Big Bank’s Analyst Worries That Iran Deal Could Depress Weapons Sales
MILITARISM, 23 Mar 2015
Photo: Colin Anderson/Getty Images
20 Mar 2015 – Could a deal to normalize Western relations with Iran and set limits on Iran’s development of nuclear technology lead to a more peaceful and less-weaponized Middle East?
That’s what supporters of the Iran negotiations certainly hope to achieve. But the prospect of stability has at least one financial analyst concerned about its impact on one of the world’s biggest defense contractors.
The possibility of an Iran nuclear deal depressing weapons sales was raised by Myles Walton, an analyst from Germany’s Deutsche Bank, during a Lockheed earnings call this past January 27th. Walton asked Marillyn Hewson, the chief executive of Lockheed Martin, if an Iran agreement could “impede what you see as progress in foreign military sales.” Financial industry analysts such as Walton use earnings calls as an opportunity to ask publicly-traded corporations like Lockheed about issues that might harm profitability.
Hewson replied that “that really isn’t coming up,” but stressed that “volatility all around the region” should continue to bring in new business. According to Hewson, “A lot of volatility, a lot of instability, a lot of things that are happening” in both the Middle East and the Asia-Pacific region means both are “growth areas” for Lockheed Martin.
The Deutsche Bank-Lockheed exchange “underscores a longstanding truism of the weapons trade: war — or the threat of war — is good for the arms business,” says William Hartung, director of the Arms & Security Project at the Center for International Policy. Hartung observed that Hewson described the normalization of relations with Iran not as a positive development for the future, but as an “impediment.” “And Hewson’s response,” Hartung adds, “which in essence is ‘don’t worry, there’s plenty of instability to go around,’ shows the perverse incentive structure that is at the heart of the international arms market.”
Rising tensions in the Middle East have prompted governments to go on a shopping spree for American lobbyists and weapons. DefenseOne reports that over the next five years, “Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Jordan are expected to spend more $165 billion on arms.” And in the U.S., concerns over ISIS and Iran have prompted calls for an increase in the defense budget.
During the call, Hewson proudly noted that 20% of Lockheed’s sales in 2014 were “international” — meaning, to non-American customers. “So we’re pleased with that,” she said, adding that Lockheed has set a goal “to get to 25% over the next few years.”
Lockheed Martin’s trademarked slogan is “We never forget who we’re working for,” which Lockheed likes to suggest means Americans in general and military veterans in particular. The January earnings call indicates that Lockheed in fact answers to very different constituencies.
_____________________________
Email the author: lee.fang@theintercept.com
DISCLAIMER: The statements, views and opinions expressed in pieces republished here are solely those of the authors and do not necessarily represent those of TMS. In accordance with title 17 U.S.C. section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. TMS has no affiliation whatsoever with the originator of this article nor is TMS endorsed or sponsored by the originator. “GO TO ORIGINAL” links are provided as a convenience to our readers and allow for verification of authenticity. However, as originating pages are often updated by their originating host sites, the versions posted may not match the versions our readers view when clicking the “GO TO ORIGINAL” links. This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.