News Analysis: Australian domestic politics costs Japan billion-dollar submarine contract

Australia's leadership challenge last year, in which Tony Abbott was dethroned by Malcolm Turnbull as Prime Minister, not only cost Abbott his job, but seemingly Japan a submarine contract worth 40 billion U.S. dollars.

Before Abbott's demise from the top job in September, the then-prime minster had gone on record with his preference that Japan be selected to build Australia's next-generation fleet of submarines.

In discussions with Japan's Prime Minister Shinzo Abe, Abbott gave the strongest possible indications that Japan would win the deal.

Abbott's favouritism toward Japan had as much to do with the merits of its bid as it did the strategic significance that would surely flow from strengthened military ties with the Asian power.

His assurances to Abe, however, hit a hurdle when South Australian Liberal Party MPs, who feared an electoral backlash if the submarines weren't built in Adelaide, opposed the move. Abbott then invited France and Germany into the bidding process.

Although never acknowledged publicly, these bids from French manufacturer DCNS and German company Thyssenkrupp Marine Systems (TKMS) were seen as largely token options.

The bids only became serious options once Abbott was removed from office in September, effectively rendering his previous agreement with Abe null and void.

Earlier on Tuesday, Australia's Defense Minister Marise Payne said France's superior technology gave its bid the edge as it met Australia's "unique requirements."

Payne, alongside Turnbull, formally announced DCNS as the project's winning designer on Tuesday in Adelaide, where the 12 submarines will be built to replace Australia's decaying fleet of six Collins Class submarines.

Turnbull said his defense advisers had made an "objective" call on the strength of each bid before settling on the DCNS proposal, which will see most - if not all - of the construction take place in Adelaide.

"These submarines will be the most sophisticated naval vessels being built in the world, and they will be built here in Australia; built in Australia with Australian jobs, Australian steel, Australian expertise."

Abbott's lost of public and party favor has served as a bell of warning for Turnbull to keep the election promise of building the submarines locally.

With mounting pressure from local voters, state governments, unions, defense industries, opposition parties and most important of all, MPs from within the ruling party itself, the government has been left without much room of maneuvering.

After the Tuesday announcement, Australian defence industry welcomed the government's decision, saying that Australia's future submarines will be built locally is a tremendous victory for local jobs, the economy and the nation's defence capability.

Local media reported that the submarine decision is likely to have shored up seats in South Australia which were in danger of falling out of government hands as the shipbuilding industry has been a big provider of jobs in the state.

South Australian economy has been plagued by a heavy loss of jobs following the closure of big manufacturing companies such as car maker Holden.

Turnbull denied that Australia's choice of DCNS would hurt diplomatic relations with two of its strongest allies, Japan and the U.S., whose military officials were thought to prefer the Japanese bid.

"Both Prime Minister Abe and I, and our respective governments, and I believe our respective nations, are thoroughly committed to the special strategic partnership between Australia and Japan which gets stronger all the time," Turnbull told reporters on Tuesday.

But, in a matter of hours, the Japanese government had asked the Australian government for an explanation for its decision.

Japanese Defence Minister Gen Nakatani labelled the move a "deeply regrettable" decision, despite Australian officials telling him it was not made on strategic grounds.

Abbott, still part of the government as a backbencher, showed his support of the decision, saying that he believed Australia's relationship with Japan was strong enough to withstand the "disappointment" of missing out on biggest military contract in the nation's history.

The final DCNS design, named the Shortfin Barracuda Block 1A, will be powered by quieter conventional propellers, measure longer than a commercial jet at 97 meters and weigh-in at 4,500 tons.

Both Japan's and Germany's proposed underwater vessel designs were shorter and lighter - at 89 meters and 4,000 tons.

DCNS plans to use its Barracuda design as a template for its Australian version, except it will be converted to operate on diesel-electric power.

The decision on Tuesday comes seven years after the Federal government made public its desire to bolster the nation's naval force, with 12 new submarines patrolling the Australian coastline.

The Australian government could pay upwards of 115 billion U.S. dollars over the life of the project, making it far and away the most expensive and complex military initiative ever undertaken in the history of the Australian Defence Force. Enditem