In March 2014, Russian forces invaded Ukrainian Crimea. A few months later, it was mainland Ukraine's turn, as battalions of what came to be called "little green men" -- with big green tanks -- ran amok across the provinces of Luhansk, Donetsk, and elsewhere. Ever since, Ukraine's neighbors have been wondering: Which one of us will be next?
In Latvia, they're not waiting around to find out.
Threat from the air
World Affairs Journal reports that since Russia's invasion of Ukraine, "Russian planes approached Latvian airspace more than one hundred and eighty times [in 2014 alone], and Russian Navy vessels -- including warships and Kilo-class submarines -- entered the country's Exclusive Economic Zone or approached its territorial waters forty times."
Spooked by these provocations, Latvia has asked NATO to base a battalion of troops in-country, Russian state media outlet SputnikNews.com reports. To further bolster its defenses, Latvia is looking to buy Stinger surface-to-air missiles from Raytheon (NYSE:RTN) -- the same kinds of missiles the U.S. supplied covertly to mujahidin fighters in Afghanistan in the 1980s, to blunt the effect of Soviet air attacks.
While originally a shoulder-launched missile, Stinger infrared heat-seeking surface-to-air missiles (SAM) can also be configured for launching from ground vehicles and also helicopters. Recent contract awards to Raytheon suggest Stinger missiles cost anywhere from $123,000 to $146,000 apiece.
A complete Stinger missile system, however, including testing and training equipment such as a new customer like Latvia would require, costs much more. For example, in 2009, the U.S. sold Taiwan a package of 171 Stinger missiles, plus necessary supporting gear. The total cost of the package was more than $45 million -- roughly a quarter-million dollars apiece.
How much would a Stinger contract be worth to Raytheon?
As of July 31, Latvian Public Broadcasting reports that "the exact number of [Stinger missile] systems and total cost has yet to be agreed." Negotiations to purchase them began during a recent U.S. visit by Latvian defense chief Lt. Gen. Raimonds Graube, and are expected to continue into next year before a deal is concluded.
Criticizing Latvia's move to buy Stinger missiles, Professor Edward Lozansky, president of the American University in Moscow, told Russia's Sputnik News that any such acquisition would constitute "an escalation against Russia." Sputnik then goes on to quote foreign policy analyst Michael Averko, who admits that the deal will probably be approved and finalized regardless, because arms deals like this are "agreeable with the U.S. military industrial complex."
They're also right in line with the current U.S. policy of trying to deter further Russian aggression in Eastern Europe by making the cost of such actions economically unacceptable to President Vladimir Putin. If arming an ally with a few hundred $250,000 Stinger missiles makes Russia think twice about risking its $12 million Mi-24 Hind attack helicopters and $40 million MiG-29 Fulcrum fighter jets in a Baltic adventure -- then that seems a good investment for U.S. foreign policy.
And if selling Stinger missiles to Latvia happens to generate a few tens of millions of revenue for Raytheon, at 12.7% profit -- the operating margin of Raytheon's Missile Systems division, according to S&P Capital IQ -- then that's all the more reason to sell them these missiles.
Rich Smith owns shares of Raytheon Company. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 329 out of more than 75,000 rated members.
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