Obama Approves Arms Package for Syriahttp://www.fool.com/investing/general/2013/07/27/obama-approves-arms-package-for-syria.aspx Katie Spence
July 27, 2013
If there's one thing that spurs defense companies' profits, it's war. And by all accounts, the civil war in Syria is horrific. More than 100,000 people have been killed, 1.8 million have fled, and 4.25 million are displaced. Further, on Thursday, the leader of Syria's Western-backed opposition group told U.S. Secretary of State John Kerry that if the United States doesn't supply the rebels with promised weapons, President Bashar al-Assad's regime would win.
Assad is known for his human-rights violations, corruption, and disdain for the U.S., but what pushed the Obama administration into promising weapons to Syrian rebels was "conclusive evidence" that Assad's regime used chemical weapons against opposition forces. However, the promise for weapons was made in June, and only recently was a "light armament" package approved. And now there is growing opposition to the United States' involvement in Syria. So, what does this mean for defense companies?
Benefiting from a state of chaos
For example, when North Korea decided to go on its missile-launching venture, South Korea responded by spending $1.6 billion on Boeing's (NYSE: BA) attack helicopters, while the U.S. found it needed to beef up missile defense. Those decisions directly benefited Lockheed Martin's (NYSE: LMT) Aegis Missile defense system and will probably end up benefiting Northrop Grumman (NYSE: NOC), the prime contractor on the Missile Defense Agency's Joint National Integration Center -- a simulating and war-gaming center -- as well as Boeing's ground-based interceptors, and Raytheon's (NYSE: RTN) SM-3, a defense weapon used to destroy incoming ballistic missiles.
The war in Syria presents similar lucrative opportunities for defense contractors. But it's not defense contractors that make the decision on whether to supply arms. In this case, the decision lies with the president.
To arm, or not to arm, Syria
There are a number of senators on both sides of the aisle that have serious concerns about arming Syrian rebels. Sen. Rand Paul (R-Ky.), said: "The president's unilateral decision to arm Syrian rebels is incredibly disturbing, considering what little we know about whom we are arming. Engaging in yet another conflict in the Middle East with no vote or Congressional oversight compounds the seve