Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Arms Dealers Flock to Mideast

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Is the defense industry headed for a downturn? Yesterday's JPMorgan downgrade of L-3 Communications (NYSE: LLL  ) certainly makes it sound that way. But you know the old saying: When the going gets tough, the tough get going ...

... to Constantinople?
Recent weeks have given investors a glimpse into the defense industry's response to curtailed Pentagon spending, and it can be summed up in three simple (if otherwise disturbing) words: Middle East arms deals.

A couple weeks back, we discussed how Congress is reviewing a plan by Lockheed Martin (NYSE: LMT  ) and Raytheon (NYSE: RTN  ) to sell $7.8 billion worth of Patriot PAC-3 missiles to Turkey. Around the same time, The Wall Street Journal ran an editorial by Iraqi commentator and political analyst Omar Fadhil Al-Nidawi calling for similar sales to Iraq. On Wednesday, the companies revealed that there interest in make yet another multibillion-dollar sale in the region, this time to the United Arab Emirates (UAE).

Like Turkey -- and Kuwait, and Israel, and Saudi Arabia -- the UAE views Patriots as a means of bolstering its air defenses and warding off a growing threat from Iran. Last year, the UAE ordered $3.3 billion worth of Patriots. Cccording to retired Admiral Charles Moore, Lockheed's man in Abu Dhabi, the UAE's also in negotiations to spend another $7 billion to deploy Lockheed's Terminal High-Altitude Area Defense system (THAAD).

If it seems a little strange to hear of U.S. defense contractors making major sales of weapons systems to a region that's given us so much grief, well, it shouldn't. After all, the UAE is a key U.S. ally. It's swimming in oil money and spending it freely on weapons systems. Over the last five years, the country has spent more on arms imports than any other nation on Earth, China and India excepted. For reference: the population of India is 1.2 billion, China is 1.3 billion, and the UAE is less than 5 million.

So I submit to you that UAE probably wins the title of grand champ of the world for per capita weapons spending.

Foolish takeaway
The more actively Secretary of Defense Gates wields the Pentagon budget axe, the more active we're going to see contractors like Lockheed and Raytheon -- and Boeing (NYSE: BA  ) , Northrop Grumman (NYSE: NOC  ) , and Textron (NYSE: TXT  ) -- getting in the Mideast.

Are Mideast arms sales bad U.S. government policy -- or just good business? Post your thoughts below.

Fool contributor Rich Smith owns shares of Boeing. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 07, 2009, at 5:51 AM, chipop wrote:

    it seems unwise to supply those guys with state of the art weapons.

    after all, you know u.s. suplied iran before it went kabam, and look what happened there.

    if turkey goes to the euro union, then no problem.

    but uae is just a very rich but other than that very primative place, monarchy and all that included.

    only democracy's should get any weapons from u.s.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 993253, ~/Articles/ArticleHandler.aspx, 10/27/2016 8:50:40 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:02 PM
LMT $248.53 Down -1.56 -0.62%
Lockheed Martin CAPS Rating: ****
BA $143.31 Down -2.23 -1.53%
Boeing CAPS Rating: ****
LLL $137.75 Down -10.96 -7.37%
L-3 Communications… CAPS Rating: ****
NOC $225.35 Down -2.70 -1.18%
Northrop Grumman CAPS Rating: ****
RTN $136.28 Down -5.00 -3.54%
Raytheon CAPS Rating: ****
TXT $39.57 Down -0.28 -0.70%
Textron CAPS Rating: ****