US defense contractors are expected to make long-term profits from the war in Ukraine as they will directly benefit from the Pentagon sending weapons into the conflict and the US’s European allies increasing military spending.
Since Russia invaded Ukraine on February 24, the US has pledged over $1 billion in new military aid for Ukraine. The US has been pulling weapons from its own stock to send to Ukraine, and as the arms are replenished, the profits of US weapons makers are expected to soar.
The main weapons being sent into Ukraine are Javelin anti-tank missiles and Stinger anti-aircraft missiles. The Javelins are a joint venture made by Raytheon and Lockheed Martin, while the Stingers are produced solely by Raytheon. Before taking his post as Pentagon chief, Secretary of Defense Lloyd Austin was on the board of Raytheon.
According to AFP, Raytheon’s Stinger missiles were no longer being produced until the Pentagon ordered $340 million of them last summer. Now, the US and its allies who are sending the Stingers into Ukraine are looking for more. A recent spending bill signed by President Biden included $3.5 billion for the replenishing of US arms sent to Ukraine.
“If 1,000 Stingers and 1,000 Javelins get shipped to Eastern Europe each month for the next year, which is not unlikely given the current pace, in our view, we think it would equate to $1 billion to $2 billion in revenue for both program manufacturers, which is material,” Colin Scarola of the investment research firm CFRA, told AFP.
US arms makers are also cashing in from the spike in European spending in the wake of Russia’s invasion of Ukraine. Last month, Germany announced that it plans to buy 35 Lockheed Martin-made F-35 fighter jets to replace its aging Tornado fleet, which is used for NATO’s nuclear sharing agreement.
Germany currently stores about 20 US B-61 nuclear gravity bombs as part of NATO nuclear sharing, and the Tornados are the only planes capable of carrying the warhead. The Tornados are expected to be phased out and replaced by the F-35s by 2030.