Top defense contractors keeping quiet amid Saudi Arabia uproar
By CHRISTIAN DAVENPORT AND AARON GREGG | The Washington Post | Published: October 15, 2018
Saudi Arabia has long been fertile territory for United States defense contractors, an oil-rich kingdom with an appetite for weapons.
Since 1950, the country has spent nearly $90 billion on arms from U.S. defense contractors, according to data compiled by the Pentagon. Last year alone, it spent nearly $5.5 billion. While that isn't anything close to what the Pentagon spends, it is enough for defense firms to court the kingdom and its young Crown Prince, Mohammed bin Salman.
But now Saudi Arabia is under scrutiny, as questions swirl around the disappearance of Jamal Khashoggi, a Saudi journalist who wrote opinion columns for The Washington Post. Turkish officials have said they believe he was killed and dismembered while visiting the Saudi consulate in Istanbul about two weeks ago.
The international backlash has been swift and damning, with a growing roster of top American executives bowing out of a Saudi investment conference in Riyadh later this month. Tech investor Steve Case and Jamie Dimon, the chief executive of JPMorgan Chase, have said they are no longer going.
Richard Branson, the founder of the Virgin Group, said he was suspending his work as a director of two tourism projects and has called off discussions about a possible $1 billion investment in his space companies.
By contrast, top U.S. defense firms have kept quiet. Spokespeople from Lockheed, Boeing and Raytheon did not immediately respond to requests for comment on whether their executives would attend the conference.
And President Donald Trump said he does not want to jeopardize a major arms sale deal to Saudi Arabia that he said was worth $110 billion, though defense experts have disputed that amount and have said it's hard to calculate precisely how many jobs would be at stake. Speaking on CBS' "60 Minutes" Sunday, Trump said that he didn't "want to hurt jobs" at contractors such as Boeing, Lockheed Martin and Raytheon.
"I don't want to lose an order like that," he said.
With so much on the line, Loren Thompson, a consultant that counts many of the top defense firms as clients, said that he "would be willing to bet that every major defense contractor that was scheduled to appear at the conference will go. Because the Saudi weapons market is too big for any defense contractor to ignore, and the Saudi leadership is too sensitive to take chances with."
Lockheed Martin, the largest defense firm in the world, has long counted Saudi Arabia as a key customer. Earlier this year, Marillyn Hewson, Lockheed's chief executive officer, hosted bin Salman and gave him a tour of its satellite and missile defense production facilities in Sunnyvale, Calif.
They also discussed Lockheed's Terminal High Altitude Area Defense (THAAD) anti-ballistic missile system, as well as the manufacturing of two communications satellites Lockheed is building for the country.
Since 1965, Lockheed has had a presence in Saudi Arabia, with the delivery of its first C-130 Hercules military transport aircraft. Since then it has sold the kingdom missile defense systems, helicopters, satellites and ships.
"Saudi Arabia is one of the most lucrative foreign markets for our defense contractors," said Todd Harrison, a defense analyst at the Center for Strategic and International Studies. "They tend to buy high-end equipment. They have a lot of money to throw around, and they can make decisions on weapons purchases pretty quickly because they don't have a lot of bureaucracy."
Still, he said, the revenue from sales to Saudi Arabia "pales in comparison to the U.S. military. In no way is it going to sink U.S. companies if they can't export to Saudi Arabia."
Andrew Hunter, also a defense analysts at CSIS, said that many of the defense firms moved to grow their international business over the past decade in an effort to attempt to offset declines in U.S. spending.
Saudi Arabia is "one of the biggest players in the Middle East and is one of the two biggest growing markets for foreign military sales," he said.
Bethesda-based Lockheed had $51 billion in sales last year, nearly 70 percent of which, or $35.2 billion, came from sales to the U.S. government — about the same amount that the Trump administration proposed for the entire State Department budget.
Last year, Lockheed announced that it had struck a $28 billion deal with Saudi Arabia to sell it an array of defense systems over the coming years. Boeing, meanwhile, signed an agreement with the country to help it build rotary-wing military aircraft in Saudi Arabia, which it said was expected to generate $22 billion in revenue and 6,000 jobs by 2030.
And Raytheon recently opened up a separate company to work directly with the Saudi government.
But often those deals don't pan out as initially planned. Trump has said repeatedly that the arms deal with Saudi Arabia was worth $110 billion. But many of the deals were "memorandums of intent," rather than signed contracts as The Washington Post's Fact Checker has noted.
The deal amounts to "a wish list," he noted. "The $100 billion figure is not real and unlikely to come to fruition — and even if it did, it represents sales far in the future."