Australia racks up biggest arms export deal: $1B AUD for Boxers to Germany

SYDNEY — Australia marked its largest defense export sale today after Germany’s parliament approved the purchase of more than 100 Boxer Heavy Weapon Carrier vehicles that will be built by Rheinmetall in Queensland.

“This is a significant milestone for Australia’s defence industry: worth over $1 billion [$660 million USD] to the Australian economy, boosting our sovereign defence industry and securing more than 600 direct jobs in Queensland alone, with even more through the supply chain,”  a statement from the Defense Ministry said.

Defense Minister Richard Marles claimed it “highlights a strengthening of the relationship between our two countries.”

To get some idea of the scale of this deal for the Lucky Country, Australia’s entire defense exports in 2020-21 were worth $2.6 billion, according to the Australian Defense Export Office.

Is this likely to lead to more mega-deals for Australian defense exports in the long run? That is not clear, argues Marcus Hellyer head of research at Strategic Analysis Australia, an Australian thinktank.

“It’s essentially a German company, a local subsidiary of a German prime that is building their own vehicle in Australia, relying largely on German components,” he said of builder Rheinmetall Defence Australia. “So, yes, it’s a good thing in that it’s creating jobs in Australia, and one assumes there’s some kind of benefit to, you know, Australian companies in the supply chain, but it’s a German company using its global essentially manufacturing capability to build stuff on contract to the German government.

“So, will it lead to more exports? Well, I don’t know. I guess if somebody in the world wants Boxers, they might buy from us since it seems pretty clear there isn’t enough capacity in Germany at the moment to build enough Boxers,” he said.

The Australian Army already plans to acquire 211 of its own Rheinmetall-made combat reconnaissance Boxers as part of its modernization program dubbed LAND 400 Phase 2, but in July Canberra announced South Korean defense giant Hanwah had won a multi-billion-dollar deal to supply its Redback infantry fighting vehicle over Rheinmetall’s Lynx for Phase 3. In the wake of that loss, there were concerns that Germany might back out of the Boxer deal, which had been signed by Prime Minister Anthony Albanese several weeks before during a visit to Berlin.

Those fears appear not to have come to pass, but Hellyer said there are still lessons to be taken from today’s announcement, namely that Western countries are trying to increase their “strategic depth” with production facilities in various regions around the world and that can lead to cross-national sales.

“Rheinmetall didn’t build a Boxer factory in Australia as an act of charity. They did it because we paid them to do it,” he said. “That gives them the capacity to now build stuff for Germany and that will mean that there will be jobs in Australia. So I guess it shows that if you build productive capacity, then there’s the potential for exports.”