Arms Manufacturers Tell Investors That Iran Tension Fuels Business

Lee Fang.

Defense executives from around the country crowded into Goldman Sachs’ glimmering tower in downtown Manhattan in mid-May, eager to present before a conference of bankers and financial analysts.

While much of the world was on edge over simmering tension in the Middle East, as the U.S. and its allies have stoked tensions with Iran, the businessmen at the conference talked of opportunity.

Eric DeMarco, the president of Kratos Defense & Security Solutions, addressed the conference, arguing that his company is “very well-aligned” for the shift in the military budget away from asymmetrical fighting toward nation-state warfare.

The rising threat of war with Iran, Russia, and China, DeMarco continued, could threaten U.S. naval power, which could require ballistic missile threat upgrades, the type of systems Kratos Defense specializes in.

Large arms manufacturers from across the industry have similarly told investors that escalating conflict with Iran could be good for business.

Thomas Kennedy, the CEO of Raytheon, was asked in January about the “demand signals” that could shape the defense budget going forward. Kennedy, according to a transcript of the call, said the “major concern there is Iran.” The company, Kennedy added, had recently won approval to provide missile defense systems to Saudi Arabia, as the country has ramped up defense systems in preparation for potential war.

The following month, Kennedy presented at the Cowen Aerospace conference for investors, again focusing on how conflict with Iran will boost revenue. Kennedy said he had spent time on Capitol Hill discussing “all the information that we’re seeing from Russia and from China and to a certain degree even still North Korea and then what Iran is doing.” The discussions in Washington, D.C., he said, left him “pretty optimistic about the U.S. budget moving forward.”

Lockheed Martin CEO Marillyn Hewson also discussed the rising threat from Iran during her company’s investor call in January. The Defense Department’s National Defense Strategy, a blueprint released earlier this year for military planning, said Hewson, focused on “great power competition with China and Russia, and also the other players like Iran and North Korea.” The strategy, along with “bipartisan support for defense spending,” favored her company moving forward, Hewson said.

The statements to investors come as the U.S. has openly threatened to launch a new war. In recent weeks, the Trump administration discussed sending 120,000 soldiers to the Middle East in preparation for war with Iran, a move that comes after two years of increasing sanctions and militant rhetoric about the threat posed by the government in Tehran.

The escalating tensions, while raising the potential for catastrophic conflict and loss of human life, could also be good for companies in the business of war.

The defense industry is far from an idle observer of the conflict. Major firms spend big sums on lobbying to influence the Pentagon’s budget — money that came primarily from Congress in the first place. The last National Defense Authorization Act includes several provisions on Iran, including a directive that U.S. allies “build an interoperable ballistic missile defense architecture … to defend against the Islamic Republic of Iran missile threat” and that the secretary of defense develop a plan to counter the “destabilizing activities of Iran.”

Feature image: An F/A-18E Super Hornet launches from the flight deck of the USS Abraham Lincoln on May 10, 2019, in the Red Sea. The Abraham Lincoln Carrier Strike Group has been deployed to U.S. Central Command as tensions with Iran have recently escalated.

Photo: Mass Communication Specialist Seaman Michael Singley/U.S. Navy via Getty Images

Posted on The Intercept and ZCommunications May 30, 2019

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