With the AUKUS Deal Now Sealed, the UK's Rishi Sunak goes from Strength to Strength
The chaos of the past few years in British politics may be nearing an end with Prime Minister Rishi Sunak’s firm management of the ship. With the AUKUS deal, and a crisis averted over the Silicon Valley Bank debacle, things are beginning to look up for the United Kingdom.
It’s hard to judge which world leader had the toughest time this last week as the winds of war once again began to destabilise relations between the two greatest powers. While the US-China conflict remains mostly a war of words, Vladimir Putin’s Russia downed a US fighter drone in international air space over the Black Sea, and the collapse of the Silicon Valley Bank led to a massive global rescue operation to avert the collapse of tens of thousands of firms in the tech sector and, potentially, a financial crisis on the scale of that in 2008.
My choice for workaholic leader of the week goes to Rishi Sunak, the British prime minister. An unusual choice perhaps, but Sunak has been earning his relatively modest salary on both sides of the Atlantic in recent days. We saw his capacity for negotiation, learned while working at Goldman Sachs, and which distinguishes him from his two predecessors, the hapless Liz Truss and the disingenuous Boris Johnson.
For Australians, the most significant event involving Sunak was the summit between Prime Minister Anthony Albanese, United States president Joe Biden, and the UK leader on board the USS Missouri off the coast of southern California. It was there that they announced some of the detail of the AUKUS deal to supply Australia with nuclear powered submarines, following Canberra’s decision to abandon the procurement of French submarines as replacements for the Navy’s Collins class vessels. Predictably, China attacked the new defence pact as an act of aggression and President Xi Jinping promised to defend China with a “ring of steel.”
AUKUS was the main news in the Australian press. The deal involves a significant and unprecedented technology transfer from the US to Australia and the UK, with a proportion of the new submarines being built in both countries, and a hefty bill for the Australian tax payer.
Some Americans seemed surprised by the strength of Biden’s commitment to the Anglosphere. The Washington Post described the deal as potentially the most consequential defence technology partnership in modern history, noting that America has military bases in Japan and South Korea which are far closer to China. Gideon Rachman, foreign affairs columnist for the Financial Times quoted Sam Roggerveen of the Lowy Institute who asked, “Why is Australia buying a weapon expressly designed to hem in China’s Navy along its coastline and strike targets deep inside China’s territory? Australians should be asking themselves, Is this really who we are?’”
But it is a triumph for Sunak because Britain had no role in the original French submarine deal, and now has acquired valuable long-term export potential. The deal has boosted the prime minister’s plan to transform a flagging economy into a technological superpower. By midweek, he was back in Westminster sitting alongside Jeremy Hunt, his chancellor of the exchequer, as he made his Budget speech to excited Conservative MPs, telling the House that, contrary to previous forecasts, Britain would not be in recession this year and that inflation is forecast to drop from over ten percent to below four percent by the end of 2023. Among the welter of announcements were the hundreds of millions of dollars in handouts for the tech sector, especially in those fields where Britain has a lead in Europe, including wind power, carbon recapture, artificial intelligence, life sciences, and defence.
Last Friday, the day before flying to California for the AUKUS meeting, Sunak spent the day in Paris at a summit with French President Emmanuel Macron, a tricky meeting designed to repair the fractured relations between the two countries left by his two predecessors. Liz Truss had declared that she wasn’t sure whether Macron was “friend or foe.” By the end of the day the entente cordiale was restored, with Sunak publicly referring to the president as mon ami. He failed to get France’s agreement to take back asylum seekers crossing the channel to England by small boat, but he did get a five-year agreement for increased support for additional police and security along the Normandy coast, although at a cost to the UK of some £180 million a year.
When the prime minister woke up the next morning, he was confronted with the front page news in the Financial Times that the Silicon Valley Bank (SVB) had gone bust. He immediately realised that the collapse would have major implications for some 3000 fledgling and medium-sized companies in Britain’s important technology sector. In a busy day, including preparations for the defence summit, and finalising details for the upcoming budget, he and the chancellor discussed the implications of the insolvency for the British subsidiary of SVB with the governor of the Bank of England (BoE). They considered a managed sale of the UK subsidiary or, as a last resort, a state takeover. Over the next 24 hours, the BoE told Sunak of two potential “white knights” that had expressed interest in buying SVB UK, both from the United Arab Emirates.
By Sunday afternoon, the situation had changed. The two Arab parties had dropped out, but HSBC, one of Britain’s four major high street banks had shown more than casual interest. By this time, Sunak was on the long flight from London to San Diego, taking and receiving calls from officials and advisers on both sides of the Atlantic. He favoured the HSBC option; one person close to the negotiations told the Financial Times it was a good fit for the business while also reducing risk for British taxpayers. Still on the plane, just before midnight, Sunak spoke to Mark Tucker, HSBC group chairman to tell him how pleased he would be if HSBC took over the SVB UK operation. The deal was signed during the night and announced at 7am the next morning.
It is just four and a half months since Sunak moved into Downing Street; there is no doubt that he has transformed the spirits of the Tory party and shown himself well capable of governing with diligence and competence. He now has the opposition Labour Party a little less confident of winning the 2024 election, with Sir Keir Starmer acutely aware that he has much more to do to claim victory. Sunak also appears to have destroyed any hope that Boris Johnson has of a return to Downing Street. But he still faces many obstacles. The best hope for Sunak now is that British politics will settle down for an unusual period of stability.
Colin Chapman is a writer, broadcaster, public speaker, who specialises in geopolitics, international economics, and global media issues. He is a former president of AIIA NSW and was appointed a fellow of the AIIA in 2017. Colin is an editor at large with Australian Outlook.
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