Hypersonic Missiles Are Unstoppable. And They’re Starting a New Global Arms Race.

The new weapons — which could travel at more than 15 times the speed of sound with terrifying accuracy — threaten to change the nature of warfare.

In March 6, 2018, the grand ballroom at the Sphinx Club in Washington was packed with aerospace-industry executives waiting to hear from Michael D. Griffin. Weeks earlier, Secretary of Defense James Mattis named the 69-year-old Maryland native the Pentagon’s under secretary for research and engineering, a job that comes with an annual budget of more than $17 billion. The dark-suited attendees at the McAleese/Credit Suisse Defense Programs Conference were eager to learn what type of work he would favor.

The audience was already familiar with Griffin, an unabashed defender of American military and political supremacy who has bragged about being labeled an “unreconstructed cold warrior.” With five master’s degrees and a doctorate in aerospace engineering, he was the chief technology officer for President Reagan’s Strategic Defense Initiative (popularly known as Star Wars), which was supposed to shield the United States against a potential Russian attack by ballistic missiles looping over the North Pole. Over the course of his career that followed, he wrote a book on space vehicle design, ran a technology incubator funded by the C.I.A., directed NASA for four years and was employed as a senior executive at a handful of aerospace firms.

Griffin was known as a scientific optimist who regularly called for “disruptive innovation” and who prized speed above all. He had repeatedly complained about the Pentagon’s sluggish bureaucracy, which he saw as mired in legacy thinking. “This is a country that produced an atom bomb under the stress of wartime in three years from the day we decided to do it,” he told a congressional panel last year. “This is a country that can do anything we need to do that physics allows. We just need to get on with it.”

In recent decades, Griffin’s predecessors had prioritized broad research into topics such as human-computer interaction, space communication and undersea warfare. But Griffin signaled an important shift, one that would have major financial consequences for the executives in attendance. “I’m sorry for everybody out there who champions some other high priority, some technical thing; it’s not that I disagree with those,” he told the room. “But there has to be a first, and hypersonics is my first.”

Griffin was referring to a revolutionary new type of weapon, one that would have the unprecedented ability to maneuver and then to strike almost any target in the world within a matter of minutes. Capable of traveling at more than 15 times the speed of sound, hypersonic missiles arrive at their targets in a blinding, destructive flash, before any sonic booms or other meaningful warning. So far, there are no surefire defenses. Fast, effective, precise and unstoppable — these are rare but highly desired characteristics on the modern battlefield. And the missiles are being developed not only by the United States but also by China, Russia and other countries.

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Griffin is now the chief evangelist in Washington for hypersonics, and so far he has run into few political or financial roadblocks. Lawmakers have supported a significant expansion of federal spending to accelerate the delivery of what they call a “game-changing technology,” a buzz phrase often repeated in discussions on hypersonics. America needs to act quickly, says James Inhofe, the Republican senator from Oklahoma who is chairman of the Armed Services Committee, or else the nation might fall behind Russia and China. Democratic leaders in the House and Senate are largely in agreement, though recently they’ve pressed the Pentagon for more information. (The Senate Armed Services Committee ranking member Jack Reed, a Democrat from Rhode Island, and House Chairman Adam Smith, the Democratic representative for Washington’s ninth district, told me it might make sense to question the weapons’ global impact or talk with Russia about the risks they create, but the priority in Washington right now is to get our versions built.)

In 2018, Congress expressed its consensus in a law requiring that an American hypersonic weapon be operational by October 2022. This year, the Trump administration’s proposed defense budget included $2.6 billion for hypersonics, and national security industry experts project that the annual budget will reach $5 billion by the middle of the next decade. The immediate aim is to create two deployable systems within three years. Key funding is likely to be approved this summer.

The enthusiasm has spread to military contractors, especially after the Pentagon awarded the largest one, Lockheed Martin, more than $1.4 billion in 2018 to build missile prototypes that can be launched by Air Force fighter jets and B-52 bombers. These programs were just the beginning of what the acting defense secretary, Patrick M. Shanahan, described in December as the Trump administration’s goal of “industrializing” hypersonic missile production. Several months later, he and Griffin created a new Space Development Agency of some 225 people, tasked with putting a network of sensors in low-earth orbit that would track incoming hypersonic missiles and direct American hypersonic attacks. This isn’t the network’s only purpose, but it will have “a war-fighting capability, should it come to that,” Griffin said in March.

Development of hypersonics is moving so quickly, however, that it threatens to outpace any real discussion about the potential perils of such weapons, including how they may disrupt efforts to avoid accidental conflict, especially during crises. There are currently no international agreements on how or when hypersonic missiles can be used, nor are there any plans between any countries to start those discussions. Instead, the rush to possess weapons of incredible speed and maneuverability has pushed the United States into a new arms race with Russia and China — one that could, some experts worry, upend existing norms of deterrence and renew Cold War-era tensions.

Although hypersonic missiles can in theory carry nuclear warheads, those being developed by the United States will only be equipped with small conventional explosives. With a length between just five and 10 feet, weighing about 500 pounds and encased in materials like ceramic and carbon fiber composites or nickel-chromium superalloys, the missiles function like nearly invisible power drills that smash holes in their targets, to catastrophic effect. After their launch — whether from the ground, from airplanes or from submarines — they are pulled by gravity as they descend from a powered ascent, or propelled by highly advanced engines. The missiles’ kinetic energy at the time of impact, at speeds of at least 1,150 miles per hour, makes them powerful enough to penetrate any building material or armored plating with the force of three to four tons of TNT.

They could be aimed, in theory, at Russian nuclear-armed ballistic missiles being carried on trucks or rails. Or the Chinese could use their own versions of these missiles to target American bombers and other aircraft at bases in Japan or Guam. Or the missiles could attack vital land- or sea-based radars anywhere, or military headquarters in Asian ports or near European cities. The weapons could even suddenly pierce the steel decks of one of America’s 11 multibillion-dollar aircraft carriers, instantly stopping flight operations, a vulnerability that might eventually render the floating behemoths obsolete. Hypersonic missiles are also ideal for waging a decapitation strike — assassinating a country’s top military or political officials. “Instant leader-killers,” a former Obama administration White House official, who asked not to be named, said in an interview.

Within the next decade, these new weapons could undertake a task long imagined for nuclear arms: a first strike against another nation’s government or arsenals, interrupting key chains of communication and disabling some of its retaliatory forces, all without the radioactive fallout and special condemnation that might accompany the detonation of nuclear warheads. That’s why a National Academies of Sciences, Engineering and Medicine report said in 2016 that hypersonics aren’t “simply evolutionary threats” to the United States but could in the hands of enemies “challenge this nation’s tenets of global vigilance, reach and power.”

The arrival of such fast weaponry will dangerously compress the time during which military officials and their political leaders — in any country — can figure out the nature of an attack and make reasoned decisions about the wisdom and scope of defensive steps or retaliation. And the threat that hypersonics pose to retaliatory weapons creates what scholars call “use it or lose it” pressures on countries to strike first during a crisis. Experts say that the missiles could upend the grim psychology of Mutual Assured Destruction, the bedrock military doctrine of the nuclear age that argued globe-altering wars would be deterred if the potential combatants always felt certain of their opponents’ devastating response.

This position worries arms-control experts like Thomas M. Countryman, a career diplomat for 35 years and former assistant secretary of state in the Obama administration. “This is not the first case of a new technology proceeding through research, development and deployment far faster than the policy apparatus can keep up,” says Countryman, who is now chairman of the Arms Control Association. He cites examples of similarly “destabilizing technologies” in the 1960s and 1970s, when billions of dollars in frenzied spending on nuclear and chemical arms was unaccompanied by discussion of how the resulting dangers could be minimized. Countryman wants to see limitations placed on the number of hypersonic missiles that a country can build or on the type of warheads that they can carry. He and others worry that failing to regulate these weapons at the international level could have irreversible consequences.

“It is possible,” the United Nations Office of Disarmament Affairs said in a February report, that “in response [to] the deployment of hypersonic weapons,” nations fearing the destruction of their retaliatory-strike capability might either decide to use nuclear weapons under a wider set of conditions or simply place “nuclear forces on higher alert levels” as a matter of routine. The report lamented that these “ramifications remain largely unexamined and almost wholly undiscussed.”

So why haven’t the potential risks of this revolution attracted more attention? One reason is that for years the big powers have cared mostly about numerical measures of power — who has more warheads, bombers and missiles — and negotiations have focused heavily on those metrics. Only occasionally has their conversation widened to include the issue of strategic stability, a topic that encompasses whether specific weaponry poses risks of inadvertent war.

An aerospace engineer for the military for more than three decades, Daniel Marren runs one of the world’s fastest wind tunnels — and thanks to hypersonics research, his lab is in high demand. But finding it takes some time: When I arrived at the Air Force’s White Oak testing facility, just north of Silver Spring, Md., the private security guards only vaguely gestured toward some World War II-era military research buildings down the road, at the edge of the Food and Drug Administration’s main campus. The low-slung structure that houses Marren’s tunnel looks as if it could pass for an aged elementary school, except that it has a seven-story silver sphere sticking out of its east side, like a World’s Fair exhibit in the spot where an auditorium should be. The tunnel itself, some 40 feet in length and five feet in diameter, looks like a water main; it narrows at one end before emptying into the silver sphere. A column of costly high-tech sensors is grafted onto the piping where a thick window has been cut into its midsection.

Marren seemed both thrilled and harried by the rising tempo at his laboratory in recent months. A jovial 55-year-old who speaks carefully but excitedly about his work, he showed me a red brick structure on the property with some broken windows. It was built, he said, to house the first of nine wind tunnels that have operated at the test site, one that was painstakingly recovered in 1948 from Peenemünde, the coastal German village where Wernher von Braun worked on the V-2 rocket used to kill thousands of Londoners in World War II. American military researchers had a hard time figuring out how to reassemble and operate it, so they recruited some German scientists stateside.

Inside the main room, Marren — dressed in a technologist’s polo shirt — explained that during the tests, the tunnel is first rolled into place on a trolley over steel rails in the floor. Then an enormous electric burner is ignited beneath it, heating the air inside to more than 3,000 degrees, hot enough to melt steel. The air is then punched by pressures 1,000 times greater than normal at one end of the tunnel and sucked at the other end by a vacuum deliberately created in the enormous sphere.

That sends the air roaring down the tunnel at up to 18 times the speed of sound — fast enough to traverse more than 30 football fields in the time it takes to blink. Smack in the middle of the tunnel during a test, attached to a pole capable of changing its angle in fractions of a second, is a scale model of the hypersonics prototype. That is, instead of testing the missiles by flying them through the air outdoors, the tunnel effectively makes the air fly past them at the same incredible pace.

For the tests, the models are coated with a paint that absorbs ultraviolet laser light as it warms, marking the spots on their ceramic skin where frictional heat may threaten the structure of the missile; engineers will then need to tweak the designs either to resist that heat or shunt it elsewhere. The aim, Marren explains, is to see what will happen when the missiles plow through the earth’s dense atmosphere on their way to their targets.

It’s challenging work, replicating the stresses these missiles would endure while whizzing by at 30 times the speed of a civilian airliner, miles above the clouds. Their sleek, synthetic skin expands and deforms and kicks off a plasma like the ionized gas formed by superheated stars, as they smash the air and try to shed all that intense heat. The tests are fleeting, lasting 15 seconds at most, which require the sensors to record their data in thousandths of a nanosecond. That’s the best any such test facility can do, according to Marren, and it partly accounts for the difficulty that defense researchers have had in producing hypersonics, even after about $2 billion-worth of federal investment before this year.

Nonetheless, Marren, who has worked at the tunnel since 1984, is optimistic that researchers will be able to deliver a working missile soon. He and his team are operating at full capacity, with hundreds of test runs scheduled this year to measure the ability of various prototype missiles to withstand the punishing friction and heat of such rapid flight. “We have been prepared for this moment for some time, and it’s great to lean forward,” Marren says. The faster that weapons systems can operate, he adds, the better.

Hypersonics pose a different threat from ballistic missiles, according to those who have studied and worked on them, because they could be maneuvered in ways that confound existing methods of defense and detection. Not to mention, unlike most ballistic missiles, they would arrive in under 15 minutes — less time than anyone in Hawaii or elsewhere would need to meaningfully react.

How fast is that, really? An object moving through the air produces an audible shock wave — a sonic boom — when it reaches about 760 miles per hour. This speed of sound is also called Mach 1, after the Austrian physicist Ernst Mach. When a projectile flies faster than Mach’s number, it travels at supersonic speed — a speed faster than sound. Mach 2 is twice the speed of sound; Mach 3 is three times the speed of sound, and so on. When a projectile reaches a speed faster than Mach 5, it’s said to travel at hypersonic speed.

One of the two main hypersonic prototypes now under development in the United States is meant to fly at speeds between Mach 15 and Mach 20, or more than 11,400 miles per hour. This means that when fired by the U.S. submarines or bombers stationed at Guam, they could in theory hit China’s important inland missile bases, like Delingha, in less than 15 minutes. President Vladimir Putin has likewise claimed that one of Russia’s new hypersonic missiles will travel at Mach 10, while the other will travel at Mach 20. If true, that would mean a Russian aircraft or ship firing one of them near Bermuda could strike the Pentagon, some 800 miles away, in five minutes. China, meanwhile, has flight-tested its own hypersonic missiles at speeds fast enough to reach Guam from the Chinese coastline within minutes.

One concept now being pursued by the Defense Advanced Research Projects Agency uses a conventional missile launched from air platforms to loft a smaller, hypersonic glider on its journey, even before the missile reaches its apex. The glider then flies unpowered toward its target. The deadly projectile might ricochet downward, nose tilted up, on layers of atmosphere — the mesosphere, then the stratosphere and troposphere — like an oblate stone on water, in smaller and shallower skips, or it might be directed to pass smoothly through these layers. In either instance, the friction of the lower atmosphere would finally slow it enough to allow a steering system to maneuver it precisely toward its target. The weapon, known as Tactical Boost Glide, is scheduled to be dropped from military planes during testing next year.

Under an alternative approach, a hypersonic missile would fly mostly horizontally under the power of a “scramjet,” a highly advanced, fanless engine that uses shock waves created by its speed to compress incoming air in a short funnel and ignite it while passing by (in roughly one two-thousandths of a second, according to some accounts). With its skin heated by friction to as much as 5,400 degrees, its engine walls would be protected from burning up by routing the fuel through them, an idea pioneered by the German designers of the V-2 rocket.

Officials will have trouble even knowing where a strike would land. Although the missiles’ launch would probably be picked up by infrared-sensing satellites in its first few moments of flight, Griffin says they would be roughly 10 to 20 times harder to detect than incoming ballistic missiles as they near their targets. They would zoom along in the defensive void, maneuvering unpredictably, and then, in just a few final seconds of blindingly fast, mile-per-second flight, dive and strike a target such as an aircraft carrier from an altitude of 100,000 feet.

During their flight, the perimeter of their potential landing zone could be about as big as Rhode Island. Officials might sound a general alarm, but they’d be clueless about exactly where the missiles were headed. “We don’t have any defense that could deny the employment of such a weapon against us,” Gen. John E. Hyten, commander of United States Strategic Command, told the Senate Armed Services Committee in March 2018. The Pentagon is just now studying what a hypersonic attack might look like and imagining how a defensive system might be created; it has no architecture for it, and no firm sense of the costs.

Developing these new weapons hasn’t been easy. A 2012 test was terminated when the skin peeled off a hypersonic prototype, and another self-destructed when it lost control. A third hypersonic test vehicle was deliberately destroyed when its boosting missile failed in 2014. Officials at Darpa acknowledge they are still struggling with the composite ceramics they need to protect the missiles’ electronics from intense heating; the Pentagon decided last July to ladle an extra $34.5 million into this effort this year.

The task of conducting realistic flight tests also poses a challenge. The military’s principal land-based site for open-air prototype flights — a 3,200-square-mile site stretching across multiple counties in New Mexicoisn’t big enough to accommodate hypersonic weapons. So fresh testing corridors are being negotiated in Utah that will require a new regional political agreement about the noise of trailing sonic booms. Scientists still aren’t sure how to accumulate all the data they need, given the speed of the flights. The open-air flight tests can cost up to $100 million.

The most recent open-air hypersonic-weapon test was completed by the Army and the Navy in October 2017, using a 36,000-pound missile to launch a glider from a rocky beach on the western shores of Kauai, Hawaii, toward Kwajalein Atoll, 2,300 miles to the southwest. The 9 p.m. flight created a trailing sonic boom over the Pacific, which topped out at an estimated 175 decibels, well above the threshold of causing physical pain. The effort cost $160 million, or 6 percent of the total hypersonics budget proposed for 2020.

In March 2018, Vladimir Putin, in the first of several speeches designed to rekindle American anxieties about a foreign missile threat, boasted that Russia had two operational hypersonic weapons: the Kinzhal, a fast, air-launched missile capable of striking targets up to 1,200 miles away; and the Avangard, designed to be attached to a new Sarmat intercontinental ballistic missile before maneuvering toward its targets. Russian media have claimed that nuclear warheads for the weapons are already being produced and that the Sarmat missile itself has been flight-tested roughly 3,000 miles across Siberia. (Russia has also said it is working on a third hypersonic missile system, designed to be launched from submarines.) American experts aren’t buying all of Putin’s claims. “Their test record is more like ours,” said an engineer working on the American program. “It’s had a small number of flight-test successes.” But Pentagon officials are convinced that Moscow’s weapons will soon be a real threat.

Analysts say the Chinese are even further along than the Russians, partly because Beijing has sought to create hypersonic missiles with shorter ranges that don’t have to endure high temperatures as long. Many of their tests have involved a glide vehicle. Last August, a contractor for the Chinese space program claimed that it successfully flight-tested a gliding hypersonic missile for slightly more than six minutes. It supposedly reached a speed exceeding Mach 5 before landing in its target zone. Other Chinese hypersonic missile tests have reached speeds almost twice as fast.

And it’s not just Russia, China and the United States that are interested in fast-flying military power drills. France and India have active hypersonics development programs, and each is working in partnership with Russia, according to a 2017 report by the Rand Corp., a nonpartisan research organization. Australia, Japan and the European Union have either civilian or military hypersonics research underway, the report said, partly because they are still tantalized by the prospect of making super-speedy airplanes large enough to carry passengers across the globe in mere hours. But Japan’s immediate effort is aimed at making a weapon that will be ready for testing by 2025.

This is not the first time the United States or others have ignored risks while rushing toward a new, apparently magical solution to a military threat or shortcoming. During the Cold War, America and Russia competed fiercely to threaten each other’s vital assets with bombers that took hours to cross oceans and with ballistic missiles that could reach their targets in 30 minutes. Ultimately, each side accumulated more than 31,000 warheads (even though the detonations of just 100 weapons would have sparked a severe global famine and stripped away significant protections against ultraviolet radiation). Eventually the fever broke, partly because of the Soviet Union’s dissolution, and the two nations reduced their arsenals through negotiations to about 6,500 nuclear warheads apiece.

Since then, cycles of intense arms racing have restarted whenever one side has felt acutely disadvantaged or spied a potential exit from what the political scientist Robert Jervis once described as the “overwhelming nature” of nuclear destruction, a circumstance that we’ve been involuntarily and resentfully hostage to for the past 70 years.

[Putin Warns That Russia Is Developing ‘Invincible’ Hypersonic Missiles]

Trump officials in particular have resisted policies that support Mutual Assured Destruction, the idea that shared risk can lead to stability and peace. John Bolton, the national security adviser, was a key architect in 2002 of America’s withdrawal from the Anti-Ballistic Missile Treaty with Russia, which limited both nations’ ability to try to block ballistic missiles. He asserted that freeing the United States of those restrictions would enhance American security, and if the rest of the world was static, his prediction might have come true. But Russia started its hypersonics program to ensure it could get around any American ballistic missile defenses. “Nobody wanted to listen to us” about the strategic dangers of abandoning the treaty, Putin said last year with an aggressive flourish as he displayed videos and animations of his nation’s hypersonic missiles. “So listen now.”

But not much listening is going on in either country. In January, the Trump administration released an updated missile-defense strategy that explicitly calls for limiting mutual vulnerability by defeating enemy “offensive missiles prior to launch.” The administration also continues to eschew any new limits on its own missiles, arguing that past agreements lulled America into a dangerous post-Cold War “holiday,” as a senior State Department official described it.

The Obama administration’s inaction helped open the door to the 21st-century hypersonic contest America finds itself in today. “We always do these things in isolation, without thinking about what it means for the big powers — for Russia and China — who are batshit paranoid” about a potential quick, pre-emptive American attack, the adviser said, expressing regret about how the issue was handled during Obama’s tenure.

While it might not be too late to change course, history shows that stopping an arms race is much harder than igniting one. And Washington at the moment is still principally focused on “putting a weapon on a target,” as a longtime congressional staff member put it, rather than the reaction this capability inspires in an adversary. Griffin even projects an eventual American victory in this race: In April 2018, he said the best answer to the Chinese and Russian hypersonic programs is “to hold their assets at risk with systems similar to but better than what they have fielded.” Invoking the mantra of military scientists throughout time, Griffin added that the country must “see their hand and raise them one.” The world will soon find out what happens now that the military superpowers have decided to go all in.

Statement from President Donald J. Trump on Standing with Saudi Arabia

The world is a very dangerous place!

The country of Iran, as an example, is responsible for a bloody proxy war against Saudi Arabia in Yemen, trying to destabilize Iraq’s fragile attempt at democracy, supporting the terror group Hezbollah in Lebanon, propping up dictator Bashar Assad in Syria (who has killed millions of his own citizens), and much more. Likewise, the Iranians have killed many Americans and other innocent people throughout the Middle East. Iran states openly, and with great force, “Death to America!” and “Death to Israel!” Iran is considered “the world’s leading sponsor of terror.”

On the other hand, Saudi Arabia would gladly withdraw from Yemen if the Iranians would agree to leave. They would immediately provide desperately needed humanitarian assistance. Additionally, Saudi Arabia has agreed to spend billions of dollars in leading the fight against Radical Islamic Terrorism.

After my heavily negotiated trip to Saudi Arabia last year, the Kingdom agreed to spend and invest $450 billion in the United States. This is a record amount of money. It will create hundreds of thousands of jobs, tremendous economic development, and much additional wealth for the United States. Of the $450 billion, $110 billion will be spent on the purchase of military equipment from Boeing, Lockheed Martin, Raytheon and many other great U.S. defense contractors. If we foolishly cancel these contracts, Russia and China would be the enormous beneficiaries – and very happy to acquire all of this newfound business. It would be a wonderful gift to them directly from the United States!

The crime against Jamal Khashoggi was a terrible one, and one that our country does not condone. Indeed, we have taken strong action against those already known to have participated in the murder. After great independent research, we now know many details of this horrible crime. We have already sanctioned 17 Saudis known to have been involved in the murder of Mr. Khashoggi, and the disposal of his body.

Representatives of Saudi Arabia say that Jamal Khashoggi was an “enemy of the state” and a member of the Muslim Brotherhood, but my decision is in no way based on that – this is an unacceptable and horrible crime. King Salman and Crown Prince Mohammad bin Salman vigorously deny any knowledge of the planning or execution of the murder of Mr. Khashoggi. Our intelligence agencies continue to assess all information, but it could very well be that the Crown Prince had knowledge of this tragic event – maybe he did and maybe he didn’t!

That being said, we may never know all of the facts surrounding the murder of Mr. Jamal Khashoggi. In any case, our relationship is with the Kingdom of Saudi Arabia. 1 They have been a great ally in our very important fight against Iran. The United States intends to remain a steadfast partner of Saudi Arabia to ensure the interests of our country, Israel and all other partners in the region. It is our paramount goal to fully eliminate the threat of terrorism throughout the world! 2

I understand there are members of Congress who, for political or other reasons, would like to go in a different direction – and they are free to do so. I will consider whatever ideas are presented to me, but only if they are consistent with the absolute security and safety of America. After the United States, Saudi Arabia is the largest oil producing nation in the world. 3 They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels – so important for the world. As President of the United States I intend to ensure that, in a very dangerous world, America is pursuing its national interests and vigorously contesting countries that wish to do us harm. Very simply it is called America First!

 


  1. Not free-speech or justice

  2. yes, and fully and forever eliminate the threat of murder too

  3. what is the connection between the security and safety of America and oil?  Did I missed the connecting transition?

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.

Japan Missile Plans Put North Korean Bases Within Range

Japan plans to make its first purchase of missiles that could target North Korean military bases from long distance, a major military upgrade as a rising nuclear threat from Pyongyang sparks a regional arms race.

The decision, announced Friday, includes the potential purchase of missiles from Lockheed Martin Corp. and is likely to be welcomed by President Donald Trump. During a visit to Tokyo in November, Mr. Trump called for Japan to buy “massive” amounts of military equipment from the U.S.

Under Mr. Trump, the U.S. has sought to push Japan to upgrade its military capabilities and shoulder more of the burden of its defense. Prime Minister Shinzo Abe is largely in agreement as he seeks to loosen restrictions on the Japanese military.

 .. Last year, South Korea deployed a U.S.-built missile defense system and is currently working on a new ballistic missile capable of destroying North Korea’s underground military facilities. Japan also intends to purchase a new land-based missile defense system from the U.S.

Powerful lobbyist Tony Podesta steps down amid Mueller’s Russia probe

Last week, Tony Podesta, an eminence in the annals of Washington lobbying, threw one of his signature events, a big birthday bash at his stately stone manse in Kalorama. His guests thought he was on top of his world, one of the men who makes the city go.

On Monday, hours after the first indictments in the investigation into ties between President Trump’s campaign and the Russian government, Podesta abruptly quit his post atop the Podesta Group, the capital’s eighth-wealthiest lobbying firm.

.. raised questions about the work Podesta’s firm did with Manafort to buff the image of the Ukrainian government.

.. “It is impossible to run a public affairs firm while you are under attack by Fox News and the right wing media,”

.. For decades, Tony and John Podesta — brothers who share a Jesuit education, a devotion to liberal causes and a passion for politics — have been central players in Washington. And in the past year, both have been drawn into the orbit of scandals.

.. Tony’s Podesta Group is one of two firms described in Monday’s indictment as having been recruited by Manafort and Gates to lobby on behalf of Viktor Yanukovych

.. Both the Podesta Group and the other firm, Mercury Public Affairs, have said they were hired to lobby for a European nonprofit based in Brussels trying to polish Ukraine’s image in the West. But behind the scenes, prosecutors allege, the real client was a political party led by the former Ukraine president, who was friendly with Russia.

.. To their opponents, the Podestas are quintessential swamp rats, exemplars of the permanent Washington establishment. Their defenders, however, view them as the oil that makes the gears of government turn.

.. Tony Podesta has been a pivotal figure in the murky connections between policy and politics, becoming wealthy on fees from industries and foreign entities that want something from Congress and the White House. He also bundles big donations and dispenses them to politicians who might someday be helpful to those lobbying clients.

..  the Podesta Group, representing some of the country’s biggest and most powerful businesses, including Walmart, Bank of America and BP.

.. This year, the firm’s top clients are Mylan, a pharmaceutical company; Wells Fargo; Crawford Group, the parent of Enterprise car rentals; and Lockheed Martin

.. Along the way, the firm also represented a number of foreign entities, including the government of Egypt under ex-dictator Hosni Mubarak.

.. “More and more, foreign countries turn to lobbyists to do work that diplomats once did themselves,”

Nearly Half the Pentagon Budget Goes To Contractors

In fiscal year 2016, the Pentagon issued $304 billion in contract awards to corporations—nearly half of the department’s $600 billion-plus budget for that year.

the biggest beneficiaries by a country mile were

  1. Lockheed Martin ($36.2 billion),
  2. Boeing ($24.3 billion),
  3. Raytheon ($12.8 billion),
  4. General Dynamics ($12.7 billion), and
  5. Northrop Grumman ($10.7 billion).

Together, these five firms gobbled up nearly $100 billion of your tax dollars, about one-third of all the Pentagon’s contract awards in 2016.

Health care companies like

  1. Humana ($3.6 billion),
  2. UnitedHealth Group ($2.9 billion), and
  3. Health Net ($2.6 billion) cash in as well,

and they’re joined by, among others, pharmaceutical companies like

  • McKesson ($2.7 billion) and

universities deeply involved in military-industrial complex research like

  • MIT ($1 billion) and
  • Johns Hopkins ($902 million).

.. The heads of the top five Pentagon contractors—Lockheed Martin, Boeing, Raytheon, General Dynamics, and Northrop Grumman—made a cumulative $96 million last year.

These are companies that are significantly or, in the cases of Lockheed Martin and Northrop Grumman, almost entirely dependent on government dollars.

.. Donald Trump initially spent a fair amount of tweeting energy bragging about how he was going to bring such contractors to heel on their pricing practices for weapons systems. In fact, he’s already turned out to be good news indeed for major contractors, most of whom have seen sharp upturns in revenues and profits

.. Trump has proven eager to lift restrictions on U.S. weapons sales abroad (and enlist State Department and Pentagon officials to spend more of their time shilling such weaponry).

.. The arms industry’s investment in lobbying is even more impressive. The defense sector has spent a total of more than $1 billion on that productive activity since 2009, employing anywhere from 700 to 1,000 lobbyists in any given year.

.. you’re talking about significantly more than one lobbyist per member of Congress, the majority of whom zipped through Washington’s famed “revolving door”; they moved, that is, from positions in Congress or the Pentagon to posts at weapons companies from which they could proselytize their former colleagues.

.. Two analysts from U.S. war colleges have estimated that about 300 deliverable nuclear warheads would be enough to dissuade any nation from attacking the United States with a nuclear weapon.

.. And note that the current trillion-dollar “modernization” program for the nuclear arsenal was initiated under President Barack Obama, a man who won the Nobel Prize for his urge to abolish all such weaponry.

.. In 2011, a study by economists from the University of Massachusetts made this blindingly clear.  What they showed was that military spending is the worst way to create jobs. Putting the same money into any other area—from infrastructure to transportation to alternative energy to healthcare or education—creates up to twice as many jobs as military spending does.

.. Contractors aid and abet the process of investing in the Pentagon by routinely exaggerating the number of jobs their programs create.

.. the best jobs generated by Pentagon spending are the ones for well-heeled lobbyists and overpaid corporate executives.

.. So the next time someone suggests that the Pentagon needs yet more money for the troops, just remember that what they’re actually talking about are troops of overpaid defense contractors, not members of the armed forces.

Mastering the Machine

How Ray Dalio built the world’s richest and strangest hedge fund.

.. “Given that I’m never sure, I don’t want to have any concentrated bets.”

.. Dalio is a consistent hitter of singles and doubles

.. these days many markets move in the same direction, which makes it hard to achieve real diversification.

.. “spread” bets, purchasing one security it considers undervalued and selling short another one it considers overvalued.

.. In any market that interests him, he identifies the buyers and sellers, estimates how much they are likely to demand and supply, and then looks at whether his findings are already reflected in the market price. If not, there may be money to be made.

.. Unless he and Jensen and Prince agree that a certain trade makes sense, the firm doesn’t make it.

.. The firm’s researchers also went through the public accounts of nearly all the major financial institutions in the world and constructed estimates of how much money they stood to lose from bad debts. The figure they came up with was eight hundred and thirty-nine billion dollars. Armed with this information, Dalio visited the Treasury Department in December, 2007, and met with some of Treasury Secretary Henry Paulson’s staff. Nobody took much notice of what he said, but he went on to the White House, where he presented his numbers to some senior economic staffers.

.. “Everybody else was talking about liquidity. Ray was talking about solvency.”

.. Summers went on, “He had a fully articulated way of looking at the economy. I’m not sure I would agree with all of it, but it seems to have been a very powerful analytical tool through this particular period.”

.. Dalio’s bearishness cost him in 2009. Despite the Fed’s actions and the Obama Administration’s stimulus package, Dalio predicted that the economic recovery would be weak. When growth rebounded faster than he expected and the Dow rose nineteen per cent, the Pure Alpha fund gained just four per cent.

.. an article in New York ridiculed Dalio’s Principles, saying that they read “as if Ayn Rand and Deepak Chopra had collaborated on a line of fortune cookies.”

.. It’s also the case that in the time I spent at the firm I saw senior people criticizing subordinates—but not the reverse.

.. “What we’re trying to have is a place where there are no ego barriers, no emotional reactions to mistakes. . . . If we could eliminate all those reactions, we’d learn so much faster.”

.. I have never seen a C.E.O. spend as much time developing his people as Ray.”

.. Another new member of Bridgewater’s management committee is James Comey, the firm’s top lawyer, who served as Deputy Attorney General in the Bush Administration between 2003 and 2005. “Most of my friends think I am having a midlife crisis,” Comey told me in a recent phone conversation, referring to his decision, last year, to leave Lockheed Martin and accept an offer from Dalio.

.. Comey said of Dalio, “He’s tough and he’s demanding and sometimes he talks too much, but, God, is he a smart bastard.”

.. “We learned that beyond having enough money to help secure the basics—quality relationships, health, stimulating ideas, etc.—having more money, while nice, wasn’t all that important.”

..

he regards it as self-evident that all social systems obey nature’s laws, and that individual participants get rewarded or punished according to how far they operate in harmony with those laws. He views the financial markets as simply another social system, which determines payoffs and punishments in a like manner. “You have to be accurate,” he says. “Otherwise, you are going to pay. Alpha is zero sum. In order to earn more than the market return, you have to take money from somebody else.”

.. Dalio is right, but somewhat self-serving. If hedge-fund managers are playing a zero-sum game, what is their social utility? And if, as many critics contend, there isn’t any, how can they justify their vast remuneration? When I put these questions to Dalio, he insisted that, through pension funds, Bridgewater’s investors include teachers and other public-sector workers, and that the firm created more value for its clients last year than Amazon, eBay, and Yahoo combined.

However, it is one thing to say that the most successful hedge-fund managers earn the riches they reap. It is quite another to suggest that the entire industry serves a social purpose. But that is Dalio’s contention. “In aggregate, it really contributes a lot to the efficiency of capital allocation, and capital allocation is very important,” he said.

.. Like many successful financiers, Dalio justifies capitalism and his place in it as a Darwinian process, in which the over-all logic of the system is sometimes hidden.

Of course, this view conveniently ignores the argument that hedge funds, through their herd behavior, have contributed to speculative bubbles, in tech stocks, oil, and other commodities.

.. “There is a basis for the argument that hedge funds add economic value,” Andrew Lo, an economist at M.I.T. who runs his own hedge fund, says. “At the same time, they create systemic risks that have to be weighed against those positives.”

.. In 2008, hedge funds had hundreds of billions of dollars on deposit at investment banks, which acted as their brokers and counterparties on many trades. When the Wall Street firms got into trouble, a number of other hedge funds demanded their money back immediately. These demands amounted to a virtual run on the banks and helped to bring down Bear Stearns and Lehman Brothers. Dalio acknowledged to me that Bridgewater was one of the funds that pulled a lot of money out of Lehman

.. Fifteen years ago on Wall Street, remuneration packages of five or ten million dollars a year were rare. Today, C.E.O.s and star traders routinely demand vastly higher sums to keep up with their counterparts at hedge funds.

.. some of the very brightest science and mathematics graduates to the industry. Can it really be in America’s interest to have so much of its young talent playing a zero-sum game?

.. “We are still in a deleveraging period,” he said. “We will be in a deleveraging period for ten years or more.”

.. Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,”

.. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said