[News] How Pentagon Contractors Are Cashing in on the Ukraine Crisis

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Mon Apr 18 11:49:45 EDT 2022

How Pentagon Contractors Are Cashing in on the Ukraine Crisis by Julia
Gledhill – William D. Hartung
<https://www.counterpunch.org/author/jlghllhrt2992/>- April 18, 2022

Javelin missile. Photo: US Army/Markus Rauchenberger.

The Russian invasion of Ukraine has brought immense suffering to the people
of that land, while sparking calls for increased military spending in both
the United States and Europe. Though that war may prove to be a tragedy for
the world, one group is already benefiting from it: U.S. arms contractors.

Even before hostilities broke out, the CEOs of major weapons firms were
talking about how tensions in Europe could pad their profits. In a January
2022 call with his company’s investors, Raytheon Technologies CEO Greg
Hayes typically bragged
that the prospect of conflict in Eastern Europe and other global hot spots
would be good for business, adding that “we are seeing, I would say,
opportunities for international sales… [T]he tensions in Eastern Europe,
the tensions in the South China Sea, all of those things are putting
pressure on some of the defense spending over there. So I fully expect
we’re going to see some benefit from it.”

In late March, in an interview with the *Harvard Business Review* after the
war in Ukraine had begun, Hayes defended
the way his company would profit from that conflict:

“So I make no apology for that. I think again recognizing we are there to
defend democracy and the fact is eventually we will see some benefit in the
business over time. Everything that’s being shipped into Ukraine today, of
course, is coming out of stockpiles, either at DoD [the Department of
Defense] or from our NATO allies, and that’s all great news. Eventually
we’ll have to replenish it and we will see a benefit to the business over
the next coming years.”

*Arms to Ukraine, Profits to Contractors*

The war in Ukraine will indeed be a bonanza for the likes of Raytheon and
Lockheed Martin. First of all, there will be the contracts to resupply
weapons like Raytheon’s Stinger anti-aircraft missile and the
Raytheon/Lockheed Martin-produced Javelin anti-tank missile that Washington
has already provided to Ukraine by the thousands
The bigger stream of profits, however, will come from assured post-conflict
increases in national-security spending here and in Europe justified, at
least in part, by the Russian invasion and the disaster that’s followed.

Indeed, direct arms transfers to Ukraine already reflect only part of the
extra money going to U.S. military contractors. This fiscal year alone,
they are guaranteed to also reap significant benefits from the Pentagon’s
<https://crsreports.congress.gov/product/pdf/IF/IF12040>Ukraine Security
Assistance Initiative (USAI) and the State Department’s Foreign Military
Financing <https://www.dsca.mil/foreign-military-financing-fmf> (FMF)
program, both of which finance the acquisition of American weaponry and
other equipment, as well as military training. These have, in fact, been
the two primary
channels for military aid to Ukraine from the moment the Russians invaded
and seized Crimea in 2014. Since then, the United States has committed
around $5 billion in security assistance to that country.

According to the State Department
<https://www.state.gov/u-s-security-cooperation-with-ukraine/>, the United
States has provided such military aid to help Ukraine “preserve its
territorial integrity, secure its borders, and improve interoperability
with NATO.” So, when Russian troops began to mass on the Ukrainian border
last year, Washington quickly upped the ante. On March 31, 2021
the U.S. European Command declared a “potential imminent crisis,” given the
estimated 100,000 Russian troops already along that border and within
Crimea. As last year ended, the Biden administration had committed $650
in weaponry to Ukraine, including
<https://www.forumarmstrade.org/ukrainearms.html> anti-aircraft and
anti-armor equipment like the Raytheon/Lockheed Martin Javelin anti-tank

Despite such elevated levels of American military assistance, Russian
troops did indeed invade Ukraine in February. Since then, according to
Pentagon reports, the U.S. has committed to giving approximately $2.6
in military aid to that country, bringing the Biden administration total to
more than $3.2 billion
and still rising.

Some of this assistance was included in a March emergency-spending package
for Ukraine, which required
the direct procurement of weapons from the defense industry, including
drones, laser-guided rocket systems, machine guns, ammunition, and other
supplies. The major military-industrial corporations will now seek Pentagon
contracts to deliver that extra weaponry, even as they are gearing up to
replenish Pentagon stocks already delivered to the Ukrainians.

On that front, in fact, military contractors have much to look forward to.
More than half of the Pentagon’s $6.5 billion portion of the
emergency-spending package for Ukraine is designated simply to replenish
DoD inventories. In all, lawmakers allocated $3.5 billion to that effort, $1.75
more than the president even requested
They also boosted funding by $150 million
<https://www.congress.gov/bill/117th-congress/house-bill/2471/text> for the
State Department’s FMF
for Ukraine. And keep in mind that those figures don’t even include
emergency financing for the Pentagon’s acquisition and maintenance costs,
which are guaranteed to provide more revenue streams for the major weapons

Better yet, from the viewpoint of such companies, there are many bites left
to take from the apple of Ukrainian military aid. President Biden has
made it all too clear that “we’re going to give Ukraine the arms to fight
and defend themselves through all the difficult days ahead.” One can only
assume that more commitments are on the way.

Another positive side effect of the war for Lockheed, Raytheon, and other
arms merchants like them is the push
House Armed Services Committee chair Adam Smith (D-WA) and ranking
committee Republican Mike Rogers of Alabama to speed up production of a
next-generation anti-aircraft missile to replace the Stinger. In his
congressional confirmation hearing, William LaPlante, the latest nominee to
head acquisition at the Pentagon, argued that America also needs more “hot
lines” for bombs, missiles, and drones. Consider that yet another
benefit-in-waiting for the major weapons contractors.

*The Pentagon Gold Mine*

For U.S. arms makers, however, the greatest benefits of the war in Ukraine
won’t be immediate weapons sales, large as they are, but the changing
nature of the ongoing debate over Pentagon spending itself.  Of course, the
representatives of such companies were already plugging
the long-term challenge posed by China, a greatly exaggerated
threat, but the Russian invasion is nothing short of manna from heaven for
them, the ultimate rallying cry for advocates of greater military outlays.
Even before the war, the Pentagon was slated to receive at least $7.3
trillion <https://www.cbo.gov/publication/57538#_idTextAnchor038> over the
next decade, more than four times the cost of President Biden’s $1.7
domestic Build Back Better plan, already stymied by members of Congress who
labeled it “too expensive” by far.  And keep in mind that, given the
current surge in Pentagon spending, that $7.3 trillion could prove a
minimal figure.

Indeed, Pentagon officials like Deputy Secretary of Defense Kathleen Hicks
promptly cited Ukraine as one of the rationales for the Biden
administration’s proposed record national-security budget proposal of $813
Russia’s invasion “an acute threat to the world order.” In another era that
budget request for Fiscal Year 2023 would have been mind-boggling, since
it’s higher
than spending at the peaks of the conflicts in Korea and Vietnam and over
$100 billion more than the Pentagon received annually at the height of the
Cold War.

Despite its size, however, congressional Republicans — joined by a
significant number of their Democratic colleagues — are already pushing for
more. Forty Republican members of the House and Senate Armed Services
Committees have, in fact, signed a letter
to President Biden calling for 5% growth in military spending beyond
inflation, which would potentially add up to $100 billion
to that budget request. Typically enough, Representative Elaine Luria
(D-VA), who represents the area near the Huntington Ingalls company’s
Newport News military shipyard in Virginia, accused
administration of “gutting the Navy” because it contemplates
decommissioning some older ships to make way for new ones. That complaint
was lodged despite that service’s plan to spend a whopping $28 billion
on new ships in FY 2023.

*Who Benefits?*

That planned increase in shipbuilding funds is part of a proposed pool of $276
weapons procurement, as well as further research and development, contained
in the new budget, which is where the top five weapons-producing
contractors — Lockheed Martin, Boeing, Raytheon, General Dynamics, and
Northrop Grumman — make
most of their money. Those firms already split more than $150 billion
in Pentagon contracts annually, a figure that will skyrocket if the
administration and Congress have their way. To put all of this in context,
just one of those top five firms, Lockheed Martin, was awarded $75 billion
<https://watson.brown.edu/costsofwar/papers/2021/ProfitsOfWar> in Pentagon
contracts in fiscal year 2020 alone. That’s considerably more
than the entire budget for the State Department, dramatic evidence of how
skewed Washington’s priorities are, despite the Biden administration’s
pledge to “put diplomacy first.”

The Pentagon’s weapons wish list
FY 2023 is a catalog of just how the big contractors will cash in. For
example, the new Columbia Class ballistic missile submarine, built by
General Dynamics Electric Boat plant in southeastern Connecticut, will see
its proposed budget for FY 2023 grow from $5.0 billion to $6.2 billion.
Spending on Northrop Grumman’s new intercontinental ballistic missile
(ICBM), the Ground Based Strategic Deterrent, will increase by about
one-third annually, to $3.6 billion.  The category of “missile defense and
defeat,” a specialty of Boeing, Raytheon, and Lockheed Martin, is slated to
receive more than $24 billion
And space-based missile warning systems, a staple of the Trump
administration-created Space Force, will jump from $2.5 billion
in FY 2022 to $4.7 billion in this year’s proposed budget.

Among all the increases, there was a single surprise: a proposed reduction
in purchases of the troubled Lockheed Martin F-35 combat aircraft, from 85
to 61 planes in FY 2023.  The reason is clear enough. That plane has more
than 800
identified design flaws and its production and performance problems have
been little short of legendary.  Luckily for Lockheed Martin, that drop in
numbers has not been accompanied by a proportional reduction in funding.
While newly produced planes may be reduced by one-third, the actual budget
allocation for the F-35 will drop by less than 10%
from $12 billion to $11 billion, an amount that’s more than
the complete discretionary budget of the Centers for Disease Control and

Since Lockheed Martin won the F-35 contract, development costs have more
than doubled
while production delays have set the aircraft back by nearly a decade.
Nonetheless, the military services have purchased so many of those planes
that manufacturers can’t keep up with the demand for spare parts. And yet
the F-35 can’t even be properly tested for combat effectiveness because the
simulation software required is not only unfinished, but without even an
estimated completion date. So, the F-35 is many years away from the full
production of planes that actually work as advertised, if that’s ever in
the cards.

A number of the weapons systems which, in the Ukraine moment, are
guaranteed to be showered with cash are so dangerous or dysfunctional that,
like the F-35, they should actually be phased out.  Take the new ICBM.
Former Secretary of Defense William Perry has called
ICBMs “some of the most dangerous weapons in the world” because a president
would only have minutes to decide whether to launch them in a crisis,
greatly increasing the risk of an accidental nuclear war based on a false
alarm. Nor does it make sense to buy aircraft carriers at $13 billion
a pop, especially since the latest version is having trouble
even launching and landing aircraft — its primary function — and is
increasingly vulnerable to attack
by next-generation high-speed missiles.

The few positives in the new budget like the Navy’s decision to retire the
unnecessary and unworkable Littoral Combat Ship
— a sort of “F-35 of the sea” designed for multiple tasks none of which it
does well — could easily be reversed by advocates from states and districts
where those systems are built and maintained.  The House of
Representatives, for instance, has a powerful Joint Strike Fighter Caucus,
which, in 2021, mustered
more than one-third of all House members to press for more F-35s than the
Pentagon and Air Force requested, as they will no doubt do again this year.
A Shipbuilding Caucus
<https://wittman.house.gov/congressional-shipbuilding-caucus/>, co-chaired
by representatives Joe Courtney (D-CT) and Rob Wittman (R-VA), will fight
against the Navy’s plan to retire old ships to buy new ones.  (They would
prefer that the Navy keep the old ones *and *buy new ones with more of your
tax money up for grabs.) Similarly, the “ICBM Coalition
made up of senators from states with either ICBM bases or production
centers, has a near perfect record of staving off
reductions in the deployment or funding of those weapons and will, in 2022,
be hard at work defending its budgetary allocation.

*Towards a New Policy*

Coming up with a sensible, realistic, and affordable defense policy, always
a challenge, will be even more so in the midst of the Ukrainian nightmare.
Still, given where our taxpayer dollars go, it remains all too worthwhile.
Such a new approach should include things like reducing the numbers of the
Pentagon’s private contractors, hundreds of thousands
of people, many of whom are engaged in thoroughly redundant jobs that could
be done more cheaply by civilian government employees or simply eliminated.
It’s estimated that cutting spending on contractors by 15% would save
around $262 billion
over 10 years.

The Pentagon’s three-decades-long near $2 trillion
<https://www.armscontrol.org/reports/2019/USnuclearexcess> “modernization”
plan to build a new generation of nuclear-armed bombers, missiles, and
submarines, along with new warheads, should, for instance, simply be
scrapped in keeping with the kind of “deterrence-only” nuclear strategy
by the nuclear-policy organization Global Zero.  And the staggering
American global military footprint — an invitation to further conflict that
includes more than 750
bases scattered on every continent except Antarctica, and counterterror
operations in 85 countries
— should, at the very least, be sharply scaled back.

According to the Center for International Policy’s Sustainable Defense Task
a study <https://www.cbo.gov/publication/57128> of alternative approaches
to defense carried out by the Congressional Budget Office, even a
relatively minimalist strategic rethinking could save at least $1 trillion
over the next decade, enough to make a healthy down payment on investments
in public health, preventing or mitigating the worst potential impacts of
climate change, or beginning the task of narrowing record levels of income

Of course, none of these changes can occur without challenging the power
and influence of the military-industrial-congressional complex, a task as
urgent as it is difficult in this moment of carnage in Europe. No matter
how hard it may be, it’s a fight worth having, both for the security of the
world and the future of the planet.

One thing is guaranteed: a new gold rush of “defense” spending is a
disaster in the making for all of us not in that complex.

*This column is distributed by TomDispatch.*
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