[Marxism] Foreign Sales by U.S. Arms Makers Doubled in a Year

Bonnie Weinstein giobon at sbcglobal.net
Sat Nov 11 12:17:43 MST 2006

Foreign Sales by U.S. Arms Makers Doubled in a Year
[U.S. arms its allies while turning a pretty profit...bw]
November 11, 2006

Sales of military weapons by United States contractors to foreign
governments doubled in the last year, as countries like Pakistan,
Australia and Greece stepped up purchases of armaments and the
United States government loosened policies to allow more American
weapons to be sold on the world market.

A total of $21 billion in arms sales agreements were signed from
September 2005 to September 2006, compared with $10.6 billion
in the previous year, according to new data compiled by the Pentagon.
Foreign military sales agreements have typically ranged from
$10 billion to $13 billion a year since 2001.

A number of factors are behind the surge in sales. Since
Sept. 11, 2001, the Bush administration has used arms sales
as a way to reward allies and cement international relationships.
Middle Eastern countries, flush with oil revenues, have
become big buyers.

Countries like India, Pakistan and Indonesia that were once
barred from buying American weapons have had those bans
lifted, and some have placed big orders.

For military contractors, the sales have provided a welcome
source of new revenue at a time when the Pentagon
has indicated that the era of record military budgets is ending.

Because many of the weapons sold overseas are mature
products, the profit margins to American arms makers
are high, since the initial development costs have long
been recuperated.

And in the case of some planes, like the F-16 Fighting Falcon
fighter jet and the C-17 Globemaster cargo plane, foreign
military sales are a way to keep open production lines that
might close for lack of Pentagon orders.

³There have been a remarkable number of orders placed,²
said Howard Rubel, an analyst at Jeffries & Company.
³It¹s another arrow in the quiver of military contractors.²

One of the biggest orders was placed by Pakistan, which
had been barred from buying most American weapons
because of its nuclear program. That ban was lifted last
year and the country placed a $5 billion order for advanced
F-16 jets made by the Lockheed Martin Corporation.

A similar ban on India was also lifted, opening up a potentially
lucrative market to American contractors. India is currently
looking to buy up to 126 new fighter jets, and American
contractors have been flying to India to show off their wares.

Oil profits are also behind some of the orders. Saudi Arabia
said in July that it planned to spend $5.8 billion on American
weapons to modernize its National Guard and will also put
in more than $3 billion in orders for Black Hawk helicopters,
Abrams and Bradley armored land vehicles, new radio systems
and other weapons.

In the gulf region, Bahrain, Jordan and the United Arab Emirates
have filed plans to buy Black Hawk helicopters ‹ for a total
of $1 billion. Oman plans to buy a $48 million anti-tank missile
system. The Emirates plans to buy rocket artillery equipment
and military trucks for $752 million and Bahrain will purchase
Javelin missiles for $42 million.

Bahrain alone has accounted for $1 billion in foreign military
sales in the five years since 9/11.

³The rise in oil prices has allowed countries like Saudi Arabia
and the United Arab Emirates to increase their arms purchases
dramatically,² said William Hartung, director of the arms trade
project at the World Policy Institute, which is part of the
New School in New York.

For contractors, Mr. Hartung added, these sales ³are a welcome
windfall, not just icing on the cake.²

These new big gulf region orders, like the Saudi deal, were
not included in the $21 billion tally for 2006. They will be
carried over into the 2007 tally and are a sign that next year
will be as robust as this one.

³We¹ve got a good start on 2007,² said Lt. Gen. Jeffrey B. Kohler,
director of the Defense Security Cooperation Agency, which
manages foreign military sales.

Besides Pakistan and India, since 9/11, bans on arms sales
have been lifted on Tajikistan, Serbia and Montenegro, Armenia
and Azerbaijan as these countries have been identified by the
State Department as critical allies in the war on terror. They have
turned into buyers, although on a much smaller scale than the
big Pakistani or Saudi orders.

Armenia, Azerbaijan and Tajikistan had no American arms
purchases before 9/11. But as a group, they have bought $32
million in weapons under the foreign military sales program,
according to statistics from the Center for Defense Information.

Foreign military sales are negotiated directly between the United
States and other governments and are overseen by the State
Department, the Pentagon and Congress.

Other strategically situated countries have also stepped up their
purchases. Nepal, for instance, bought $1.1 million of American
weapons in the full decade before 9/11, and $22 million in the
five years since.

Similarly, Yemen, Djibouti and Uzbekistan bought $16.4 million
combined in the decade before 9/11, and $73 million of American
weapons since.

³Foreign military sales are a good hedge against potential further
cuts in Pentagon procurement,² said Mark T. Esper, executive
vice president for defense and international affairs at the
Aerospace Industries Association, a trade group.

In a conference call with analysts, Christopher E. Kubasik, chief
financial officer of Lockheed, estimated that foreign sales
account for 15 percent ‹ or $5.5 billion ‹ of Lockheed¹s
sales, which were $37 billion in 2005.

³They¹re valued customers, and we plan to continue to grow
in that area,² he said.

Foreign sales have importance to military contractors beyond
the dollar value of the contract. Once a country buys a weapon
system, it will need to continue to buy spare parts or upgrades.

³In the next couple of years,² said Cai von Rumohr, an analyst
with Cowen & Company, ³foreign sales as a percentage
of company revenues will be tracking up.²

Foreign sales can also keep endangered weapons programs alive.

For instance, when Boeing made some announcements that it
might begin to close production of its C-17 cargo line, Canada
and Australia quickly stepped in to place orders: Canada¹s deal
is valued at $1.3 billion and Australia¹s at $2 billion. Orders
for the F-16 from Turkey, Greece and Pakistan are pumping
$11 billion into that program at a time when the Air Force
is phasing out of it.

For that reason, the Aerospace Industries Association has been
pressing Congress to relax rules so more foreign deals can
be done outside of government scrutiny ‹ an effort that has,
so far, been rebuffed in Congress.

Last month, the industry association, along with representatives
from the Boeing Company and the Northrop Grumman Corporation,
met at the Heritage Foundation, a conservative Washington research
group, to outline their plans to pursue this effort.

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