Cowboys and Indians

The Bush administration, like the Reagan regime before it, is often derisively labeled "cowboy" in international circles. Yesterday, though, the administration didn't just tolerate the label, but seemed to embrace it, bringing cowboys and Indians together to play war games.

The administration announced that it will permit India to purchase six C-130J cargo planes manufactured by Lockheed Martin (NYSE: LMT  ) . Along with training and logistical support, plus "peripherals" such as spare Rolls-Royce engines, communications equipment, and AAR-47 anti-aircraft missile warning systems, the contract should be worth more than $1 billion.

You lose, I win
The sale is part of an ongoing effort by the Indian military to upgrade its aging fleet of 100-odd Russian Antonov AN-32s and about two dozen Ilyushin IL-76 transport aircraft, an effort that Lockheed is understandably interested in assisting. If the firm can lock up transport aircraft sales and deny them to Airbus before the latter fields its long-anticipated A400M transport (not expected to ship for another two years), all the better.

Moreover, the C-130 deal comes at an especially sensitive time in Indian-Russian relations. Recently, Russia has been playing hardball with India, which buys about $1.5 billion worth of military hardware from its northern neighbor annually. India's already paying for $8.5 billion worth of contracts to buy, or license the manufacturing of, 238 Sukhoi Su-30 fighter jets. Not content with the initial price, Russia wants an extra-half billion.

Russia may well be shooting itself in the foot, just as Lockheed places its foot in the door of the New Delhi arms market. Significantly, all of this is happening in the midst of India inviting bids for a contract to purchase 126 multirole combat aircraft -- a contract that not only the Russians, but Sweden's Saab, France's Dassault, and also Lockheed and Boeing (NYSE: BA  ) , would very much like to win.

I win, we all win
Meanwhile, returning to the transport aircraft deal, the C-130J sales seem likely to open the Indian market not just to Lockheed, but to subcontractors such as Honeywell (NYSE: HON  ) and Goodrich (NYSE: GR  ) , who also work on the aircraft. More generally, if the Indians decide they'd like to buy more U.S. hardware, and the administration and Congress prove amenable, it's not too hard to see good things coming to even more U.S. contractors. Raytheon (NYSE: RTN  ) , Northrop Grumman (NYSE: NOC  ) , United Technologies (NYSE: UTX  ) -- you name it, I'm betting this is good news for them all.

For further Foolish musings on the world of (legal) international arms trafficking, read:

Fool contributor Rich Smith does not own shares of any company named above.


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