CANBERRA: Australia decided to invest in US nuclear-powered submarines and dump its contract with France to build diesel-electric submarines because of a changed strategic environment, Prime Minister Scott Morrison said on Thursday.
President Joe Biden on Wednesday had announced a new US security alliance with Australia and Britain that would develop an Australian nuclear-powered submarine fleet.
As a result, Australia notified France that that it would end its contract with state majority-owned DCNS to build 12 of the world's largest conventional submarines.
Australia has spent 2.4 billion Australian dollars (USD 1.8 billion) on the project since the French won the contract in 2016.
Morrison said US nuclear submarine technology wasn't an option open to Australia when the USD 43 billion deal was struck in 2016.
The United States had until now only shared the technology with Britain.
Morrison said he told French President Emanuel Macron in June that there were "very real issues about whether a conventional submarine capability" would address Australia's strategic security needs in the Indo-Pacific.
"Of course they're disappointed," Morrison said.
"They've been good partners. This is about our strategic interest, our strategic capability requirements and a changed strategic environment and we've had to take that decision."
Australia had not yet decided what class of submarine it would select and did not know how much the nuclear fleet would cost, Morrison said.
But Morrison said Australia's defence budget would grow above the current 2.2% of gross domestic product.
The first of the 97-meter (318-foot) Shortfin Barracuda submarines, an adapted French nuclear sub design, was to be delivered in 2027.
Morrison said he expected the first of the nuclear subs, which are to be built in the Australian city of Adelaide, would be built within a decade.
Top French officials made clear they were unhappy with the deal.