openpolitics.com

U.S.-Saudi Defense Ties on Track to Weather Controversy

President Trump last year heralded nearly $110 billion in potential deals during a trip to Saudi Arabia in May 2017. Many defense analysts said that figure includes existing commitments and contracts that could last as long as 30 years.

.. “We continue to believe that the death of Jamal Khashoggi will not lead to a major break in U.S. or European defense sales to Saudi Arabia,” said Byron Callan at Capital Alpha LLC. Mr. Callan estimated that Saudi Arabia accounts for about 5% of sales at the big U.S. defense companies.

.. Saudi Arabia is the world’s third-largest defense market after the U.S. and China and the biggest export destination for U.S. contractors, which made more than $3 billion in sales to the kingdom last year

.. The biggest signed deal is a $10 billion purchase agreed in 2014 of hundreds of armored vehicles by a Canadian subsidiary of General Dynamics, which is continuing to make shipments.

..  The kingdom’s wealth and longstanding tensions with Iran led it to plan to purchase best-in-class capabilities such as Lockheed’s Thaad missile-defense system.

.. Saudi Arabia has also bought precision bombs and missiles

.. Defense executives were among prominent attendees lined up for the Future Investment Initiative conference in capital Riyadh next week. A number of executives from finance and industry have pulled out of the conference.

.. Lockheed Martin CEO Marillyn Hewson in April hosted a tour of a U.S. satellite and missile facility by Crown Prince Mohammed bin Salman, heir to the Saudi throne and the kingdom’s day-to-day ruler.Boeing CEO Dennis Muilenburg in March hosted the prince at the plane maker’s plant in Seattle. Other executives, including Mr. Kennedy at Raytheon, have talked of frequent trips to the kingdom

.. Saudi Arabia’s huge arms bill has led the country to push for a greater share of the economic benefits, especially jobs. The kingdom has said it wants to become less reliant on imports and spend half its weapons budget in domestic facilities—compared to just 2% at present—part of a plan to diversify its economy beyond the oil industry by 2030.

.. That has led U.S. companies to open Saudi subsidiaries and to agree to shift assembly and other production processes to the kingdom. Boeing announced a joint venture in March that would place more than half the repair work for Saudi helicopters in the country, creating 6,000 jobs.

.. BAE Systems BAESY -3.80% plc, Europe’s largest weapons maker with deep ties to Saudi Arabia, is expected to have representatives at the business conclave in Saudi next week,

Robert Stallard, an analyst at Vertical Research, said the signing of the multibillion-dollar combat jet deal could be delayed. He said, though, long-term BAE’s business would not be dented. “We think the Saudi situation will blow over,” he said in a note.