The historic sale of arms to Saudi Arabia announced on President Donald Trump’s first overseas trip is expected to bestow hundreds of billions of dollars on the U.S. defense industry, which will create thousands of jobs to fill the demand for tanks, helicopters, missiles and other weapons.
Most of the windfall is destined for prime contractors Lockheed Martin [LMT], Boeing [BA] and Raytheon [RTN], according to accounts of the deal worth a total of $460 billion over the next decade. Just shy of $110 billion in foreign military sales (FMS) through eight letters of acceptance and a memorandum of intent to develop future military capabilities will take immediate effect.
Defense giants Northrop Grumman [NOC] and General Dynamics [GD] have not commented on whether they will share in the deal, but the military hardware desired by Saudi Arabia includes tanks and aircraft, giving those companies room to play.
The White House has not been forthcoming with specific details of what weapons are included in the deal, but have generally grouped them into five categories: border security and counter terrorism capabilities such as tanks, artillery, counter-mortar radars, armored vehicles and helicopters; maritime security platforms like multi-mission surface combatant ships and patrol boats; modern light close-air support and surveillance aircraft and command-and-control network modernization and cybersecurity capabilities.
To improve Saudi air and missile defense, the administration specifically mentioned Raytheon’s Patriot missile defense system and Lockheed’s terminal high-altitude area defense (THAAD) system.
FMS deals must be submitted to Congress and approved by the State Department, which then announces the greenlit sales through the Defense Security Cooperation Agency (DSCA). No new major arms sales to Saudi Arabia were posted on DSCA’s website May 22, meaning most if not all of the immediate sales have already been approved in previous announcements.
“This landmark agreement includes the announcement of a $110 billion Saudi-funded defense purchase – and we will be sure to help our Saudi friends to get a good deal from our great American defense companies,” Trump said in a speech during his visit to Riyadh, Saudi Arabia. “This agreement will help the Saudi military to take a greater role in security operations.”
Saudi Arabia already is a major consumer of U.S. military materiel. Nearly 10 percent of U.S. defense exports went to the Kingdom from 2011 to 2015, according to the Council on Foreign Relations.
By the Trump administration’s calculation, the deal will create jobs in more than a dozen U.S. states including Georgia, Connecticut, New York, Alabama and Arkansas, where much of this equipment is made. Aircraft and combat vehicles included in the deal are built in Pennsylvania, Missouri and elsewhere. Second- and third-tier suppliers in Florida, Michigan, Iowa and Arizona also should reap rewards, according to a statement from the administration.
Premier U.S. defense contractors praised the deal without mentioning Trump’s unorthodox promise to extract deals from them on behalf of a foreign government. Unlike previous presidents, Trump has taken a hands-on role in dealing with defense contractors by publicly decrying cost overruns on programs like the F-35 Joint Strike Fighter, Air Force One replacement and the Ford-class aircraft carrier.
Lockheed Chief Executive Marillyn Hewson said her company’s share of the deal shakes out to $28 billion and could eventually support 18,000 jobs in the U.S. and thousands more in Saudi Arabia on maintenance and modernization work.
“At Lockheed Martin, we are proud to be part of this historic announcement that will strengthen the relationship between the United States and the Kingdom of Saudi Arabia,” Hewson said in a prepared statement. “We are especially proud of how our broad portfolio of advanced global security products and technologies will enhance national security in Saudi Arabia, strengthen the cause of peace in the region, and provide the foundation for job creation and economic prosperity in the U.S. and in the Kingdom.”
One of the letters of intent signed by the Saudi king establishes a partnership between Lockheed Martin and Saudi-based Taqnia, to support final assembly and completion of 150 S-70 Black Hawk utility helicopters. The program will create more than 450 jobs including in Connecticut at Sikorsky and throughout the U.S. supply chain, Lockheed said. It also creates an additional 450 jobs in Saudi Arabia, developing local capabilities through technology and skills transfer.
Lockheed signed a memorandum of understanding with Saudi Arabian Military Industries to work together to build domestic manufacturing capability for multi-mission surface combatants – likely a littoral combat ship/frigate-type surface ship – and aerostats, which are tethered blimps outfitted with sophisticated surveillance technologies.
Boeing made out similarly in the deal, cementing agreements to both sell fixed- and rotor-wing aircraft to the Saudis and establish partnerships that establish domestic Saudi manufacturing, maintenance and modernization capabilities.
“These announcements reaffirm our commitment to the economic growth, prosperity and national security of both Saudi Arabia and the United States, helping to create or sustain thousands of jobs in our two countries,” Boeing Chief Executive Dennis Muilenburg said in a statement. “Our decades-long partnership with the Kingdom began in 1945 when President Roosevelt presented a DC-3 to King Abdul Aziz Al Saud, launching commercial air travel in the region. We welcome the opportunity to continue that support. I appreciate the efforts of King Salman, President Trump and his administration to support American manufacturers as we seek to grow at home and around the world.”
Boeing will build an undisclosed number of CH-47 Chinook heavy lift helicopters and guided weapons for the Saudi government. The company also announced Saudi intent to purchase P-8 maritime patrol aircraft – based on the commercial 737 airframe – and negotiation of the sale of another 16 widebody commercial aircraft.
The company also has launched a joint venture with the Kingdom to provide sustainment services for a range of legacy military platforms grow its indigenous aerospace industry. The deal supports a commercial registration certificate for the Saudi Rotorcraft Support Company, a newly formed joint venture between Boeing, Alsalam Aerospace Industries and Saudia Aerospace Engineering Industries with bases in both Riyadh and Jeddah that will provide support for both military and commercial helicopters, Boeing said.
Raytheon stands to benefit from Saudi demand for air defense systems, guided munitions, command-and-control and cybersecurity capabilities.
“This strategic partnership is the next step in our over 50-year relationship in the Kingdom of Saudi Arabia and a strong indicator of our continued global growth,” Raytheon Chief Executive Thomas A. Kennedy said in a statement. “By working together, we can help build world-class defense and cyber capabilities in the Kingdom of Saudi Arabia.”
The company announced plans to establish Raytheon Arabia, a Saudi legal entity wholly-owned by Raytheon that will focus on implementing programs to create indigenous defense, aerospace and security capabilities in the Kingdom. The new company will be based in Riyadh and is expected to include in-country program management, supply and sourcing capabilities, improved customer access and centralized accountability. These programs will positively impact Saudi and U.S. economies including job creation.
By cementing such a lucrative and close-knit security relationship with Saudi Arabia, the Trump administration hopes to plant the seed for a NATO-like coalition of Western-leaning Middle Eastern countries that can support one another in the fight against global terrorism and to curtail Iran’s regional influence.
“A robust, integrated regional security architecture is critical to our cooperation,” the White House said in a statement. “The United States of America and the Kingdom of Saudi Arabia intend to expand engagement with other countries in the region over the coming years and to identify new areas of cooperation. Over the course of our history, the United States of America and the Kingdom of Saudi Arabia have developed a productive partnership built upon trust, cooperation, and shared interests. We now stand together to thwart our common enemies, to strengthen the bonds between us, and to chart a path towards peace and prosperity for all.”
Despite the announcements and official signing ceremonies, nothing contained in the deal is certain. Individual sales must be cleared through Congress and the State Department. Even then, the specifics are subject to the vagaries of international business and political relations. The most recent approved FMS case to Saudi Arabia was A $525 million deal in January for aerostats and related sensors.
Saudi Arabia, though a long-standing military ally and U.S. arms customer, is under fire for domestic human rights violations and the conduct of its war against an insurgency in Yemen, where critics contend the Saudis have targeted civilians in violation of international convention. Rep. Tulsi Gabbard (D-Hawaii), who sits on both the House Armed Services Committee and the House Foreign Affairs subcommittee on the Middle East and North Africa, swiftly condemned the sale.
Saudi Arabia has a history of human-rights violations and support for terrorist organizations, she said, calling the country the “world’s largest sponsor and propagator of the extremist Wahhabi Salafist ideology that fuels terrorist groups like ISIS and al-Qaeda.”
“Saudi Arabia has spent hundreds of billions of dollars … creating fertile ground for terrorist organizations like ISIS and al-Qaeda to recruit, while simultaneously providing direct support to terrorist groups who pose a direct threat to U.S. interests and who are fighting to overthrow the Syrian government,” Gabbard said in a statement. “The Trump administration talks tough against ISIS and terrorism while selling weapons to, supporting, and praising a country that beheads dissidents, oppresses women, persecutes religious minorities, atheists, and LGBT people, and is the greatest supporter of terror groups like al-Qaeda and ISIS in the world today. This arms deal will enable Saudi Arabia to use U.S.-made weapons in their war crimes against Yemeni civilians in a brutal civil war, and continue perpetuating human rights atrocities at home and abroad.”