Russian President Putin is not going to like this news one bit.
On Wednesday, the U.S. Navy revealed that it has dispatched a second guided missile destroyer to Europe. Equipped with its experimental new ballistic missile defense, or BMD, system, the USS Ross (DDG 71) will take up a position in Rota, Spain, and begin building a "missile shield" over Europe.
This is actually the second BMD-equipped destroyer that the U.S. has sent to Europe. The Ross's sister ship, the USS Donald Cook (DDG 75) transited the Atlantic in February. (If Ross makes as good time as Cook did on her voyage a few months ago, she could be in port in Spain around June 12). The U.S. plans to double the size of its BMD fleet in Europe yet again, dispatching the destroyers USS Porter (DDG 78) and USS Carney (DDG 64) over the next 18 months.
What's up with all the warships?
Why is America sending all of these warships to Europe? They're part of a monumental effort to protect American allies from the threat of ballistic missile attack from our foes. To date, the U.S. Government Accounting Office estimates that we have invested $98 billion in developing the technology to protect the U.S. and its allies from ballistic missile strikes. The GAO expects that building up a ship-based BMD capability (represented by the four destroyers already noted) will cost "several billion dollars over the elements' lifetime).
Adding land-based missile batteries in Romania and Poland, to bolster the European missile shield further, will cost additional billions. When you add it all up, the Heritage Foundation estimates that we are spending about $8 billion per year on missile defense programs such as European BMD -- for which Congress authorized $2.1 billion in funding in 2014 alone.
The biggest beneficiaries of this legislative largesse to date have been Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTN), and Boeing (NYSE:BA), who as of last year had received contracts worth $1.4 billion, $710 million, and $325 million, respectively. Raytheon in particular is winning additional contracts -- worth upwards of $3.5 billion at last count -- to manufacture SM-3 IB and IIA interceptor missiles to outfit the BMD systems.
And who are these anti-missile missiles aimed at?
U.S. Government statements make it clear that the original idea behind developing the BMD system was to counter a perceived threat to Europe from the Iranian nuclear weapons program. But already, the system is proving to have fringe benefits for U.S. foreign policy.
In April, following Russia's invasion and annexation of Crimea, the U.S. dispatched the USS Donald Cook to the Black Sea to "show the flag" in a region of heightened instability. Russia reacted immediately.
Within hours of the Cook entering the Black Sea, the warship got buzzed at close range by a pair of Russian Su-24 "Fencer" fighter-bombers. Russian government news outlet RT made no bones about what the fighters were up to, either. Reporting on the incident, RT noted that one Fencer made as many as a dozen "simulated low-altitude attacks on the US destroyer."
Notably, the U.S. had been rotating ships in and out of the Black Sea ever since Russia invaded Crimea. First was the guided missile frigate USS Taylor, then the destroyer USS Truxtun, then the Cook, then the Taylor again, and most recently, the guided missile cruiser USS Vella headed east to the Black Sea.
But out of all these warships, Russia picked the one outfitted with ballistic missile defense, to harass.
The upshot for investors
As Russian Duma Deputy Mikhail Nenashev told RIA Novosti in April, the Cook's visit to the Black Sea that month demonstrates that despite Russia's objections, the U.S. has "not abandoned their intention to deploy sea-based ABM defense systems."
That's bad news for Russia, which would much prefer a free hand to act as and where it wills. But for investors who see billions of dollars' worth of opportunity in America's efforts to install a ballistic missile defense shield over Europe, it tells us that installation of the BMD system is still going full-steam ahead.