In a typical sale, the U.S. government is involved every step of the way. The Pentagon often does assessments of an allied nation's armed forces in order to tell them what they "need" -- and of course what they always need is billions of dollars in new U.S.-supplied equipment. Then the Pentagon helps negotiate the terms of the deal, notifies Congress of its details, and collects the funds from the foreign buyer, which it then gives to the U.S. supplier in the form of a defense contract. In most deals, the Pentagon is also the point of contact for maintenance and spare parts for any U.S.-supplied system. The bureaucracy that helps make all of this happen, the Defense Security Cooperation Agency, is funded from a 3.5% surcharge on the deals it negotiates. This gives it all the more incentive to sell, sell, sell.
And the pressure for yet more of the same is always intense, in part because the weapons makers are careful to spread their production facilities to as many states and localities as possible. In this way, they ensure that endless support for government promotion of major arms sales becomes part and parcel of domestic politics.
General Dynamics, for instance, has managed to keep its tank plants in Ohio and Michigan running through a combination of add-ons to the Army budget -- funds inserted into that budget by Congress even though the Pentagon didn't request them -- and exports to Saudi Arabia. Boeing is banking on a proposed deal to sell 40 F-18s to Kuwait to keep its St. Louis production line open, and is currently jousting with the Obama administration to get it to move more quickly on the deal. Not surprisingly, members of Congress and local business leaders in such states become strong supporters of weapons exports.
Though seldom thought of this way, the U.S. political system is also a global arms distribution system of the first order. In this context, the Obama administration has proven itself a good friend to arms exporting firms. During President Obama's first six years in office, Washington entered into agreements to sell more than $190 billion in weaponry worldwide -- more, that is, than any U.S. administration since World War II. In addition, Team Obama has loosened restrictions on arms exports, making it possible to send abroad a whole new range of weapons and weapons components -- including Black Hawk and Huey helicopters and engines for C-17 transport planes -- with far less scrutiny than was previously required.
This has been good news for the industry, which had been pressing for such changes for decades with little success. But the weaker regulations also make it potentially easier for arms smugglers and human rights abusers to get their hands on U.S. arms. For example, 36 U.S. allies -- from Argentina and Bulgaria to Romania and Turkey -- will no longer need licenses from the State Department to import weapons and weapons parts from the United States. This will make it far easier for smuggling networks to set up front companies in such countries and get U.S. arms and arms components that they can then pass on to third parties like Iran or China. Already a common practice, it will only increase under the new regulations.
The degree to which the Obama administration has been willing to bend over backward to help weapons exporters was underscored at a 2013 hearing on those administration export "reforms." Tom Kelly, then the deputy assistant secretary of the State Department's Bureau of Political-Military Affairs, caught the spirit of the era when asked whether the administration was doing enough to promote American arms exports. He responded:
"[We are] advocating on behalf of our companies and doing everything we can to make sure that these sales go through... and that is something we are doing every day, basically [on] every continent in the world... and we're constantly thinking of how we can do better."
One place where, with a helping hand from the Obama administration and the Pentagon, the arms industry has been doing a lot better of late is the Middle East. Washington has brokered deals for more than $50 billion in weapons sales to Saudi Arabia alone for everything from F-15 fighter aircraft and Apache attack helicopters to combat ships and missile defense systems.
The most damaging deals, if not the most lucrative, have been the sales of bombs and missiles to the Saudis for their brutal war in Yemen, where thousands of civilians have been killed and millions of people are going hungry. Members of Congress like Michigan Representative John Conyers and Connecticut Senator Chris Murphy have pressed for legislation that would at least stem the flow of the most deadly of the weaponry being sent for use there, but they have yet to overcome the considerable clout of the Saudis in Washington (and, of course, that of the arms industry as well).
When it comes to the arms business, however, there's no end to the good news from the Middle East. Take the administration's proposed new 10-year aid deal with Israel. If enacted as currently planned, it would boost U.S. military assistance to that country by up to 25% -- to roughly $4 billion per year. At the same time, it would phase out a provision that had allowed Israel to spend one-quarter of Washington's aid developing its own defense industry. In other words, all that money, the full $4 billion in taxpayer dollars, will now flow directly into the coffers of companies like Lockheed Martin, which is in the midst of completing a multi-billion-dollar deal to sell the Israelis F-35s.
"Volatility" in Asia and Europe
As Lockheed Martin's Marillyn Hewson noted, however, the Middle East is hardly the only growth area for that firm or others like it. The dispute between China and its neighbors over the control of the South China Sea (which is in many ways an incipient conflict over whether that country or the United States will control that part of the Pacific Ocean) has opened up new vistas when it comes to the sale of American warships and other military equipment to Washington's East Asian allies. The recent Hague court decision rejecting Chinese claims to those waters (and the Chinese rejection of it) is only likely to increase the pace of arms buying in the region.
At the same time, in the good-news-never-ends department, growing fears of North Korea's nuclear program have stoked a demand for U.S.-supplied missile defense systems. The South Koreans have, in fact, just agreed to deploy Lockheed Martin's THAAD anti-missile system. In addition, the Obama administration's decision to end the longstanding embargo on U.S. arms sales to Vietnam is likely to open yet another significant market for U.S. firms. In the past two years alone, the U.S. has offered more than $15 billion worth of weaponry to allies in East Asia, with Taiwan, Japan, and South Korea accounting for the bulk of the sales.
In addition, the Obama administration has gone to great lengths to build a defense relationship with India, a development guaranteed to benefit U.S. arms exporters. Last year, Washington and New Delhi signed a 10-year defense agreement that included pledges of future joint work on aircraft engines and aircraft carrier designs. In these years, the U.S. has made significant inroads into the Indian arms market, which had traditionally been dominated by the Soviet Union and then Russia. Recent deals include a $5.8 billion sale of Boeing C-17 transport aircraft and a $1.4 billion agreement to provide support services related to a planned purchase of Apache attack helicopters.
And don't forget "volatile" Europe. Great Britain's recent Brexit vote introduced an uncertainty factor into American arms exports to that country. The United Kingdom has been by far the biggest purchaser of U.S. weapons in Europe of late, with more than $6 billion in deals struck over the past two years alone -- more, that is, than the U.S. has sold to all other European countries combined.
The British defense behemoth BAE is Lockheed Martin's principal foreign partner on the F-35 combat aircraft, which at a projected cost of $1.4 trillion over its lifetime already qualifies as the most expensive weapons program in history. If Brexit-driven austerity were to lead to a delay in, or the cancellation of, the F-35 deal (or any other major weapons shipments), it would be a blow to American arms makers. But count on one thing: were there to be even a hint that this might happen to the F-35, lobbyists for BAE will mobilize to get the deal privileged status, whatever other budget cuts may be in the works.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
