Following France’s furore over the September 15 announcement of AUKUS—an Australian-British-U.S. security pact that entails Canberra scrapping a 2016 major submarine contract with Paris—one might wonder where the storm over the Australian fallout leaves France’s Indo-Pacific strategy.

French defense contractor Naval Group may have lost a $66 billion deal to the United States, but it is a fact that France has no intention of withdrawing from a region it has long considered one of its priorities.

The country’s presence in the Indo-Pacific predates that of many major powers, including the United States. La Réunion, a département in the Indian Ocean, became a French territory as early as the eighteenth century. Today, with a 859,000-strong population, it still sends seven members of parliament to the National Assembly in Paris. Even the tiny Wallis and Futuna in the Pacific have their own French members of parliament. So do the other French territories in the region.

The recent and still unresolved crisis raises three related questions.

The first question is: where do French-Australian relations go from here and where does Paris ultimately want to position itself within this huge region?

In the past two decades, France has indeed gradually transformed its historical presence into strategic interests. The Indo-Pacific, says the government in its newly revised strategy of August 2021, “has become a geopolitical and geo-economic reality. The global economy’s centre of gravity has shifted from the Atlantic to the Pacific.”

In 2018, President Emmanuel Macron visited the region to consolidate ties with allies and signed a strategic partnership with Australia. He recently declared France’s aim “to help make the Indo‑Pacific a free, safe and open space, which has high ambitions in terms of oceans, the climate and biodiversity, and is integrated with regard to infrastructure and human exchanges.”

Such great intentions will now have to be revisited, together with what promises to be a bitter legal battle with Australian Prime Minister Scott Morrison’s government and advisers over the cancelled contract. Trust between the two countries will have to be rebuilt and France’s long-term relations in the region will have to extend far beyond Australia, to include countries such as India, Indonesia, and Vietnam.

The second question has to do with the EU’s pride. As leaders of the AUKUS countries decided to announce their initiative just a day before the EU planned to launch its own Indo-Pacific strategy, what were they thinking?

By blatantly ignoring the EU’s claims, they sent the wrong message to the Europeans, as France is undoubtedly the most active European country in the Indo-Pacific. The nation has an extensive maritime domain in the region in addition to 1.6 million citizens and a 7,000-men military presence—larger than that of all the other twenty-six EU member states combined.

France’s Indo-Pacific strategy partly inspired the Dutch and German strategies as well as the aforementioned EU strategy, which had been in the works for months. It will take time for U.S. President Joe Biden’s administration—now gifted with a new assistant secretary of state for European and Eurasian affairs, veteran Karen Donfried—to rebuild trust.

Although U.S. Secretary of State Antony Blinken’s meeting with Macron on October 5 in Paris paved the way for a better recognition of France’s role in the region, Europeans now understand Washington’s unilateral pivot toward the Indo-Pacific.

Despite statements about rallying like-minded democratic countries, the Biden administration failed to anticipate France’s reaction. This will have long-term negative consequences on the United States’ image and on transatlantic relations, already damaged by Donald Trump’s presidency.

Finally, the leaders of Australia, the UK, and the United States seem to have ignored the fact that some 280,000 French citizens living in New Caledonia will soon—most probably in December—decide by referendum whether they should remain part of France or not.

As New Caledonia is geographically one the closest territories to the Australian continent, this may affect the regional balance of powers. Should the territory become independent, it risks coming under strong financial and political pressure from China—not unlike Vanuatu, Fiji, Samoa, or Papua New Guinea, for example. Many of these countries have their own Chinese communities and were persuaded by China to join its Belt and Road Initiative.

Should the New Caledonian situation deteriorate in the future, Australia would have no choice but to get involved, and may not have the means to do so, unless it relies on the United States. Cooperating with France might be an option if both parties were willing to talk. Australia also awaits the critical signature of a free trade deal with the EU—now delayed by France.

Still, there might be a silver lining to this diplomatic crisis.

Ahead of the April 2022 presidential and legislative elections, politicians and analysts in France are debating the Indo-Pacific more than ever before. This means the strategy will move on. Macron has managed to make his country’s voice heard far beyond the transatlantic sphere on a major geostrategic subject.

On September 22, President Biden acknowledged the “strategic importance of French and European engagement in the Indo-Pacific region, including in the framework of the European Union’s recently published strategy for the Indo-Pacific.”

Back in Europe, Macron was also able to make his point about European defense at a summit in Slovenia. Fellow Europeans may not feel the urge to keep their distance from the United States, but there is a growing sentiment—including in France's neighbor Germany—that Washington’s new focus on the Pacific is not in line with EU interests. That is why France’s “third way” in the Indo-Pacific might not be such a bad idea after all.

This blog is part of the Transatlantic Relations in Review series. Carnegie Europe is grateful to the U.S. Mission to the EU for its support.