US Arms Companies Make Big Fortune amid Russia-Ukraine Conflict
Published 31 March 2022 (2 hours 59 minutes ago)
by teleSUR/MS
The world's top five arms companies have all been American since 2018, and the United States accounted for 39 percent of global military expenditure in 2020.
As the Russia-Ukraine conflict continues to unfold, casualties keep rising and its economic impact has been devastating, stock prices of major American arms companies on the other side of the world have surged.
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Experts believe that the ongoing conflict will bring huge revenues to U.S. arms manufacturers, and the military-industrial complex will profit from the crisis in the long run, with continued lobbying for a more confrontational approach and higher defense spending.
U.S. defense firms are the indisputable top producers of the world's weapons. According to the Stockholm International Peace Research Institute, the world's top five arms companies have all been American since 2018, and the United States accounted for 39 percent of global military expenditure in 2020.
Lockheed Martin, the world's top weapons manufacturer, saw its stock price surge over 25 percent since the start of the year, while the stock price of Raytheon Technologies is 17 percent higher.
Company executives had foreseen this. In a January earnings call, Lockheed Martin CEO James Taiclet highlighted the "renewed great power competition," noting that it would lead to higher defense budgets and additional sales. Raytheon Technologies CEO Greg Hayes, meanwhile, said the company expected to see "opportunities for international sales" amid the tension in Eastern Europe and other geopolitical tensions.
There are at least three ways in which the Russia-Ukraine conflict will bring additional sales to U.S. arms dealers: U.S. arms aid to Ukraine, ballooning U.S. defense budget, and growing defense budgets in many European countries.
DEFENSE BUDGETS HIKES
Immediately after the Russia-Ukraine conflict broke out in late February, President Joe Biden announced that the United States would provide US$350 million in military aid to Ukraine. On March 16, Biden announced an additional US$800 million in security assistance to Ukraine.
According to a White House fact sheet, the two rounds of assistance package include 1,400 Stinger anti-aircraft systems, 4,600 Javelin anti-armor systems, five Mi-17 helicopters and over 20 million rounds of small arms ammunition and grenade launcher and mortar rounds, among others.
Meanwhile, the Russia-Ukraine conflict has led to growing bipartisan consensus to increase the already elevated defense budget, with the Congress approving its largest-ever defense spending bill just weeks after, more than the president requested. The US$1.5-trillion government funding bill allocates US$782 billion toward defense, 5.7-percent larger than the previous year's package.
"Supporting defense department budgets is a very cheap form of patriotism!" Greg Cusack, a former member of the Iowa House of Representatives, said. "At a time when most primary opposition to existing congresspersons comes from the far-Right, no one wants to toss any 'red meat' to such potential opponents by voting against 'providing our troops with the best that money can buy'," he added.
The defense spending hikes don't seem temporary. On Monday, the White House unveiled a budget plan for the fiscal year 2023 calling for a boost in military spending. The budget plan totaling US$5.8 trillion includes US$813.3 billion for "national defense," of which US$773 billion is allocated for the Defense Department.
Defense contractors are also eyeing additional sales in Europe, where several countries, including Germany, have announced they will increase defense budgets in light of the recent conflict.
"With more countries, Germany making a pretty abrupt shift towards increased military spending and focus on countering Russia militarily, that is a huge opportunity (for U.S. arms companies), " Erik Sperling, executive director of the anti-war group Just Foreign Policy, said.
Noting that defense spending across North Atlantic Treaty Organization (NATO) members are likely to grow, Sperling said many of the weapons "that NATO uses are gonna be overwhelmingly U.S. based weaponry. So that's all positive for the weapons companies."
PROFITABLE ARMS MANUFACTURERS
A recent report released by the U.S. Defense Department showed that since the 1990s, the defense sector has consolidated "substantially," transitioning from 51 to five aerospace and defense prime contractors, indicating an oligopoly situation, which means a lack of competition and potentially excessive profits.
How profitable are the arms manufacturers? Their generous investment in lobbying might throw light on this. A study from Brown University showed that weapon makers have spent US$2.5 billion on lobbying over the past two decades, employing, on average, over 700 lobbyists per year over the past five years. Sperling, a former congressional staffer, said that he had dealt with arms-industry lobbyists and was familiar with their moves.
"One of the things they do that is very smart is they spread the jobs of the industry really across the country. So a huge number of congressional districts and states have thousands and thousands of jobs that are connected to the defense industry. So that means that it's very possible that, if someone votes for (defense budget) cuts, that they could be cutting jobs in their own district," said Sperling.
REVOLVING DOOR
The indirect impact of the "revolving door" could also be significant. High-level former U.S. military officials and state department officials could be sitting on the boards of a lot of the arms companies, or are acting as consultants or lobbyists for these companies. People who have worked for those companies could then go back into the government.
"It creates a general climate where it's in the interest of many people both in terms of their ideology, but also financially and even personally to see to have at least a somewhat confrontational, militarized response to a crisis rather than a diplomatic one," Sperling said.
"Certainly it's not in the interest of weapons companies to see issues resolved diplomatically, it's in their interest to see... military tension that requires arms buildups. There's not very much money to be made in diplomacy, usually," he added.
Former Hawaii Congresswoman Tulsi Gabbard, a 2020 presidential candidate, told Fox News in mid-February that warmongers on both sides of Washington had been drumming up tensions, and if a Russia-Ukraine war broke out, the military-industrial complex would make a ton more money than they had been in fighting al-Qaida or making weapons for al-Qaida.
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