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AF agency expects 'spike' in foreign military sales after big drop in 2016

Boeing and the U.S. Air Force successfully completed the first flight of the KC-46 tanker test program December 28, 2014.

U.S. AIR FORCE

By BARRIE BARBER | Dayton Daily News, Ohio | Published: January 7, 2017

WRIGHT-PATTERSON AIR FORCE BASE, Ohio  (Tribune News Service) — The Air Force Security Assistance and Cooperation Directorate handled $8.1 billion in foreign military sales in fiscal year 2016, a drop of more than half from the prior year.

AFSAC Director Brig. Gen. Gregory M. Gutterman expects the Wright-Patterson headquartered agency with more than 600 employees who handle deals with 108 countries to see a "spike" in future sales with the roll out of the new Boeing KC-46 Pegasus aerial refueling tanker, among other big ticket items in demand.

The one-star general said "insatiable demand" has pushed two areas foreign customers want most: intelligence, surveillance and reconnaissance aircraft and sensors, and precision guided munitions.

"Some of our customers have started dropping weapons in combat operations for the first time in many, many years," he said.

Among the biggest deals were $650 million for four Lockheed Martin C-130J cargo planes to France; and aircraft armaments worth $360 million sold to the United Arab Emirates and $320 million to Saudi Arabia.

Upcoming deals in the works will easily soar beyond this year's total, with a $21.1 billion expected agreement with Qatar to purchase 72 of Boeing's F-15 Eagle strike fighter jets and a $1.9 billion deal with Japan to buy four KC-46 Pegasus aerial tankers, according to the Defense Security Cooperation Agency at the Pentagon.

In fiscal year 2015, AFSAC sales reached $19 billion, with sales of the fifth-generation Lockheed Martin F-35 Lightning II the biggest driver of higher spending. Today, the agency has $44 billion in future deliveries on the books.

DCSA reported sales of $33.6 billion in the last fiscal year, a drop from $47.1 billion the prior year.

With a "resurgent Russia," demand has grown in Eastern Europe, he said. Japan and South Korea, which face both expansionist Chinese maritime claims in the South China Sea and North Korean threats of nuclear weapons, have an eye on acquiring more U.S. weapon systems, too.

US 'dominant supplier' in arms deals

"America is the dominant supplier in the global arms market, and military aircraft make up much of that trade," said Loren B. Thompson, a senior defense analyst and defense industry consultant at the Lexington Institute in Virginia. "The F-35 fighter alone will generate over $50 billion in export sales during the next three decades, sustaining many thousands of U.S. manufacturing jobs.

"Foreign military sales wax and wane from year to year depending on who is in the market and what they need," he added in an email. "Sales were soft last year because low oil prices limited the ability of Persian Gulf countries to buy. With tensions rising, though, some countries may limit other expenditures going forward to buy more weapons."

Regional tensions and aging aircraft are two of the biggest drivers of U.S. military aircraft sales, said Richard Aboulafia, a senior aerospace analyst with the Teal Group in Virginia.

"Every combat aircraft (sale) has its own fairly unique story," he said.

South American countries flying old aircraft that have deteriorated over the decades will be a growing market for U.S. arms exports in future years, Gutterman said. Argentina has a $300 million deal to purchase 24 T-6C Texan trainers, according to DSCA.

"We're getting to a point where it's so expensive to keep the old stuff flying that for a very small dollar return on investment increase you can just get rid of the old and buy the new," he said.

Some nations have foregone expensive aircraft or drones and put high tech sensors on less sophisticated aircraft, Gutterman said.

"In the past, if the U.S. was flying it, countries would want to fly that," he said. Now, some countries may buy a Cessna and add advanced surveillance sensors to the plane, he said.

"They do that because the cost of the airplane is going to be really cheap, simpler to train and fly and the maintenance supply chain tail is going to be cheaper for them," he said.

Speeding up a lengthy process

With a push from the Pentagon, AFSAC has targeted reducing the time it takes to get orders up and running after some foreign customers complained about the time it takes to get military aircraft.

Response times from when a request to buy is received to a letter of acceptance have dropped 39 percent, Gutterman said.

The process took 151 days in fiscal year 2013 and dropped to 91.9 days in fiscal year 2016, AFSAC figures indicate. The goal is to reduce the wait time an additional 10 percent in the next year.

A foreign customer waits four to five years to receive a complex weapon system like an F-16. On rare occasions, some nations may be put in line ahead of another country to acquire an aircraft sooner, Gutterman said.

"We have done that very rarely, but that is a way someone can get a product quicker," he said.

Secretary of the Air Force Deborah Lee James pushed for more staff training after she and other high-ranking Air Force leaders heard complaints overseas about how long deliveries take.

But the complicated deal making, particularly on a complex sale such as F-16 Fighting Falcon jets, involve a review and approval process with multiple agencies, from the U.S. State Department to the Defense Security Cooperation Agency, Gutterman said.

"Foreign military sales are by far the hardest thing I've done," he said. "There are so many different tentacles, so many different interests, so many different laws at play, it's an incredibly complex business."

The one-star general expects to serve a three-year tenure -- longer than most in previous years at an agency where leaders have often had short stints -- to instill reforms and speed up the process, he said.

"We've been on a conscious path for 18 months on improvement," he said.

Thompson said the Obama administration has disputed charges the export approval process for weapons is too slow.

"The State Department and the Pentagon have moved to streamline procedures, but when you are exporting technology designed to kill people, it is essential for the government to make sure it will not be misused," he said.

The United States faces growing competition from China and Russia for arms sales, but concern over those nations' military activities has drawn nations to U.S. weapon systems.

"We do recognize that there are other folks out there who do want to sell their weapon systems to our partners as well, and that's not just a decision a country is making on what weapon systems to buy, sometimes that's a decision who they are allying with," Gutterman said.

"We, the United States, have to make sure that a reason that country decides to become an ally of someone other than the United States is not because they couldn't get a weapon system," he added. "It should be a much bigger decision than that."

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©2017 Dayton Daily News (Dayton, Ohio)
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