A former defense contractor was arrested on Thursday at Newark Liberty International Airport before he could board a flight with a final destination of Tehran, Iran. The engineer had attempted to ship stolen documents on the F-35 Joint Strike Fighter to Iran in November. The little-reported story adds to the list of challenges facing the F-35 and possibly U.S.-Iranian relations.
The defendant, Mozaffar Khazaee, first sparked the government's interest in November, when U.S. Customs inspected a shipment of his to Iran. The shipment was marked as containing household goods but upon inspection revealed 44 "boxes of documents consisting of sensitive technical manuals, specification sheets, and other proprietary material relating to the U.S. Air Force's F35 Joint Strike Fighter program and military jet engines."
Further investigation by the government revealed that Khazaee is a dual Iranian U.S. citizen and worked as an engineer for defense contractors as recently as August. It's unclear whom he worked for, but since he was a resident of Connecticut and had documentation on military jet engines, it's safe to assume that one of those contractors was United Technologies' (NYSE:UTX) Pratt & Whitney, which is based in Connecticut and makes engines for the F-35. Other defense contractors in the area that are working on the F-35 include Lockheed Martin (NYSE:LMT), which owns the F-35, as well as its subcontractor Northrop Grumman (NYSE:NOC).
Lockheed Martin's F-35 is the United States' newest warplane, expected to replace the F-16, F/A-18, EA-6B, F-111, A-10, AV-8B, Harrier GR.7, Sea Harrier, AMX, and Tornado. The plane has been in the news a lot recently as it is hugely expensive, estimated to be 70% over budget, and seven years behind schedule.
How bad is it? In 2001 the plane was expected to cost $82 million per plane, and that figure has now risen to $159 million. With the military expected to order 2,443 planes, that really adds up. The original total cost of the program was $233 billion, but with the additional plane costs, the price tag has ballooned to $392 billion. And that's just the cost to order the planes. The total cost to run them for the next 55 years is expected to run between $850 billion and $1.1 trillion. The enormous costs have many wondering whether the military should cut its losses and focus on drones, which are far cheaper, don't risk a pilot's life, and cost less to operate.
While drones look to be financially a sound decision, I expect the F-35 program will continue as planned, as the plane is essential for the continued modernization of the U.S. warplane fleet. Nor will this arrest slow things down. U.S. military technology and defense contractors have constantly faced the threat of having foreign governments steal secrets, and this is just another case of a spy who got caught.
It's worth noting that the shipment and arrest took place as the five members of the U.N. Security Council and Germany were working to sign an agreement with Iran to ease sanctions. It remains to be seen whether there was any direct involvement with the Iranian government. The deal with Iran was signed on Sunday and provides limited sanction relief, including the ending of import restrictions for airplane parts, which might finally get Iran to curb its nuclear production activities. Assuming that Iran does so, the sanctions end, and the nation increases its oil exports back to historical levels, there could be a big boost to the global economy as oil prices decrease. Let's hope for the best but be prepared for the worst.