US defense giants see fattened wallets
Ukraine, Gaza conflicts add to surging arms demand, fueling jump in revenue
WASHINGTON — Defense giants in the US are faring well amid heavy government demand for military aid to Ukraine and Israel. Experts expect this to continue this year.
“The Pentagon’s increased demand for goods and services from US defense companies has likely improved their potential profits,” William Courtney, a retired US ambassador and adjunct senior fellow at RAND Corporation, said.
“Since most of the fight involves ground operations, US and other Western producers of equipment, ammunition and other supplies for ground forces, including groundbased air defenses such as the Patriot, may have benefited the most.”
Major US arms dealers recently released their financial reports for the fourth quarter and full year of 2023.
Sales of defense company Raytheon, or RTX, were close to $20 billion in the fourth quarter, exceeding the third quarter and up by 10 percent compared to the same period last year.
Still, analysts said the stocks have much upside potential.
According to The Defense Post, US weapons behemoth Lockheed Martin is increasing production of GMLRS, a type of GPS-guided rockets that carry 90-kilogram warheads — from an annual 10,000 to 14,000 units. These are heavily used now in Ukraine.
The excellent performances in the fourth quarter are primarily attributed to the continuous supply of weapons and ammunition provided by US military-industrial giants to Israel with the support of the government.
The Israeli Air Force uses many air-to-ground missiles produced by Raytheon, while Boeing provides Israel with a large quantity of smalldiameter bombs and joint direct attack munitions kits among others.
The US is Israel’s largest military aid provider. Considering strategic interests, domestic politics and other factors, the US has provided Israel with over $130 billion in security and weapon aid since its founding in 1948, with approximately 80 percent of Israel’s military equipment imports coming from the US.
In recent years, the US has provided Israel with about $3.8 billion in military aid annually. President Joe Biden’s administration recently asked Congress for additional aid to the country.
Record orders
Lockheed Martin, Raytheon and General Dynamics all reported record levels of unfilled orders in their financial reports, indicating strong potential for future performance growth.
While some experts do not believe defense companies drive US strategy significantly, others highlighted the military-industrial complex, in which political donations, lobbying efforts, stock holdings and other interconnections form a complex chain of interests.
Over the years, senior US officials and high-ranking military officers have frequently moved within the political, military and defense industries through a “revolving door”, engaging in commercial activities upon exiting public service and assuming official positions after being involved in businesses, resulting in collusion of government, business and shuttle profiteering.
Several senior officials in the Biden administration have had close ties to defense contractors, with Secretary of Defense Lloyd Austin being a former board member of Raytheon, Secretary of State Antony Blinken providing policy consulting for Boeing and National Intelligence Director Avril Haines serving as adviser to Palantir Technologies, which provides artificial intelligence support to the military.
This traditional “revolving door” practice has taken on new forms recently.
According to a recent report by The New York Times, over the past five years, at least 50 US national security officials, including former secretary of defense Mark Esper and former secretary of the army Ryan McCarthy, have joined venture capital and private equity industries after leaving office. They regularly interact with Pentagon officials or members of Congress, lobbying to promote specific policies or increase defense spending, thereby benefiting the companies in which they have invested.
The enormous US military expenditure is a reminder of the warning issued by former US president Dwight Eisenhower in the 1950s: “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”