After calling AUKUS "a stab in the back", French Foreign Minister Jean-Yves Le Drian announced on September 17 that President Emmanuel Macron had requested the recall of the French ambassadors to Australia and the United States. While France's relationship with the United States and the United Kingdom are starting to normalise, Mr Macron has yet to accept Scott Morrison's phone calls. A similar request from Trade Minister Dan Tehan has been turned down by his French counterpart on the basis that "we can't go on as if it was business as usual".

Many have argued that Paris' reaction constitutes an overreaction. It is undeniable that the French response has contained an element of dramatic and can in fact be thought as a "strategic outcry". The latter aimed to limit the damage done "at home", especially with the presidential election coming up in April 2022. It also helped push Mr Macron's "European sovereignty" project further, by once again allowing Paris to argue that the United States - but also NATO - are not as reliable as partners as they used to be.

Despite this strategic aspect, it would be unwise to underestimate the extent of the diplomatic row between France and Australia. Paris is disappointed at the loss of the deal - we are, after all, talking about a $90 billion contract that was central to France's strategy in the Indo-Pacific - but perhaps more importantly, it is furious at the way AUKUS was handled. The French ambassador to Australia, Jean-Pierre Thebault, explained that France felt a "sense of treason" after being kept "in the dark" for months and only finding out at the last minute, while Mr Le Drian argued that AUKUS amounted to "unacceptable behaviour between allies and partners".

In other words, AUKUS was perceived as a betrayal and a humiliation. Its impact was aggravated by France's obsession with its international status or what French leaders call its "rank in the world". Justifiably or not, the idea that France is "more than a middle size power" is a key component of its identity and has constantly been promoted in France, including throughout Mr Macron's presidency. Consequently, Paris wanted to respond strongly since, as Mr Le Drian put it, it felt the need to emphasise that, "when you have an ally of the stature of France, you don't treat them like that".

These tensions with France are likely to have a couple of financial implications for Australia. First, Canberra can expect a hefty bill from breaking its contract with France. The partially state-owned Naval Group is already drafting a compensation claim and French Army Minister Florence Parly has argued that Paris would make sure that its interests are "well defended".

Additionally, Paris seems determined to make things tricky for Australia's free trade agreement negotiations with the European Union. Even though Paris does not speak for the EU, it is expected to adopt a harder stance on requests made by Canberra (such as a greater access to the European market for Australian farmers) and it has already attempted to slow down the negotiations.

Beyond these financial implications, which might help Paris save face, we can expect France and Australia to remain strong partners in the Indo-Pacific. As its strategy in the region acknowledged, France needs Australia to maintain and develop its status in the region, and conversely, Australia needs Europe's most important Indo-Pacific power. France indeed has "nearly two million of its nationals and more than 7000 military personnel" in the region.

Additionally, Paris and Canberra share common objectives in the region, one of which is their will to contain China's influence. As Mr Le Drian has emphasised, when it comes to achieving this goal, France is more committed than ever to promoting a different pathway than the one proposed by the US, and now AUKUS. To borrow Mr Macron's words, "join(ing) all together against China" is deemed "counterproductive because it will push China to increase its regional strategy". But the bottom line is that beyond this difference in strategies, they share a core common objective, and this is only one example among many.

So while it is important to not underestimate the extent of the diplomatic crisis, it is just as essential to not exaggerate the implications it will have on the Franco-Australian partnership in the long term. In order to de-escalate the situation, it is now time for Messrs Macron and Morrison to restore dialogue. A communiqué similar to the Franco-American one conceding that things could have been handled differently and acknowledging the strategic importance of French and European engagement in the Indo-Pacific is likely to be an essential starting point. Some gestures of goodwill will also be necessary since declarations alone won't be enough. These could include the purchase of small military contracts by Australia, which would help counter some of the criticisms raised by Canberra towards the French military industry. Once the dust settles, high-level bilateral meetings such as the one suggested by Mr Tehan will be able to resume to redefine what this partnership will look like in the years to come.

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