Don’t panic: the US AUKUS review could strengthen the partnership

The Trump administration has ordered a review of AUKUS to be led by Undersecretary of Defense Policy Elbridge Colby. The review has some attendant risks, but also a potential upside for the three-way partnership.

The decision to review AUKUS shouldn’t be surprising. It’s normal, after a change of government, for a new administration to review existing commitments in the light of new policy priorities: in this case, ‘America First’. Britain’s Labour government has completed its own review into AUKUS, under Sir Stephen Lovegrove. This review reaffirmed the British commitment to AUKUS and made tripartite recommendations, including the need for a whole-of-nation approach to the partnership. As Lovegrove knows well, this was how AUKUS was originally conceived at its launch in 2021. Since then, however, AUKUS has increasingly become a defence-owned and defence-resourced initiative across the three partners. This has hampered its development, despite significant progress under Pillar One, the nuclear submarine optimal pathway. We can expect the US review to assess cooperation on the smorgasbord of advanced military technologies under AUKUS Pillar Two.

It is unlikely that the US review will fundamentally reassess Washington’s commitment to remaining in AUKUS. Since Donald Trump’s election, Secretary of State Marco Rubio and Secretary of Defense Pete Hegseth have backed the initiative as a model for US cooperation with close allies. While Colby expressed greater scepticism out of government, his comments on AUKUS have been more neutral in-office. Washington has given mixed signals on AUKUS, and the administration’s approach has at times appeared disjointed. There is also the political drag factor of AUKUS being a legacy agreement from Joe Biden’s presidency.

Currently, the United States’ main point of contention is the commitment to sell and transfer three to five Virginia-class submarines to Australia’s navy, starting from 2032, under AUKUS’s optimal pathway. This stems from concerns around the US defence industrial base’s capacity to deliver enough submarines to meet both the US Navy’s and Australia’s requirements, at a time when US attack submarine numbers are approaching a low point and its submarine industry is already struggling to fulfil the recapitalisation of the US undersea nuclear deterrent force. Moreover, the Virginia class will have to continue in US service for significantly longer than expected due to slow progress on delivering its successor, SSN-X.

The US also has concerns about AUKUS partners’ capacity and commitment levels. Britain’s recent defence review and commitment to boost nuclear submarine production have eased doubts in the Trump administration. For its part, Australia has also made significant progress towards upskilling its submariners and defence workforce for the nuclear-propulsion challenges ahead. In February, Australia made its first direct financial contribution of US$500 million (A$770 million) towards increasing US submarine production capacity.

However, Washington has growing concerns about the general trajectory of Australia’s defence spending. Earlier this month, Hegseth made clear the US’ expectation that Canberra lift its defence budget to 3.5 percent of GDP. While Minister for Defence Richard Marles initially indicated that the government was willing to have a ‘conversation’ around increasing Australia’s defence spending, Prime Minister Anthony Albanese appeared more reluctant to enter into new commitments, based on recent remarks.

On the Virginia transfer, in essence, the Trump administration needs to convince itself that the effect of transferring several submarines from the US Navy’s order of battle is outweighed by the longer-term gains of access to forward basing and new maintenance facilities in Western Australia. This access would be a strategic gain for the US, as it would strengthen US submarine presence in the Indo-Pacific priority theatre and support greater interoperability with Australia and with Britain, which has committed to forward deploying one of its attack submarines to HMAS Stirling from 2027.

On the more political issue around AUKUS complying with Trump’s ‘America First’ agenda, Australia’s ongoing cash infusions into the US defence industrial base should be appealing to the president, though the review could potentially recommend a higher price tag than the US$3 billion (A$4.5 billion) that Canberra has committed to. The US is also likely to press for a more focused and energetic commitment to Pillar Two.

Rather than overreact to the US government’s decision to review AUKUS, Australia should see it as an opportunity to make the strategic and political case for the partnership in Washington. In the future, Australia could consider launching its own review into AUKUS, including the opportunity costs it may present for Australia’s defence capability in the nearer term.

Silent risk to net-zero commitment: climate policy meets national security

Australia faces a growing dilemma: in attempting to ease genuine climate challenges, it is creating national security vulnerabilities by embedding Chinese smart technologies in critical infrastructure. This includes solar inverters and batteries.

Electric vehicles, too, are needed for the transition to renewables—and increasingly come from China filled with internet-linked systems.

Recent media reporting highlighted the existence of undocumented control devices in some China-made inverters, which change direct current from solar panels into the alternating current that goes into the grid. Unfortunately, this is not new. We’ve long known smart devices can be remotely accessed, raising concerns over data control and cybersecurity.

But the risk is worsening as AI amplifies cyber threats and geostrategic competition becomes harsher. Climate policy is now wrapped up with national security policy.

So how can Australia meet its legislated emissions-reduction target of 43 percent by 2030 while also managing cyber and systemic risks in the internet-connected infrastructure and AI systems we use daily? We need to ensure that the transition to renewables doesn’t introduce new and long-term national security vulnerabilities into our critical infrastructure.

Cyber expert Rachael Falk warned in 2023 of escalating threats that solar inverters and smart home devices could pose as the internet of things expanded. She argued for a ‘concerted global approach’. It was already clear then that inverters—central to household and industrial energy systems—had become a pathway for malicious actors to sabotage systems or feed false data to the grid.

Such interference has the potential to result in costly blackouts, in which a grid loses all power and must be restored with what’s called a black start. That can take weeks. The risk has been highlighted by a US incident involving Chinese-disrupted inverters in 2024 and widespread power outages in Spain and Portugal in April.

Australia’s $20 billion Rewiring the Nation initiative aims to modernise the grid and support a renewable transition, with a target of 82 percent renewable electricity by 2030. This includes installing 22,000 solar panels daily, 40 wind turbines monthly and 10,000 kilometres of transition lines within the target period. Complementary policies include the $2.3 billion Cheaper Home Batteries Program, which launches on 1 July, and multi-billion-dollar investments in industrial-scale battery energy storage systems.

These initiatives are ambitious and necessary, and we should expect to see more of them. But things become complicated for Australia, and for the many other countries engaging in serious energy transition, when we examine the core technologies, equipment and supply chains underpinning such transitions. Chinese firms dominate these markets, producing 76 percent of the world’s inverters and comprising more than 91 percent of solar battery supply chains. These companies are legally obliged to cooperate with China’s national security agencies. Australia and its partners shouldn’t ignore the risks.

Then there are forced-labour concerns linked to some of the companies supplying this equipment to Australia. For example, ASPI research found that some of the materials required for large-scale Australian battery projects have been linked to forced labour, particularly from Uyghur and other Turkic ethnic groups in China.

Beijing’s 2023 Digital China blueprint explicitly integrates digital infrastructure and energy transformation. Smart grids have been formally designated as a component of China’s critical information infrastructure. This reflects duality in the technology’s  function: delivering electricity in a way that enables the generation of masses of precision data, which is considered to be a nationally important strategic resource. In doing so, the smart grid gives China the tools to merge energy production with data governance that, ultimately, enables the CCP’s political control.

So, while Beijing has sought to reduce China’s technology dependence on the rest of the world, it has increased the world’s technological dependence on China. Australia’s modern energy system illustrates this.

Inverters from such Chinee makers as Huawei, Sungrow and GoodWe are widely used in Australia, in both residential and utility-scale solar projects. Sungrow has also supplied fully integrated storage systems. Battery cells from the Chinese companies CATL and BYD appear in several large-scale storage projects. Chinese firms have invested indirectly in Australian energy assets: the State Grid Corporation of China owns stakes in Jemena and AusNet, while CHINT Group has partnered with local developers to advance large-scale photovoltaic projects.

ASPI analysed renewable projects each of more than 10 megawatts capacity and within 200 km of key defence and industrial infrastructure. This analysis identified 37 such projects, 17 of which had clear Chinese involvement. This was reflected throughout the supply chain. The Merredin and Katherine solar farms, for example, use photovoltaic (PV) solar systems from Risen Energy. Similarly, the Chichester and Rodds Bay projects employ China-made panels, while Haughton features Trina modules in conjunction with Chinese batteries. The Kwinana Big Battery and the Waratah Super Battery integrate cells from CATL. In the wind sector, Goldwind turbines and associated control systems are used in significant developments including Clarke Creek, Stockyard Hill, and Moorabool.

Even sites established as part of the Defence Renewable Energy and Energy Security Program—a $64 million government investment to deliver solar energy generation and battery storage systems at 10 Defence sites throughout Australia—use Chinese components. The RAAF Darwin solar farm, for example, has PV solar systems from China, according to the local energy provider registry.

Chinese ownership further amplifies these risks. Pacific Hydro, owned by China’s State Power Investment Corporation, manages several projects. Goldwind is involved in Gullen Range, Moorabool and other major wind projects. Sungrow, Huawei, CATL, Trina, and Jinko consistently appear across these developments, underlining the deep presence of Chinese capital and technology.

Approximately 37 renewables projects identified within 200 km of Australia’s sensitive industrial and defence zones. Source: ASPI OSINT analysis.

China’s smart internet-of-things ambition extends to electric vehicles. Earlier this year, it emerged that major Chinese electric vehicle makers had established strategic partnerships with DeepSeek, with plans to integrate that Chinese company’s AI technology in their products. This creates a further point of tension between Australia’s important renewable ambitions and its national security responsibilities.

Tax breaks and other financial incentives are helping to shift Australians to electric vehicles, now mostly from China. It’s in Australia’s interests to have more Australians driving electric vehicles. But it’s not in Australia’s interests for that to result in the proliferation of China’s AI-capable internet of things systems across the country—noting the Australian government, top universities and corporations have already banned employees from using DeepSeek on work devices. But unlike inverters, this is not a hardware risk; it’s a software one.

Cost appears to be trumping security in much of the market, highlighting that there’s more work to do, including in areas such as economic security, addressing supply chain risks and building greater national resilience against some of these security challenges. The Australian Energy Market Operator reported in May that costs for transmission projects have surged—overhead lines are up as much as 55 percent over the past year and substations by as much as 35 percent—making secure alternatives more expensive and politically harder to justify. The steep hike is expected to affect home electricity bills.

That means we’re confronting not just supply chain risks, but also market distortion risks. Chinese technology dominance is a result of price, not necessarily quality or trustworthiness, and any attempt to secure alternatives must navigate the politics of affordability.

This is playing out as US–China technological rivalry accelerates. As ASPI analysts note, in this context, Australia’s decisions need to be shaped less by China’s stated intent and more by its growing capabilities—especially when these intersect with critical infrastructure.

While deepened intelligence-sharing is important for understanding threats to Australia’s critical infrastructure, the threats to Australia’s renewable ecosystem are not simply an intelligence or security problem.

Similarly, cybersecurity policy alone is not enough. The 2023-2030 Australian Cyber Security Strategy, the landmark Cyber Security Act 2024 and ongoing amendments to the Security of Critical Infrastructure Act along with the Australian Cyber Security Centre’s consistent outreach shows Australia has not been idle in addressing the cybersecurity risks. Despite this progress, the complex—and interrelated—set of challenges outlined still requires addressing.

Evolving threats demand updated tools. That might include physical and technical verification for high-risk systems, including AI, not just compliance paperwork. The government would also benefit from studying Lithuania’s 2024 law, which limits remote access to inverters at its solar and wind power plants that produce more than 100 kilowatts.

Australia’s $22.7 billion Future Made in Australia fund and Solar Sunshot program signal a vital shift towards building local clean tech capability. But economic benefit alone shouldn’t drive these climate efforts. Investments need also to prioritise cyber security, supply chain resilience and avoidance of support for forced labour.

That means working with international partners to build trusted supply chains and, in areas where we have comparative advantage, accelerate efforts to build sovereign capabilities. It also means rejecting the false binary of cheap versus secure, and instead adopting a fit-for-purpose standard: if a technology is insecure or vulnerable to coercion, or could be exploited in the future, it’s not fit—regardless of how cheap it is.

There’s a strong case for a structured, risk-based approach that distinguishes between what can be mitigated through standards, what requires targeted investment, and what demands structural decoupling. Policy levers—procurement, subsidies, sovereign capabilities, or strategic partnerships—provide a menu of options to support.

Australia’s challenge is to decarbonise without compromising national security. This means ensuring the vital transition to renewables doesn’t introduce more vulnerabilities into critical infrastructure, turning clean climate solutions into dirty national security liabilities. Australia is facing its next Huawei 5G moment, this time across the entire green transition. To safely modernise and decarbonise its critical infrastructure, the country needs sharper assessment, deeper due diligence and a unified national approach that considers not just emissions, but exposure.

Let’s diversify our space partnerships—and build some self-reliance

Australia’s long-term interests in space are best served by independent capability, diversified international partnerships and a civil-led strategy that reflects national priorities.

As global competition intensifies, Australia must avoid tying its trajectory to the political cycles or slogans of other nations. Instead, we should strengthen domestic capability, embrace a wider array of partnerships, and lead with values of transparency and collaboration.

First, overreliance on the United States carries serious risks. US space policy is prone to abrupt shifts. The Trump-era emphasis on ‘planting the flag’, ‘winning in space’, and space dominance contrasts sharply with earlier US rhetoric around ‘inspiration’ and ‘peaceful exploration’.

Australia cannot afford to tether its space future to transient slogans of dominance. Attaching our ambitions to this political cycle threatens stability for Australia’s space sector. A diversified posture, making use of the low costs of the Indian Space Research Organisation, the governance models of the European Space Agency and the technical innovation of the Japan Aerospace Exploration Agency, would insulate Australia from such volatility. For instance, Australia’s partnership with the Indian agency on navigation satellites demonstrates how non-US collaboration can serve both strategic and economic needs.

Achieving an Australian launch capability is rightly seen as a national priority. A nationally driven launch strategy could prioritise dual-use smallsat constellations for disaster monitoring, climate surveillance and secure communications. These applications would support civil and defence needs. While costs are real, they are a fraction of the long-term strategic penalty of dependency, particularly during crises, when foreign launch may be denied or delayed.

Third, the US Artemis lunar exploration program should not dominate our strategic vision. In a March article on Australian space policy, ASPI senior analyst Malcolm Davis frames Artemis as a singular opportunity, and participation does offer tangible benefits: access to advanced technology, increased industry visibility, and potential tech transfer. But Australia should also pursue complementary partnerships with countries whose programs also align with our goals. Engagement must be strategic, not deferential.

The defence collaboration is important, but Australia’s space agenda must go further. We do have a general policy direction for civil space, in the Australian Civil Space Strategy 2019–2028, but its implementation has been uneven, and recent funding cuts suggest waning commitment. A more integrated and updated national strategy is needed to align civil, commercial and defence priorities and ensure consistent investment. It should support national broad priorities, such as agriculture, climate resilience, bushfire response, regional development, and deep space science. A civil-led framework would enable a more inclusive and adaptable space economy.

Greater cooperation with such partners as the Indian and European agencies would open access to projects that support these goals. India’s Chandrayaan and Gaganyaan missions demonstrate innovation on limited budgets. Europe’s institutional models offer experience in collaborative governance and peaceful norms, a necessary balance as outer space becomes increasingly contested. On the military side of policy, we should be cautious in promoting space-control capabilities. Implementing them risks normalising a destabilising space arms race.

As a signatory to the UN Sustainability Guidelines, Australia has already chosen a different path, one where leadership means restraint as much as resilience. The pursuit of space deterrence must not come at the cost of Australia’s resistance to an arms race. We are well placed to lead by example through transparency, diplomacy, and responsible behaviour.

The case for integrating space into national defence is compelling, but it must not overshadow Australia’s broader strategic interests. Our future in orbit requires investment in independent capabilities, engagement with diverse partners, and a resilient, end-to-end ecosystem.

You call that a defence industry?

Australia’s defence manufacturers are essentially a cottage industry, with the average supplier employing only 13 people and achieving net annual sales of about $2.2 million.

These averages, drawn from the annual review of the industry by the Australian Bureau of Statistics, obscure the contribution of the major suppliers, such as BAE Systems, Lockheed Martin and Thales, but also underline the challenge of scaling up the domestic contribution to defence capability.

The typical manufacturer supplying Defence would be classed by the ABS as either a small (5 to 19 employees) or medium (20 to 199 employees) business enterprise.

While just under 70,000 people are employed across 5,500 private businesses supplying Defence, most are in services sectors. They keep the department ticking over, rather than contributing to the acquisition of new military capabilities.

For example, 24,400 of them work in information technology, legal, accounting and other professional services; 13,300 in construction; 4,100 in transport and warehousing; 2,900 in administrative support and 2,800 in education and training.

Only 11,400 workers are employed by 904 manufacturing businesses supplying Defence. These businesses include many highly innovative firms working on advanced  technologies in specialised niches.

The recently announced first round of defence industry development grants illustrates the typical scale of the sector. The Western Australian engineering firm Veem, which makes marine propulsion and stabilisation systems and has about 180 employees, received a $1 million grant to help buy a  machining tool and scanner for making propellers.

Queensland-based space technology start-up Black Sky Industries received $910,000 to purchase mixing tanks for making solid-rocket propellant. Victorian firm Total Precision Products, which has about 80 employees, received $491,000 for highly precise machining equipment.

The round of grants extended to 58 firms for a total of $16.5 million. The scheme is capped at $170 million over four years, with in batches every two to three months.

In the war in Ukraine, small and medium enterprises have made outsized contributions to military firepower, notably through development of drone technology. Three of the recipients in the first round of defence industry grants were involved in drone or counter-drone technology.

A common complaint among small and medium enterprises is that they face difficulty in dealing with defence procurement practices that have evolved to suit the needs of the prime contractors. The focus of the new industry development grants on this sector is therefore welcome.

However, the scheme is tiny compared with the Defence capability acquisition program, which is approaching $20 billion a year. A similar amount is spent sustaining equipment that is  already in service.

The lack of scale undermines the idea that boosting defence manufacturing would have multiplier benefits for the wider economy. Domestic manufacturing contracts with Defence represent 1.3 percent of the national manufacturing value-added, but with the decline of the importance of manufacturing in the last two decades, they contribute just 0.07 percent of GDP.

The ABS shows that the value-added (a measure of production, sale value less inputs value) on manufacturing contracts for defence was $1.96 billion last year. Of this, $1.5 billion was from the manufacture of transport equipment, while $275 million was on machinery and equipment, $29 million on clothing and footwear, $12 million on furniture and $8 million on polymer and rubber products.

Defence spending on manufacturing is strongly skewed to South Australia due to its role in shipbuilding. The state generates 35 percent of the value added in Defence manufacturing contracts, although it accounts for only 6 percent of the value added in manufacturing nationwide.

South Australia’s share is followed by 23 percent in New South Wales, 13 percent in both Queensland and Western Australia, and only 8 percent in Victoria.

Defence spending with local suppliers has been rising. The value added from manufacturing contracts with Defence has increased at 7.7 percent a year for the past four years.

While the focus of the military capability acquisition program is on hardware and manufacturing, some services sectors, such as information technology, engineering and design, also contribute.

The value added from information technology contracts with Defence has risen by 10.7 percent in the past four years. It reached $1.93 billion last year, which is only slightly less than manufacturing suppliers’.

The net Defence sales of other professional service providers was $3.5 billion. This has risen by 14.5 percent annually for the past four years, possibly boosted by preliminary work for the AUKUS nuclear powered submarine project. Defence is an important customer for the professional services sector, accounting for 2.8 percent of its national value added.

The construction sector is a big defence supplier. Building construction for Defence added $900 million in value last year, while heavy engineering added $500 million and construction services $175 million. However, defence contracts account for less than 1 percent of value-added by the national construction industry.

Taiwan has 12 diplomatic partners left. Who’ll drop it next?

Beneath Taiwan’s high-profile fight for global recognition lies a parallel contest in capitals scattered across the Caribbean and the Pacific. This is Beijing’s relentless campaign to isolate Taiwan diplomatically—country by country—until Taipei is left with no country that formally recognises it and no international voice. Since 2016, Taiwan has lost the recognition of 10 countries to China; just 12 remain. The question is not whether that number will fall again, but which will be next.

In the 1970s, the United States, Australia and others switched recognition to China, signalling Taiwan’s diplomatic marginalisation. Though many maintain informal ties, the lack of formal recognition fuels a perception that Taiwan’s status is an unresolved question of the international order—an ambiguity that Beijing exploits to isolate it further.

In line with Beijing’s goals, every further diplomatic defection strengthens the perception that Taiwan is not a legitimate state but a breakaway province awaiting inevitable reunification. Each loss weakens Taiwan’s ability to advocate in international forums, reinforces Beijing’s so-called One China narrative, and signals to other countries that siding with Beijing is both lucrative and inevitable.

So, who is currently most at risk of switching recognition under pressure?

Taiwan’s 12 diplomatic partners and their risk of switching recognition to the People’s Republic of China. Source: ASPI’s State of the Strait Database.

Haiti’s recognition is arguably the most precarious. Once Taiwan’s strongest foothold in the Caribbean, Haiti today is a failed state in all but name. With no functioning government, a shattered economy, and cities under the control of armed gangs, Haiti is desperate for security assistance and international support. In recent months, Haitian officials openly engaged with Beijing, hoping that China—as a permanent member of the United Nations Security Council—will back a multilateral security mission. That engagement already skirts the diplomatic line of recognition.

While Taiwan continues to provide modest development aid, it cannot offer Haiti what Beijing can: immediate cash, infrastructure support and a vote at the UN to authorise a security mission aimed at stabilising the country. In Haiti, where authority is fractured and whoever emerges next in Port-au-Prince will be looking for fast and visible gains, switching recognition to the China is more than plausible; it’s likely.

Next in line is Saint Lucia, a country with a history of flip-flopping between Taipei and Beijing. After switching to China in 1997, it restored ties with Taiwan in 2007. But that reversal has always carried an air of fragility. The current government, led by the Saint Lucia Labour Party, has signalled a more pragmatic approach driven by the island’s reliance on tourism and agriculture, which makes it susceptible to external economic pressures. Saint Lucia recently sent a representative to a forum involving China and the Community of Latin American and Caribbean states in Beijing. That was a diplomatic olive branch that Beijing welcomed.

While Taiwan’s relationship with Saint Lucia remains cordial, the signs are ominous. China has previously offered generous inducements to Caribbean nations, including debt write-offs, Belt and Road investment and development loans. If Prime Minister Philip J Pierre judges that China can offer more than Taiwan—or simply wants to diversify Saint Lucia’s options—a shift could come with little warning. Among Taiwan’s Caribbean diplomatic partners, Saint Lucia appears to be the state that is most actively hedging.

Even the Holy See, Taiwan’s sole diplomatic partner in Europe, presents a unique and symbolic risk. Although the Vatican has maintained warm ties with Taipei for decades, its ongoing dialogue with Beijing over the appointment of bishops has long raised fears of an eventual diplomatic shift. A broader agreement on religious affairs could increase pressure on the Holy See to sever formal ties with Taiwan. While the late Pope Francis was notably more open to rapprochement with Beijing, it remains too early to gauge whether his successor, Pope Leo XIV, will continue down that path or instead recalibrate the Vatican’s approach to China.

Eswatini, Taiwan’s last remaining ally in Africa, also sits on shaky ground. Its loyalty hinges entirely on the personal support of King Mswati III, one of the world’s last absolute monarchs. Taiwan has cultivated this relationship for decades, supporting health and education initiatives and extending symbolic gestures of friendship. But cracks are showing. In 2023, Eswatini quietly signed its first major infrastructure deal with a Chinese state-owned company—without recognising Beijing. This kind of transactional engagement may be a prelude to something more formal. What makes Eswatini especially vulnerable is the opacity of its decision-making. If King Mswati decides that China offers more—whether in aid, political backing or regime security—the switch could be sudden.

Guatemala and Paraguay—two of Taiwan’s key Latin American diplomatic partners—are showing signs of strain. Guatemala’s new president, Bernardo Arévalo, supports Taiwan but faces political instability that China could exploit with promises of investment and influence. In Paraguay, President Santiago Peña remains pro-Taiwan, but pressure from the powerful agricultural lobby and a competitive opposition open the door to a future shift, especially if economic conditions worsen.

In contrast, Taiwan’s Pacific diplomatic partners—Tuvalu, Palau, and Marshall Islands— have held firm against Beijing’s pressure due to shared democratic values, strong US ties, and long-standing development support from Taipei. Unlike China’s often debt-driven offers, Taiwan’s aid is seen as consistent and transparent. These countries are also wary of Beijing’s coercive tactics, such as Palau’s tourism ban, and current leaders have shown strong personal commitment to maintaining ties with Taiwan. While these nations have resisted Beijing’s overtures so far, Beijing is patient—and persistent.

Taiwan, to its credit, has responded by doubling down on high-level engagement, offering targeted development aid, and encouraging informal partnerships with democracies. But the stark reality is this: in the contest between Taiwan’s limited resources and China’s coercive toolkit, the ground is shifting. The next defection may not be a surprise; it may be confirmation that Beijing’s long game is working.

State of the Strait is available here. Governments and organisations can contact [email protected] to discuss co-funding this project and gaining access to the entire State of the Strait database.

The hole in Canada’s intelligence system is ASIS-shaped

A hardy perennial in Ottawa politics is whether Canada should create a foreign intelligence service equivalent to the United States’ Central Intelligence Agency (CIA) or Britain’s Secret Intelligence Service (SIS, aka MI6).

If it does, it should note that collecting foreign intelligence abroad through personal contact with human sources—humint—can be consistent with liberal-democratic norms and can be done on a middle-power budget. The model is the Australian Secret Intelligence Service (ASIS).

Canada already collects humint domestically. Gathering intelligence about matters abroad is likewise nothing new to it. The Canadian Security Intelligence Service (CSIS) can collect intelligence without geographical restriction—but only intelligence concerning actual or suspected threats to Canada’s security.

Security intelligence is narrower than foreign intelligence, which Canadian law defines as ‘information or intelligence about the capabilities, intentions or activities of a foreign individual, state, organization or terrorist group, as they relate to international affairs, defence or security.’

Canada’s signals intelligence (sigint) agency, the Communications Security Establishment, has a mandate to collect this broader category of intelligence. CSIS, however, may collect foreign intelligence only inside Canada, only at written ministerial request and, if concerning an individual, only on non-citizens. No Canadian intelligence service has ever had a mandate to collect foreign humint abroad.

The assumptions behind previous decisions not to create such a service have become questionable.

Outside the cursory efforts of its foreign ministry, Canada depends wholly on allies for foreign humint, mainly the US. That makes sense if one assumes that US and Canadian interests compete in few areas, that Washington’s foreign intelligence priorities are also Ottawa’s and that the US will remain tolerant of Canadian dependence. This arrangement provides far more humint than Canada could collect by itself, while the US foots the bill and takes any reputational damage.

If those assumptions no longer hold, Canada should look to develop a foreign humint capability. This would entail substantial, though not unmanageable, expense. Something on the scale of a Canadian CIA would be unaffordable, but the most appropriate model within Canada’s means has existed in Australia for 73 years.

ASIS is costing Canberra $718 million this financial year due to a once-in-a-generation modernisation program. That’s similar to what Ottawa already spends on CSIS, and it’s still significantly less than either country’s investment in sigint. It’s true that initial set-up costs would be considerable. A new service would require premises, talent and bespoke institutional machinery. All told, it might take 10 years to reach maturity.

An arguably easier interim option would be expanding CSIS’s mandate to include a foreign intelligence function. It would be then like the New Zealand Security Intelligence Service, collecting foreign intelligence domestically and, presumably, abroad. But the Australian model, the ASIS model, is more responsive to the longstanding concerns of Canada’s intelligence policy.

Those concerns are not just about cost or potential loss of face, although the then government cited both in 2007 when it reneged on an election promise to create a foreign intelligence service.

Canada’s hesitancy about humint is based on concern for liberal-democratic norms. Its modern intelligence system was born in scandal, after the 1981 McDonald Royal Commission found that officers of the security service of the Royal Canadian Mounted Police (RCMP) had flagrantly broken the law in the line of duty. The commission’s resulting recommendations led to the withdrawal of the RCMP’s national security mandate and the creation of CSIS in 1984, separating intelligence collection from law enforcement.

While the McDonald report did not recommend for or against establishing a foreign intelligence service, it was clear about what one should look like, above all that it should be separate from CSIS. This was, firstly, to prevent the habits of foreign humint collection (bluntly put, empowering public officials to break other countries’ laws) from spreading into domestic security work. Secondly, the country needed to avoid the perceived dangers of having a monolithic security apparatus—precisely the problems that had arisen with the RCMP.

The report further recommended that such a service should have a legislated charter, be forbidden from engaging in subversion or paramilitary activity, should be subject to executive and parliamentary review and should engage solely in intelligence collection, with assessment done elsewhere.

That hypothetical service is almost a precise description of ASIS as it has functioned since the passage of the Intelligence Services Act 2001. The ASIS model is right for Canada because Australia’s intelligence apparatus happens to have rigorously (if unconsciously) implemented the McDonald commission’s recommendations, and with them the principled separations intended to balance intelligence needs with parliamentary democratic norms.

Recognising the economic potential of digital infrastructure resilience

Australia needs to coordinate national digital infrastructure investment and resilience or risk falling behind in security and missing economic opportunities.

For the past decade, Australia has focused outward on projects such as funding regional telecommunications infrastructure and infrastructure protection initiatives, while neglecting to coordinate such development at home.

This gap is especially visible in the case of the management and protection of Australia’s subsea cables.

Such cables carry nearly all of Australia’s international data traffic, and a simultaneous break across several cables on either side of the country would cause great disruption. Yet, despite rising digital dependence and a worsening threat environment, no new cable protection zones have been created. Consequently, companies laying many newer cables have squeezed them into existing protection zones, increasing the risk that a single incident—such as a dragged anchor—could take out several cables at once.

The Australian Communications and Media Authority is consulting on a proposed expansion of the Southern Sydney Submarine Cable Protection Zone. The update was initiated by a cable owner, Google subsidiary Perch Infrastructure, seeking coverage for its planned Tabua cable. If approved, this would be the first update of Australia’s cable protection zones since they were established nearly two decades ago.

The submarine cables industry has well regarded Australia’s cable protection regime for criminalisation of damage to cables and the ease of access to repair cables. While our regime is still held in high regard, we are no longer in an era where regulatory leadership alone can shield our digital backbone. We are in an era of intensifying geopolitical tension and environmental risk. If the proposed protection zone expansion is approved, Australia’s cable infrastructure will become marginally more resilient. But resilience built one cable at a time is not a strategy.

Submarine cables are infrastructure assets that carry enormous strategic and economic value. They enable digital trade, cloud services and artificial intelligence—sectors essential to Australia’s global competitiveness. They are also increasingly being seen as targets of economic warfare. If Australia wants to position itself as a regional digital hub and attract the investments and jobs that come with them, it must treat connectivity as a national economic priority. When the goal is to drive economic benefit from telecommunications, security becomes a necessary enabler.

Right now, that’s difficult for Australia to achieve, as governance is fragmented across multiple departments and levels of government with no single body responsible for aligning economic, security and infrastructure objectives.

Digital economy sits within the Industry, Science and Resources portfolio. The Cable Connectivity and Resilience Centre of the Department of Foreign Affairs and Trade, framed as part of Australia’s contribution to the Quad, focuses outwards on regional engagement in the Indo-Pacific. Home Affairs oversees critical infrastructure security under the Security of Critical Infrastructure Act 2018 but is not assigned a broader coordination role. And the Department of Infrastructure, Transport, Regional Development, Communications, Sport and the Arts is domestically focused on communications and infrastructure but appears under-resourced to lead a national telecommunications resilience agenda. Its current focus remains disaster resilience.

Notably, sub-federal entities such as the Northern Territory government and Sunshine Coast Council are pursuing an economic agenda. Subsea cables and data centres, for example, form part of the Sunshine Coast’s regional economic development strategy that aims drive a $33 billion regional economy by 2033. Australia needs a mechanism to align these efforts, set priorities and make decisions.

International submarine cables are only one part of the equation. Domestic connectivity is just as critical. Planning must consider not just where cables land, but how they connect across the country. That includes closing gaps in terrestrial fibre and ensuring the network is resilient and future-ready.

Data centres—now common subsea cable landing destinations—must be integrated into national infrastructure planning. Data centre operators will build their hyperscale facilities near cables landing points. Government should incentivise the use of renewable energy to power and cool these energy-intensive facilities. At the same time, we need to train and grow the workforce required to build and manage this infrastructure.

Without a unified approach that connects submarine cable protection to terrestrial fibre, power, cooling and workforce planning, we risk compounding vulnerabilities and missing economic growth opportunities.

The lack of government funding for a branch cable that would connect Tasmania to the planned commercial SMAP cable linking Sydney, Melbourne, Adelaide and Perth reflects a failure to prioritise nationally-significant digital infrastructure. Without forward planning and coordination, more opportunities will be missed.

The current consultation process should prompt more than redrawn boundary lines. It should trigger a national conversation about digital resilience, economic opportunity and coordinated government action. Without national coordination, we are not prepared for a major telecommunications disruption and risk squandering the economic opportunities that come with being a digital technology hub.

Without coordinated leadership, we risk both greater vulnerability and lost economic opportunity. Australia needs a national plan that defines objectives, sets priorities and gives one agency the mandate to lead.

Course correction: PAC-3 would be a better naval interceptor for Australia

The United States is moving to integrate its land-based PAC-3 surface-to-air missile onto warships. This effort presents an opportunity to enhance key Australian Defence Force capabilities and support sovereign R&D and industry—but quick work is needed.

Air and missile defence (AMD), the job of the PAC-3, is vital. It includes protection against small drones, aircraft, cruise missiles and ballistic and hypersonic missiles. Shielding against the last two is grouped as ballistic missile defence (BMD).

BMD is particularly important and difficult since ballistic and hypersonic weapons are fast, manoeuvrable or both. They’re hard to intercept. Further, they are proliferating around the world. Once the province of great powers, now even factions like the Houthis have ballistic missiles, even some that can home on ships. China has one of the largest ballistic and hypersonic missile forces.

The ADF has no BMD capability. One will arrive only with delivery of long-range (250 km plus) SM-6 missiles that Canberra ordered in undisclosed numbers in 2024. The $7 billion arms package also included SM-2 missiles for use against aircraft and cruise missiles. The navy’s Hobart and Hunter class vessels will carry these weapons in Mark 41 launchers and control them with Aegis command systems. This is essentially the same standard setup as the US Navy’s.

Yet the combination of SM-2s and SM-6s has important limitations for AMD and especially BMD. Firstly, the missiles are derived from a 1960s design and so lack key modern technologies, such as lateral rocket thrusters that quickly throw a missile on to a new course, for defeating highly manoeuvrable targets.

The SM-2 has no BMD capability, and the SM-6 is unproven against complex threats, having had limited operational use, mainly against simpler Houthi weapons. (It worked.) Also, the supply of the SM-6 is constrained, with annual production now around 125 rounds and planned to rise to 300 by 2028. The then-US Navy secretary, Carlos Del Toro, said in April 2024 the service had fired off more than US$1 billion of missiles in only a few months, so we may wonder when Australia will receive its SM-2s and SM-6s.

A promising solution is to stick with buying the SM-6 for long-range defence but use the PAC-3, a US Army weapon used in the Patriot system, instead of the SM-2. The US Navy is thinking of doing the same. The PAC-3 entered service in the 1990s in a configuration called CRI that included modern technology (such as lateral thrusters) for advanced BMD and AMD tasks. The version that would replace the SM-2 would be the more recent PAC-3 MSE, which would offer comparable range (120 km plus) and occupy the same space in a Mark 41 tube.

The PAC-3 has demonstrated extensive BMD success, with PAC-3 MSEs intercepting the most modern Russian weapons in Ukraine, including hypersonic weapons that the Kremlin calls unstoppable. In response to demand from Ukraine and  the spread of such threats elsewhere, the US has expanded today’s PAC-3 MSE production to 600 rounds per annum, rising to 650 in 2027.

The potential to replace the SM-2 led Lockheed Martin, the PAC-3 manufacturer, to work in earnest from 2023 to integrate the PAC-3 MSE with naval systems. It wanted to gain the US Navy’s attention. This work proceeded quickly, with 2024 seeing an MSE’s first flight from a launcher derived from the Mark 41 and integrated with a virtual Aegis system. This was successful enough for Washington to include USD75m of funding for continuing the work in 2025.

All this presents a two-phase opportunity for Australia. Firstly, there’s the chance to contribute to PAC-3 MSE integration effort. This aligns with the Guided Weapons and Explosive Ordnance (GWEO) Plan, which includes a focus on expanding Australian missile research, development and production capability. Yet with Lockheed’s naval PAC-3 work proceeding quickly, Canberra would need to move fast.

Another option might be to fund PAC-3 CRI missile integration, noting that design is still in service, is BMD capable and small enough to fit four into one Mark 41 tube (which would hold only one PAC-3 MSE or one SM-2). Alternatively, ensuring PAC-3 works well with the Hunters’ CEA radars would benefit the missile’s and radar’s export prospects.

In the second phase, Canberra should cancel the freshly ordered SM-2 and buy PAC-3 MSE instead if Lockheed Martin successfully integrates it with naval systems. Further, Australia should seek to start PAC-3 production under GWEO to meet our needs and those of other nations, noting that 12 use the SM-2 and nearly 20 use the Patriot.

A final matter is cost: who will pay for all this? Well, for phase one the US is covering most of the work, and even matching Washington’s investment (around $118m) is spare change in Australia’s $59bn defence budget. For phase two, there’d be money available from the SM-2 portion of the 2024 arms deal (minus any contractual penalties), plus options such as realigning funds from behemoths like the AUKUS submarine program.

Pursuing the PAC promises to affordably provide a much more capable ADF, and more developed Australian GWEO capability, in short order.

With a new administration, South Korea should strengthen security ties with Australia

As South Korea’s new administration takes office, the country has the opportunity to recalibrate its alignments in the Indo-Pacific, especially around closer defence and technology cooperation with Australia.

The strategic rationale for this becomes stronger as war risks rise and as the United States looks less certain as a security backstop for both countries. South Korea and Australia are increasingly bound by converging security interests, democratic values and a shared commitment to maintaining a regional rules-based order.

South Korea’s change of government, following Lee Jae-Myung’s win in the 3 June presidential election, is the occasion for the two countries to consider deepening their relationship.

Both confront an increasingly assertive China, an unpredictable US regional posture, and the enduring threat of North Korea’s advancing nuclear and missile capabilities. Both recognise that emerging technologies, supply chain vulnerabilities and grey-zone coercion are redefining the strategic operating environment. These shared challenges have elevated the relationship from peripheral engagement to a potential axis of middle-power coordination in regional security affairs.

The partnership has boundaries. Australia’s closest defence-technology and intelligence ties remain with its Five Eyes partners, and many will question whether South Korea could join Australia in a military contingency involving, especially since Japan is viewed as a more natural ally in such a scenario.

Differences in strategic culture, defence-industrial capabilities and established intelligence-sharing frameworks impose genuine constraints on how far bilateral cooperation can go. But the partners can to some extent work around these legacy arrangements—for example, by focusing on combined exercises in emerging technology domains, interoperability of critical systems, and coordinated efforts to shore up vulnerable supply chains. This would also support growing trust and more robust collaboration.

Bilateral defence cooperation between Australia and South Korea already sits on strong foundations. Since 2013, a regular meeting of their foreign and defence ministers has provided a platform for dialogue. The elevation of the relationship to a Comprehensive Strategic Partnership in 2021 further institutionalised this trajectory. Cooperation now needs to evolve from dialogue to capability, linking strategic intent with tangible joint outcomes. South Korea and Australia should prioritise frameworks that enable deeper interoperability, enhanced intelligence sharing, and joint operational planning. Regular participation in large-scale military exercises—such as Talisman Sabre and Ulchi Freedom Shield—must be expanded to encompass multi-domain scenarios, including cyber and space contingencies.

Defence industrial collaboration is particularly promising. Hanwha Defense’s significant investment in Australia—largely facilitating the production of advanced artillery and infantry fighting vehicles—signals the potential for long-term industrial integration and co-development. For the new South Korean administration, promoting this model in relation to other technologies, such as AI-enabled systems, cyber resilience platforms, and undersea capabilities, could serve both strategic and economic objectives. Joint research and development initiatives, supported by coordinated export policies and regulatory harmonisation, would deepen mutual defence autonomy while contributing to regional capability aggregation.

Multilateral frameworks are force multipliers. South Korea’s participation in initiatives such as the Proliferation Security Initiative and Operation Argos demonstrates its willingness to contribute to collective maritime enforcement and counter-proliferation efforts. Canberra and Seoul also share stakes in emerging minilateral arrangements, particularly as AUKUS expands its agenda under Pillar Two to encompass advanced technologies. While full South Korean participation in AUKUS remains improbable, targeted cooperation in AI, quantum computing, and electronic warfare could align with South Korea’s industrial strengths and reinforce coalition resilience in the face of rapidly evolving threats.

Emerging domains further underscore the strategic logic of collaboration. In cybersecurity and space, both countries face growing pressure to secure critical infrastructure and enhance strategic communications. Spending on small-satellite surveillance constellations, secure cloud computing, and joint cyber-training environments would build resilience and technological deterrence. South Korea’s advanced tech ecosystem and Australia’s intelligence integration with the Five Eyes network offer complementary advantages that can be leveraged to mutual benefit.

The new South Korean administration should seize this moment to elevate the relationship from cooperative intent to strategic interdependence. This requires more than just high-level summits or defence white papers. It demands institutionalised policy dialogue, joint capability planning, and integrated training pipelines for personnel across all services. It also requires political will to move beyond reactive hedging strategies and pursue proactive alignment based on shared interests rather than shared anxieties.

Security cooperation between South Korea and Australia would not supplant the centrality of the US alliance architecture, nor would it be meant to. Instead, it could serve as a stabilising pillar within a broader lattice of middle-power partnerships that strengthen regional deterrence, resilience and readiness. In an era where deterrence by presence and technological advantage increasingly shape outcomes, Seoul and Canberra must act not merely as observers of regional change but as architects of regional order.

If South Korea’s new government is to credibly project itself as an active middle power, it must look beyond the peninsula and invest in strategic partnerships that multiply both influence and capability. Australia, more than ever, offers such an opportunity. What remains is the political resolve to act decisively and the strategic imagination to build something enduring.

Australia and the EU should work with the South Pacific on AI

Australia and the European Union need to collaborate to promote the adoption of inclusive, safe and sustainable AI in the South Pacific.

While the United States and China compete for global AI leadership, the EU has opened an alternative rights-based route in the ongoing battle of AI norms, which seems to resonate with Australia’s vision and interests.

These conversations are making their way to Pacific island countries that are starting their AI adoption journeys. The technology could help address some of their most pressing challenges, but as a region at the crossroads of geopolitical influences they will have to take their pick in the battle of AI norms.

Pacific island countries are starting to implement digital strategies and have ‘a late-mover advantage to selectively adopt best AI practices from the US, China and the EU’, according to a report by the AI Asia Pacific Institute. The Pacific is already a geostrategic battlefield of the China-US rivalry and AI emerges as the latest arena for influence.

AI will be at the top of local agendas as it offers Pacific countries unique opportunities to address non-traditional security challenges. It can aid the fight against illegal, unreported and unregulated fishing; support research on climate change; improve natural disaster management; and even preserve culture through revitalisation of indigenous languages.

Pacific island countries could also be affected by the lesser-known consequences of AI, particularly its environmental impact. Energy-ravenous AI systems drive up power demand, exacerbating climate change effects. The region is already on the frontline of global warming. AI adoption should be accompanied by a rapid transition to renewable energy sources.

Pacific island countries face a choice of existing AI models to draw from.

The US has shown the world its focus is now on retaining global competitive edge in AI at all costs, resorting to deregulation, tariff barriers, trade bans, and diplomatic pressure—although high-end Nvidia chips still make their way to China through intermediate destinations.

China, meanwhile, opts not only for an interventionist framework, but also for an insidiously pragmatic approach. China has chosen to develop smaller and more specialised language models. Using unconventional tactics including smuggling and espionage—for which a Google engineer faces charges in the US—Beijing relies on supposedly smaller budgets but expects strategic and targeted impact.

Between these two geopolitical and normative poles, the EU emerged last year as a creative force. In its search for strategic autonomy and to appear as a credible normative power, it adopted the AI Act after months of negotiations. This safety legislation introduces different obligations for AI products and services sold on the EU market, adjusted to their level of societal risks. To avoid stifling innovation, the EU paired the legislation with an initiative to mobilise €200 billion for AI development.

Pacific island countries could be tempted to draw inspiration from EU norms. Certainly, the process is ongoing in the French overseas territories. If the EU’s AI Act eventually becomes applicable there—which first requires a legal translation into domestic French law first, as happened with the EU’s Digital Services Act and General Data Protection Regulation—this could serve as a practical and peaceful bridgehead in the broader region.

Australia is also acting in this battle of AI norms in the Pacific. For example, the Department of Foreign Affairs and Trade organised a series of side events on AI adoption in the Asia-Pacific at the Paris AI Action Summit.

In this situation, and as raised last week by the President of the European Commission, it is necessary for Canberra to work more closely with Brussels, a partner with a similar vision of what AI governance should look like.

For Australia, defence-related AI is covered under the AUKUS agreement, but those partners diverge on broader governance approaches. For example, Australia signed up to the Paris AI Action Summit statement on inclusive and responsible AI, but the US and Britain did not. The EU did.

Moreover, Australia seems to be on the path to developing its very own AI legislation, modelled after the European risk-based approach while simultaneously focusing on interoperability and technical standardisation.

Pacific island countries could also decide to work towards a consensual regional approach to AI governance. Indigenous technologists in Australia and New Zealand are already making a push to include indigenous data sovereignty frameworks in global AI governance discussions. The next Pacific Islands Forum in September this year could be the platform for such discussions, as AI is recognised as a driving force for change in the 2050 Strategy for the Blue Pacific Continent.