Big US firms, Lockheed Martin and Boeing to reap big profits from Saudi contracts

Lockheed Martin Corp. and Boeing Co. will reap billions from Saudi contracts subsequent to President Trump's announcement that the Saudis will buy up to $110 billion in American weapons.

Speaking at a conference in New York last Wednesday, Marillyn Hewson CEO of Lockheed Martin Corp. said she could see the company gaining up to $28 billion in new business from the Saudis. Dennis Muilenbege CEO of Boeing Co. also hopes to profit from sales to the Saudis of more than $50 billion for both military and commercial sales. Often these deals involve long term maintenance and sustainment contracts that can run up to 30 years. Typically these contracts make up 70 percent of the total value of sales.

Foreign weapons sales can often take a long time to negotiate and also a lengthy period before delivery. Congress has to be notified of the deal and this can often result in objections as is this case with this deal. Six House representatives consisting of both Republicans and Democrats have introduced a resolution of disapproval that would block the proposed sales of precision-guided munitions and other offensive weapons to the Saudis.

Congress was notified of the proposed sales, as part of a larger arms deal with Saudi Arabia reportedly worth $110 billion, on May 19. Representative Amash a Republican from Michigan one of the sponsors of the bill said: “Saudi Arabia has one of the worst human rights records and has supported many of the extremists terrorizing the people of the Middle East and the world.

These arms sales extend a reckless policy from the Obama administration and prior administrations, and they come at a time when the Saudi government is escalating a gruesome war in Yemen.” Mark Pocan a Democrat from Wisconsin also spoke for the bill: “President Trump’s proposed $110-billion weapons sale sends the wrong message to Saudi Arabia. In addition to regularly dropping U.S. bombs on Yemeni civilians, Saudi Arabia appears to have every intention of using the U.S. weapons from this sale to enforce a blockade on Yemen that prevents food and medicine from reaching millions of people on the brink of starvation.For months, my colleagues and I have been demanding answers to the most basic questions on the U.S. role in the disastrous war in Yemen and have been met with deafening silence from the White House. As we introduce a resolution of disapproval against this unprecedented weapons sale, we are concerned about U.S. complicity in the world’s largest humanitarian crisis now consuming Yemen. Our bipartisan group of lawmakers will be urging our colleagues to take seriously our constitutional duty to vigorously debate the merits of arming the Saudis even further.”

I expect that the profits that the sales will bring to the likes of Boeing and Lockheed Martin will outweigh concerns about the use to which Saudi will put the weapons. Obama supported the Saudi sales ultimately and Trump will do so as well but with not the slightest complaints about their use by the Saudis.

Senators Rand Paul a Republican from Kentucky and two Democrats including Al Franken from Minnesota have introduced identical legislation in the Senate too that in the House. Under the Arms Export Control Act of 1976 a senator is able to force a vote on arms sales. This cannot be done in the house.

Even if the weapons deal passes Congress, contracts need to be drawn up between manufacturer and the country before manufacturing begins. Payment typically begins when a contract is signed with a future payment when the unit actually reaches an assembly line. There is a final payment when a unit is actually delivered followed by sustained payments.

In 2013 the Saudis received permission to buy 25 C-130 planes some as tankers and some a cargo haulers. But so far just two have been bought with the remaining 23 probably failing under the new deal. The Lockheed CEO said that the Saudis are seeking four multi-mission warship. Lockheed is proposing they but a variant of its Littoral Combat Ship. Lockheed also agreed it would form a joint venture that would support the completion and finally assembly of 150 S-70 Black Hawk utility helicopters. CEO Hewson also said that Lockheed's THAAD and PAC-3 missile systems could be on the Saudis shopping list. The appended video lists other items.

The U.K. also sells a substantial amount of weapons to the Saudis. A report on foreign financing of terrorism due to be released in the spring of 2016 has not yet been finished and apparently may never be made public due to its "sensitive" contents. It may be too sensitive for the U.K. government that recently approved 3.5 billion pounds worth of arms export licenses to Saudi Arabia. The report apparently focuses on the role of Saudi Arabia in financing terrorism.