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U.S. defense giants fatten wallet amid Ukraine, Gaza conflicts

"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." -- former U.S. President Eisenhower

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A woman walks past damaged buildings in Gaza City, Feb. 10, 2024. (Photo by Mohammed Ali/Xinhua)

U.S. defense giants are faring well amid heavy government demand for military aid to Ukraine and Israel. Experts expect this to continue in 2024.

“The Pentagon’s increased demand for goods and services from U.S. defense companies has likely improved their potential profits,” William Courtney, a retired U.S. ambassador and adjunct senior fellow at the RAND Corporation, told Xinhua.

“Since most of the fight involves ground operations, U.S. and other Western producers of equipment, ammunition, and other supplies for ground forces, including ground-based air defenses such as the Patriot, may have benefitted the most,” Courtney said.

ROBUST PROFITS FOR U.S. DEFENSE GIANTS

The latest round of the Israeli-Palestinian conflict is in its fourth month, with the death toll in Gaza exceeding 28,000 and continuing to rise. On the other side of the world is another data set.

Major U.S. 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 U.S. dollars in the fourth quarter, exceeding the third quarter and up by 10 percent compared to the same period last year.

A recently released financial report saw defense firm Lockheed Martin’s fourth-quarter profits beat analysts’ estimates. The company’s stock price surged at the outset of the Ukraine crisis from around the 400 dollar-per-share mark to nearly 500 dollar-per-share in less than a year and is at around 426 dollars a share at the close of trading on Friday.

Northrop Grumman stock hovered around the 400 dollar-per-share mark when the war in Ukraine broke out in February 2022. Shares surged to a high of around 545 dollars per share before dropping to 455 dollars by Friday.

Still, analysts said the stocks have much upside potential.

Aerospace and defense giant Boeing said in November 2023 that it would ramp up production capacity in its Huntsville factory for sensors used to guide Patriot missiles. The firm reported that the facility will enable Boeing to boost annual production of PAC-3 seekers by over 30 percent.

According to the Defense Post, U.S. 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 in the Ukraine crisis.

The excellent performances in the fourth quarter are primarily attributed to the continuous supply of weapons and ammunition provided by American 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 Small Diameter Bombs, Joint Direct Attack Munitions kits, and more.

Lockheed Martin also supplies Israel with “Hellfire” missiles. According to Bloomberg, just over a month after the conflict in Gaza began, around 2,000 “Hellfire” missiles were shipped from the United States to Israel.

The United States is Israel’s largest military aid provider. Considering strategic interests, domestic politics and other factors, the United States has provided Israel with over 130 billion dollars in security and weapon aid since its founding in 1948, with approximately 80 percent of Israel’s military equipment imports coming from the United States.

In recent years, the United States has provided Israel with about 3.8 billion dollars in military aid annually. The Biden administration recently asked Congress for additional aid to the country.

Lockheed Martin, Raytheon and General Dynamics all reported record levels of unfilled orders in their financial reports, indicating strong potential for future performance growth.

DEFENSE COMPANIES AND U.S. FOREIGN POLICY

While some experts don’t believe defense companies drive U.S. 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 U.S. officials and high-ranking military officers have frequently moved between the political, military and defense industry realms through a “revolving door,” engaging in commercial activities upon exiting public service and assuming official positions after being involved in business, resulting in collusion between government and 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 Corporation and National Intelligence Director Avril Haines serving as an advisor 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 U.S. national security officials, including former Secretary of Defense Mark Esper and former Secretary of the Army Ryan McCarthy, have entered the 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.

Even members of Congress benefit from regional conflicts. Two days before the escalation of the Russia-Ukraine conflict in February 2022, Republican congresswoman Marjorie Taylor Greene purchased shares in Lockheed Martin Corporation, after which the stock price soared.

However, on social media, Greene displayed a stance of indignation towards those who advocate for war. “War is big business to our leaders,” she said. Her words and actions exposed the hypocrisy of American politicians and the true nature of the American military-industrial complex.

Following the Oct. 7 Hamas surprise attack, U.S. policy is in many ways captive to immediate Israeli reactions, and U.S. defense contractors are a subordinate part of that, Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland, told Xinhua.

Both congressional Democrats and Republicans agree on providing more funding for Ukraine and Israel. Still, a substantial group of House Republicans are against increasing aid to Ukraine.

Meanwhile, a growing number of Americans want less involvement in the Russia-Ukraine conflict, and some even fear the United States will send troops to fight.

The enormous U.S. military expenditure is a reminder of the warning issued by former U.S. President 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.”

Xinhua News Agency

Founded in 1931, Xinhua News Agency is one of the largest news organizations in the world, with over 10,000 employees across the globe. As the main source of news and information for China, Xinhua plays a key role in shaping the country's media landscape and communicating its perspectives to the world. The agency produces a wide range of content, including text news articles, photos, videos, and social media posts, in both Chinese and English, and its reports are widely used by media organizations around the world. Xinhua also operates several international bureaus, including in key capitals like Washington, D.C., Moscow, and London, to provide in-depth coverage of global events.

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