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S E C R E T CANBERRA 000454 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 05/11/2019 
TAGS: MCAP PREL AS CH
SUBJECT: DEBATE OVER DEFENSE WHITE PAPER 
 
REF: (A) CANBERRA 422 (B) IIR 6V 814 1105 09 
 
Classified By: Charge d'Affaires Daniel A. Clune. Reasons: 1.4 c) (d 
 
¶1.  (S/NF) Summary:  While public reaction to the 
government's long-awaited Defense White Paper's release on 
May 2 has been relatively muted, the opposition, media and 
academics have been debating the degree to which the 
perception of China's potential security threat influenced 
the document.  The Opposition, in addition to charging that 
the government has exaggerated the Chinese threat, has also 
questioned the government's ability to pay for the large 
equipment purchases called for in the paper.  Other observers 
view the Opposition's criticism as a cynical attack on a 
paper that largely reflects the views of the Coalition during 
the previous Howard government.  The head of the intelligence 
agency Office of National Assessments characterized reports 
of a split between the intelligence agencies and the Defense 
Ministry over the China threat as a "cartoonish 
characterization of a nuanced conversation."  End summary. 
 
SIGNIFICANT CAPABILITIES BOOST 
 
¶2.  (U) When the long-awaited Defense White Paper was 
released on May 2, Prime Minister Rudd described the defense 
build-up called for in the paper "the most powerful, 
integrated and sophisticated set of military capabilities" in 
Australia's history. The future defense force systems are 
impressive and will cost an estimated A$100 billion (U.S. $74 
billion) over the next two decades.  The paper calls for 
significantly augmented naval and air capabilities.  The 
submarine fleet, for example, will be replaced and doubled in 
size to 12.  There will be a new fleet of 11 frigates and 
air-warfare destroyers, equipped, like the submarines, with 
cruise missiles. The air force will get about 100 Joint 
Strike Fighters.  The army is also slated to add two more 
battle groups and the paper calls for sophisticated new 
missile, space and reconnaissance systems. 
 
CONTROVERSIAL REFERENCE TO CHINA 
 
¶3.  (SBU) Attention by politicians, media and other observers 
has been focused on several paragraphs under the heading "The 
strategic implications of the rise of China."   The paper 
notes that "by some measures, China has the potential to 
overtake the United States as the world's largest economy 
around 2020."  It goes on to state that in coming decades 
"China will also be the strongest Asian military power, by a 
considerable margin.  Its military modernization will be 
increasingly characterized by the development of power 
projection capabilities.  A major power of China's stature 
can be expected to develop a globally significant military 
capability befitting its size.  But the  pace, scope and 
structure of China's military modernization  have the 
potential to give its neighbors cause for concern  if not 
carefully explained, and if China does not reach out to 
others to build confidence regarding its military plans. 
China has begun to do this in recent years, but needs to do 
more.  If it does not, there is likely to be a question in 
the minds of regional states about the long-term strategic 
purpose of its force development plans, particularly as the 
modernization appears potentially to be beyond the scope of 
what would be required for a conflict over Taiwan." 
 
what would be required for a conflict over Taiwan." 
 
¶4.  (S/NF) This language, coupled with the maritime and air 
capabilities enhancement called for in the paper, point to 
China as Australia's primary regional threat.  Although 
Australian Defense Force Chief (CDF) Air Chief Marshal Angus 
Houston told the media that the Chinese did not express 
concern over the paper when briefed ahead of the paper's 
release, press reports and other reporting indicate Beijing 
reacted very negatively to the implication that it could pose 
a threat.  During a late April visit to Beijing to brief the 
Chinese, Deputy Secretary of the Australian Department of 
Defense and White Paper coordinator Mike Pezzullo was dressed 
down by Major General Jia Xiaoning, Deputy Director for 
Foreign Affairs in China's Defense Ministry, who demanded 
Australia make changes to the paper or suffer the 
consequences (ref B.)  (A subsequent request by Australia to 
host Hong Kong-based PLA officers on board Australian vessels 
was denied.)  Pezzullo's meetings with MFA and PLA official s 
were also characterized by similar frosty receptions. 
Pezzullo privately confirmed the account to the DATT on May 
¶7.  On May 6, the Global Times quoted Chinese Navy Rear 
Admiral Zhang Zhaozhong as attributing the expansion of 
Australia's military capabilities outlined in its White Paper 
to U.S. pressure.  In an effort to soften the perception that 
China was being singled out, Defense Secretary Nick Warner 
told the Australian Associated Press that rather than posing 
a threat, he and Houston viewed China "as an opportunity." 
 
OPPOSITION CHARGES CHINA THREAT EXAGGERATED 
 
¶5.  (C/NF) The Australian public reaction has been low key. 
The Opposition leadership, on the other hand, has slammed the 
paper both for its cost and for exaggerating the threat posed 
by China.  Opposition Leader Malcolm Turnbull, however, has 
found himself in the awkward position of attacking a paper 
with which, as one senior media observer told us, the Howard 
government would have been quite comfortable.  Turnbull has 
criticized the paper for being too focused on a major 
conflict with China: "Something most people would regard as 
being very unlikely and not realistic in the context of 
Australia's future relations and future strategy in the Asia 
Pacific."  Turnbull also declared that the government had no 
idea "how it is going to pay for this dramatic expansion in 
our military hardware."  Former Howard Foreign Minister 
Downer had earlier told us that Rudd was sending confusing 
signals in the White Paper, talking up the benefits of a 
growing relationship with China while promoting a hawkish 
view of Beijing's  military build-up (ref A). 
 
¶6.  (SBU) Conversely, others have criticized the Opposition 
for its position.  Executive Director of the Sydney Institute 
Gerard Henderson praised the White Paper but slammed 
Opposition leader Malcolm Turnbull for his claim the 
government is exaggerating the threat of China.  The Foreign 
Editor of the "The Australian", Greg Sheridan, wrote: 
"Opposition Leader Malcolm Turnbull ended up criticizing 
Rudd's defense policy from the left, saying it was too 
hawkish on China.  When that's the best the Liberals can come 
up with, the Rudd Government will lose no votes on defense." 
 
RIFT BETWEEN DEFENSE AND INTELLIGENCE COMMUNITIES? 
 
¶7.  (U) Just prior to the release of the Defense White 
Paper, articles in the Australian press reported a deep  rift 
had developed inside the defense and intelligence community 
over how to assess China's long-term capabilities  and 
intentions, including plans to acquire long-range submarines 
and aircraft carriers.  According to the reports, Defense 
Deputy Secretary Michael Pezzullo, principal drafter of the 
paper, prevailed with his view that China will eventually 
exercise its growing military power and challenge the 
long-held primacy of US military power in East Asia. 
Classified intelligence assessments prepared last year by ONA 
and DIO reportedly played down the risk of a major 
conventional war involving China and the U.S. over the next 
two decades, perceiving China's military build-up as largely 
a defensive response to the perceived threat of U.S. naval 
power in the Pacific. 
 
INTELLIGENCE CHIEF DENIES RIFT 
 
¶8.  (S/NF) In a April 24 meeting with the Charge and 
POLCOUNS, Peter Varghese, Director General of the Office of 
National Assessments (ONA - the analytical arm of the 
National Assessments (ONA - the analytical arm of the 
intelligence community that reports directly to the Prime 
Minister), dismissed press reports of a serious split between 
the defense and intelligence communities as "cartoonish 
characterizations of a nuanced conversation" between the IC 
and the Defense establishment.  Varghese explained that the 
defense establishment must produce scenarios that take into 
account all possible situations and then recommend force 
levels to meet all these contingencies.  By necessity, the 
defense analysts must include in their scenarios "low 
probability but high impact events" and make recommendations 
accordingly.  The intelligence community, on the other hand, 
deals in assessing a broad range of probabilities and does 
not recommend force or expenditure levels.  Varghese said 
that what is important is that there is "little divergence" 
in what the defense and intelligence communities see as 
China's motivations to influence its periphery and to prevent 
the U.S. from being able to militarily operate in defense of 
Taiwan. 
¶9. (C) Some media and local pundits erroneously seized on 
Secretary Gates' U.S. defense budget announcement in early 
April as evidence that the U.S. had downgraded the threat 
posed by China, claiming the budget reflected a shift in 
focus from conventional to non-conventional capabilities and 
ignoring U.S. explanations that it was primarily about 
bringing expenditures in Iraq and Afghanistan into the 
baseline budget. 
 
¶10.  (C/NF) COMMENT:  After the year-long lead up to the 
completion of the White Paper, it is perhaps not surprising 
that the release was anti-climactic, with very little public 
reaction to the paper's strategy or even cost.  Malcolm 
Turnbull, desperate for an issue that would dent Mr. Rudd's 
consistently high poll numbers, has not found one with his 
attacks on the paper's stance towards China.  Perhaps a more 
serious impediment to achieving the expanded force 
capabilities described in the paper is not political 
opposition, whether Mr. Turnbull continues to head the 
opposition or not, but rather the very high cost.  With 
widening budget deficits, defense will come under increasing 
pressure to economize, and governments may find it difficult 
to meet the White Paper's target of 3 percent real growth in 
defense spending to 2017-18 and 2.2 percent real growth 
thereafter until 2030.  Moreover, the expectation that the 
Department of Defense will be able to realize AUD 20 billion 
through a strategic overhaul of the Defense establishment may 
not be realistic.  The public may become more restive when 
the bills start arriving.  According to a poll released by 
Australia National University three days before the White 
Paper's release, over 70 percent of Australians oppose tax 
increases to pay for increased defense spending. 
 
CLUNE