In the uncertainty of the Trump administration, one sector remains confident -- the defense industry. Upon President Trump signing a $110 billion arms deal with Saudi Arabia’s King Salman, stocks have risen to all-time highs for firms like Lockheed Martin, the world’s largest weapons manufacturing company.
Returning back to Washington, DC, President Trump yet again had to face the growing Russian probe, where federal investigators are looking into alleged collusion between the Trump campaign and Kremlin.
In this precarious scenario, President Trump needs strong allies, both in defense industry executives with deep pockets, and American wage earners, who desperately need economic growth.
Security for energy
Lockheed Chief Marillyn Hewson was at Riyadh during the signing ceremony on May 20. Wearing the traditional abaya, she displayed an acute cultural awareness. She was there alongside the presidential delegation, manifesting the level of power held by the defense industry.
This has been a standard practice, whether in President Obama’s administration or those before him, to have defense contractors go alongside the president or his cabinet to make deals with foreign governments.
Lockheed received the contract to develop the Terminal High Altitude Area Defense system. This advanced missile defense radar system, designed to shoot down ballistic missiles, is within the expansive weapons package to be purchased by Saudi Arabia. Including tanks, fighter jets, and combat ships, this has been labeled the largest single arms deal in American history.
Security in exchange for energy has been the cornerstone of US-Saudi foreign relations since World War II. Saudi Arabia is the premier destination for US arms sales, purchasing 9.5% of US exports from 2011 to 2015, according to the Council on Foreign Relations.
The desert kingdom is the second-largest arms importer in the world and the land of the free is the largest exporter of arms, as reported by Stockholm International Peace Research Institute. Quite a match, these two make.
Lockheed CEO Henson stated that her firm is proud to be part of this historic announcement that will strengthen Saudi security, enhance regional peace, and create economic prosperity for both US and the Kingdom.
The defense contractor had a lot at stake: The White House directly called the executive suite for a discount in the missile detection system. Keeping the White House satisfied is essential, as without federal consent, international arms sales are not possible.
Expanding the relationship
The White House heralded the deal as an expansion of the seven-decade-long security relationship between the two nations.
It reached three stated objectives of this administration: Promote counter-terrorism in the Middle East, counter Iran’s regional influence, and reduction of American military operations in the Persian Gulf.
Trump administration’s massive arms deal emphasises hard power. Precision-guided missiles are also part of this package, which were blocked by the Obama administration as they could be used to bomb civilians in Yemen.
Although Human Rights Watch protested against the deal, citing alleged war laws violations by the Saudis in their military operation in Yemen, this deal was signed without any deliberations by the White House.
This big-ticket arms sale has boosted defense contractors’ stock values. Lockheed, Raytheon, and General Dynamics, all received parts of the defense deal and have seen their company value soar. Defense stocks were already rising, based on expectations that even if there are federal cuts elsewhere, defense spending will rise.
This has proven true with President Trump’s proposed $668 billion defense budget. Although this budget seeks to boost defense with more manpower and shiny, new equipment, it cuts social programs that benefit the poor with health care and food assistance.
Trump administration’s massive arms deal emphasises hard power. Precision-guided missiles are also part of this package, which were blocked by the Obama administration
A proponent of the spending increase, defense researcher John Venable of the Heritage Foundation, has remarked to Voice of America that comparing social cuts to defense increases should not take place, as defense is necessary to maintain borders and allow global freedom of movement. I wonder where Syrian refugees fall into this freedom of movement?
The Saudi Arab defense deal, coupled with a proposed $54bn increase for the military, may be President Trump’s strategy at gaining support within the national security infrastructure.
Defense contractors form an integral part of this infrastructure, embedded within military bases abroad, assisting US forces in combat operations, working hand-in-hand to the point where only experts recognise where the military ends and private contractors start. Most of them are headquartered in the Washington, DC area.
This provides both a logistical advantage to working with the Pentagon and easy access to politicians.
This industry has manufacturing sites across the nation, supporting thousands of jobs in suburban America. Having this industry and the military top brass on your side is a crucial element in sustaining a support base in American politics.
Despite President Trump’s numerous ordeals, he has gone with his gut instinct in both campaigning, which has proven successful, and governance, which has experienced pitfalls.
This strategy to bulk up both the private and public sectors of national security may pay dividends in continuing his administration.
Tamim Choudhury is a Texas-based Communications Analyst.