Australia - key allies of the United States - had wanted to cement security ties to counter to China's growing assertiveness in the South China Sea and beyond.
FRENCH OVERTURES
Still, France saw an opportunity to get into the game. In November 2014, DCNS CEO Herve Guillou prevailed on French Defence Minister Jean-Yves Le Drian to visit Australia and start the pitch for France.
Le Drian traveled to Albany in the country's remote southwest, where officials had gathered to commemorate the 100 year anniversary of the first sailing of Australian soldiers to fight on France's Western Front during World War One......................Read more