Julia Gledhill Military Ukraine William Hartung

The New Gold Rush: How Pentagon Contractors Are Cashing in on the Ukraine Crisis

U.S. arms contractors are not only profiting, but also benefiting, from the Russian invasion of Ukraine.
The Pentagon building in Washington, D.C.
The Pentagon, the U.S. Department of Defense headquarters, in Washington, D.C. (Wikimedia Commons)

By William D. Hartung and Julia Gledhill / TomDispatch

The Russian invasion of Ukraine has brought immense suffering to the people of that land, while sparking calls for increased military spending in both the United States and Europe. Though that war may prove to be a tragedy for the world, one group is already benefiting from it: U.S. arms contractors.

Even before hostilities broke out, the CEOs of major weapons firms were talking about how tensions in Europe could pad their profits. In a January 2022 call with his company’s investors, Raytheon Technologies CEO Greg Hayes typically bragged that the prospect of conflict in Eastern Europe and other global hot spots would be good for business, adding that “we are seeing, I would say, opportunities for international sales… [T]he tensions in Eastern Europe, the tensions in the South China Sea, all of those things are putting pressure on some of the defense spending over there. So I fully expect we’re going to see some benefit from it.”

In late March, in an interview with the Harvard Business Review after the war in Ukraine had begun, Hayes defended the way his company would profit from that conflict:

“So I make no apology for that. I think again recognizing we are there to defend democracy and the fact is eventually we will see some benefit in the business over time. Everything that’s being shipped into Ukraine today, of course, is coming out of stockpiles, either at DoD [the Department of Defense] or from our NATO allies, and that’s all great news. Eventually we’ll have to replenish it and we will see a benefit to the business over the next coming years.”

Arms to Ukraine, Profits to Contractors

The war in Ukraine will indeed be a bonanza for the likes of Raytheon and Lockheed Martin. First of all, there will be the contracts to resupply weapons like Raytheon’s Stinger anti-aircraft missile and the Raytheon/Lockheed Martin-produced Javelin anti-tank missile that Washington has already provided to Ukraine by the thousands. The bigger stream of profits, however, will come from assured post-conflict increases in national-security spending here and in Europe justified, at least in part, by the Russian invasion and the disaster that’s followed.

Indeed, direct arms transfers to Ukraine already reflect only part of the extra money going to U.S. military contractors. This fiscal year alone, they are guaranteed to also reap significant benefits from the Pentagon’s Ukraine Security Assistance Initiative (USAI) and the State Department’s Foreign Military Financing (FMF) program, both of which finance the acquisition of American weaponry and other equipment, as well as military training. These have, in fact, been the two primary channels for military aid to Ukraine from the moment the Russians invaded and seized Crimea in 2014. Since then, the United States has committed around $5 billion in security assistance to that country.

According to the State Department, the United States has provided such military aid to help Ukraine “preserve its territorial integrity, secure its borders, and improve interoperability with NATO.” So, when Russian troops began to mass on the Ukrainian border last year, Washington quickly upped the ante. On March 31, 2021, the U.S. European Command declared a “potential imminent crisis,” given the estimated 100,000 Russian troops already along that border and within Crimea. As last year ended, the Biden administration had committed $650 million in weaponry to Ukraine, including anti-aircraft and anti-armor equipment like the Raytheon/Lockheed Martin Javelin anti-tank missile.

Despite such elevated levels of American military assistance, Russian troops did indeed invade Ukraine in February. Since then, according to Pentagon reports, the U.S. has committed to giving approximately $2.6 billion in military aid to that country, bringing the Biden administration total to more than $3.2 billion and still rising.

Some of this assistance was included in a March emergency-spending package for Ukraine, which required the direct procurement of weapons from the defense industry, including drones, laser-guided rocket systems, machine guns, ammunition, and other supplies. The major military-industrial corporations will now seek Pentagon contracts to deliver that extra weaponry, even as they are gearing up to replenish Pentagon stocks already delivered to the Ukrainians.

On that front, in fact, military contractors have much to look forward to. More than half of the Pentagon’s $6.5 billion portion of the emergency-spending package for Ukraine is designated simply to replenish DoD inventories. In all, lawmakers allocated $3.5 billion to that effort, $1.75 billion more than the president even requested. They also boosted funding by $150 million for the State Department’s FMFprogram for Ukraine. And keep in mind that those figures don’t even include emergency financing for the Pentagon’s acquisition and maintenance costs, which are guaranteed to provide more revenue streams for the major weapons makers.

Better yet, from the viewpoint of such companies, there are many bites left to take from the apple of Ukrainian military aid. President Biden has already made it all too clear that “we’re going to give Ukraine the arms to fight and defend themselves through all the difficult days ahead.” One can only assume that more commitments are on the way.

Another positive side effect of the war for Lockheed, Raytheon, and other arms merchants like them is the push by House Armed Services Committee chair Adam Smith (D-WA) and ranking committee Republican Mike Rogers of Alabama to speed up production of a next-generation anti-aircraft missile to replace the Stinger. In his congressional confirmation hearing, William LaPlante, the latest nominee to head acquisition at the Pentagon, argued that America also needs more “hot production lines” for bombs, missiles, and drones. Consider that yet another benefit-in-waiting for the major weapons contractors.

The Pentagon Gold Mine

For U.S. arms makers, however, the greatest benefits of the war in Ukraine won’t be immediate weapons sales, large as they are, but the changing nature of the ongoing debate over Pentagon spending itself.  Of course, the representatives of such companies were already plugging the long-term challenge posed by China, a greatly exaggerated threat, but the Russian invasion is nothing short of manna from heaven for them, the ultimate rallying cry for advocates of greater military outlays. Even before the war, the Pentagon was slated to receive at least $7.3 trillion over the next decade, more than four times the cost of President Biden’s $1.7 trillion domestic Build Back Better plan, already stymied by members of Congress who labeled it “too expensive” by far.  And keep in mind that, given the current surge in Pentagon spending, that $7.3 trillion could prove a minimal figure.

Indeed, Pentagon officials like Deputy Secretary of Defense Kathleen Hicks promptly cited Ukraine as one of the rationales for the Biden administration’s proposed record national-security budget proposal of $813 billioncalling Russia’s invasion “an acute threat to the world order.” In another era that budget request for Fiscal Year 2023 would have been mind-boggling, since it’s higher than spending at the peaks of the conflicts in Korea and Vietnam and over $100 billion more than the Pentagon received annually at the height of the Cold War.

Despite its size, however, congressional Republicans — joined by a significant number of their Democratic colleagues — are already pushing for more. Forty Republican members of the House and Senate Armed Services Committees have, in fact, signed a letter to President Biden calling for 5% growth in military spending beyond inflation, which would potentially add up to $100 billion to that budget request. Typically enough, Representative Elaine Luria (D-VA), who represents the area near the Huntington Ingalls company’s Newport News military shipyard in Virginia, accusedthe administration of “gutting the Navy” because it contemplates decommissioning some older ships to make way for new ones. That complaint was lodged despite that service’s plan to spend a whopping $28 billion on new ships in FY 2023.

Who Benefits?

That planned increase in shipbuilding funds is part of a proposed pool of $276 billionfor weapons procurement, as well as further research and development, contained in the new budget, which is where the top five weapons-producing contractors — Lockheed Martin, Boeing, Raytheon, General Dynamics, and Northrop Grumman — make most of their money. Those firms already split more than $150 billion in Pentagon contracts annually, a figure that will skyrocket if the administration and Congress have their way. To put all of this in context, just one of those top five firms, Lockheed Martin, was awarded $75 billion in Pentagon contracts in fiscal year 2020 alone. That’s considerably more than the entire budget for the State Department, dramatic evidence of how skewed Washington’s priorities are, despite the Biden administration’s pledge to “put diplomacy first.”

The Pentagon’s weapons wish list for FY 2023 is a catalog of just how the big contractors will cash in. For example, the new Columbia Class ballistic missile submarine, built by General Dynamics Electric Boat plant in southeastern Connecticut, will see its proposed budget for FY 2023 grow from $5.0 billion to $6.2 billion. Spending on Northrop Grumman’s new intercontinental ballistic missile (ICBM), the Ground Based Strategic Deterrent, will increase by about one-third annually, to $3.6 billion.  The category of “missile defense and defeat,” a specialty of Boeing, Raytheon, and Lockheed Martin, is slated to receive more than $24 billion.  And space-based missile warning systems, a staple of the Trump administration-created Space Force, will jump from $2.5 billion in FY 2022 to $4.7 billion in this year’s proposed budget.

Among all the increases, there was a single surprise: a proposed reduction in purchases of the troubled Lockheed Martin F-35 combat aircraft, from 85 to 61 planes in FY 2023.  The reason is clear enough. That plane has more than 800 identified design flaws and its production and performance problems have been little short of legendary.  Luckily for Lockheed Martin, that drop in numbers has not been accompanied by a proportional reduction in funding.  While newly produced planes may be reduced by one-third, the actual budget allocation for the F-35 will drop by less than 10%, from $12 billion to $11 billion, an amount that’s more than the complete discretionary budget of the Centers for Disease Control and Prevention.

Since Lockheed Martin won the F-35 contract, development costs have more than doubled, while production delays have set the aircraft back by nearly a decade. Nonetheless, the military services have purchased so many of those planes that manufacturers can’t keep up with the demand for spare parts. And yet the F-35 can’t even be properly tested for combat effectiveness because the simulation software required is not only unfinished, but without even an estimated completion date. So, the F-35 is many years away from the full production of planes that actually work as advertised, if that’s ever in the cards.

A number of the weapons systems which, in the Ukraine moment, are guaranteed to be showered with cash are so dangerous or dysfunctional that, like the F-35, they should actually be phased out.  Take the new ICBM.  Former Secretary of Defense William Perry has called ICBMs “some of the most dangerous weapons in the world” because a president would only have minutes to decide whether to launch them in a crisis, greatly increasing the risk of an accidental nuclear war based on a false alarm. Nor does it make sense to buy aircraft carriers at $13 billion a pop, especially since the latest version is having trouble even launching and landing aircraft — its primary function — and is increasingly vulnerable to attack by next-generation high-speed missiles.

The few positives in the new budget like the Navy’s decision to retire the unnecessary and unworkable Littoral Combat Ship — a sort of “F-35 of the sea” designed for multiple tasks none of which it does well — could easily be reversed by advocates from states and districts where those systems are built and maintained.  The House of Representatives, for instance, has a powerful Joint Strike Fighter Caucus, which, in 2021, mustered more than one-third of all House members to press for more F-35s than the Pentagon and Air Force requested, as they will no doubt do again this year. A Shipbuilding Caucus, co-chaired by representatives Joe Courtney (D-CT) and Rob Wittman (R-VA), will fight against the Navy’s plan to retire old ships to buy new ones.  (They would prefer that the Navy keep the old ones and buy new ones with more of your tax money up for grabs.) Similarly, the “ICBM Coalition,” made up of senators from states with either ICBM bases or production centers, has a near perfect record of staving off reductions in the deployment or funding of those weapons and will, in 2022, be hard at work defending its budgetary allocation.

Towards a New Policy

Coming up with a sensible, realistic, and affordable defense policy, always a challenge, will be even more so in the midst of the Ukrainian nightmare. Still, given where our taxpayer dollars go, it remains all too worthwhile.  Such a new approach should include things like reducing the numbers of the Pentagon’s private contractors, hundreds of thousands of people, many of whom are engaged in thoroughly redundant jobs that could be done more cheaply by civilian government employees or simply eliminated. It’s estimated that cutting spending on contractors by 15% would save around $262 billion over 10 years.

The Pentagon’s three-decades-long near $2 trillion “modernization” plan to build a new generation of nuclear-armed bombers, missiles, and submarines, along with new warheads, should, for instance, simply be scrapped in keeping with the kind of “deterrence-only” nuclear strategy developed by the nuclear-policy organization Global Zero.  And the staggering American global military footprint — an invitation to further conflict that includes more than 750 military bases scattered on every continent except Antarctica, and counterterror operations in 85 countries — should, at the very least, be sharply scaled back. 

According to the Center for International Policy’s Sustainable Defense Task Forceand a study of alternative approaches to defense carried out by the Congressional Budget Office, even a relatively minimalist strategic rethinking could save at least $1 trillion over the next decade, enough to make a healthy down payment on investments in public health, preventing or mitigating the worst potential impacts of climate change, or beginning the task of narrowing record levels of income inequality.

Of course, none of these changes can occur without challenging the power and influence of the military-industrial-congressional complex, a task as urgent as it is difficult in this moment of carnage in Europe. No matter how hard it may be, it’s a fight worth having, both for the security of the world and the future of the planet.

One thing is guaranteed: a new gold rush of “defense” spending is a disaster in the making for all of us not in that complex.

Julia Gledhill

Julia Gledhill is an analyst at the Center for Defense Information at the Project On Government Oversight.

William D. Hartung

William D. Hartung, a TomDispatch regular, is a Senior Research Fellow at the Quincy Institute for Responsible Statecraft, and the author of Prophets of War: Lockheed Martin and the Making of the Military Industrial Complex.

15 comments

  1. This is a great article….if we could only stop the wasteful military industrial complex spending and use those funds for peaceful purposes…”butter..not guns!”

    1. @Kathleen

      Around 50% of the military budget goes to personnel payments, benefits, health care (butter!!). More than 40% for people from ethnic and racial minorities.
      Around 30% goes on procurement, RDT&E ( hundreds of thousands of good-paying, union jobs. Butter again!)
      So what is the problem?

      1. @alteyid48
        Not that I want to feed any of our right wing trolls, but to everyone else:

        The U.S. military budget is used to support the U.S. empire. The stats that alteyid48 provided in response to Kathleen are meaningless. The fact is that the U.S. spends more than the next ten countries combined on its military, and it has 8-900 foreign military bases. “Jobs” is the slogan of fascists, who would have people killing babies and burning down the entire planet in order to provide jobs. Right livelihood is what should be sought, not some mindless search for jobs without regard to exactly what those jobs are.

  2. Generals gathered in their masses
    Just like witches at black masses
    Evil minds that plot destruction
    Sorcerer of death’s construction
    In the fields the bodies burning
    As the war machine keeps turning
    Death and hatred to Mankind
    Poisoning their brainwashed minds…
    Oh Lord yeah!

  3. Well, at least all this money goes to support good, union, American jobs and is not spent in China!

  4. Yes, DEATH is what the USA has dealt in since WWII. We escalate wars by supplying weapons, and feed our economy with the destruction of others. USA is very very sick due to death dealing. We’ve even forgotten how to be diplomatic. No, we just go to killing off all those who oppose us. Am what I am saying true or not? Weigh in with some history or other facts that cannot be refuted, eh? Is something wrong with, (and I hate stereotypes,) with white people who rule this country and will not allow others to have voice or choice. Stacy Abram, a voice denied and an example.

    1. @Paula
      Please get real.
      The US arms exports in 2021 were less than 10% of the total US goods exports. This is not what feeds the US economy.

  5. The rich have not my respect. I know where they get their money. Except for Elon Musk, of course.

    1. @Bruce
      Property is theft, and seeking material wealth is both totally unevolved and evil, the latter because of all the environmental and social destruction it causes. Elon Musk is no exception and no one to be lauded, even if he has some qualities that make him not as bad as other rich people.

  6. The current situation and events in Ukraine are absolutely awful and it is really difficult for me to understand when people intend to cash in on the Ukraine Crisis and make a profit from it. I can say that it is so valuable that Biden provided Ukraine with such a high level of financial support because it causes great respect. Of course, nothing stopped this offensive, which is absolutely woefully. Without any doubts, it is important to supply Ukraine with military weapons, but a huge amount of money is spent on this and it doesn’t have the necessary effect. Unfortunately, a lot of money is spent on war and it is really difficult to change this now. Some of them are spent on the assignment to Ukraine, but some of them are spent on its destruction. It is so sad that these funds could be used to improve the quality of people’s life, but the situation leaves no choice. I really hope that everything will normalize.

    1. @Marina Teramond
      “[I]t is important to supply Ukraine with military weapons,” Yeah, if you want to prolong the war as long as possible, which is exactly what the U.S. wants. Things in Ukraine are “absolutely awful” because of the U.S. Russia merely entered a war that was already going on.

  7. America and its vassals will fight Russia until the last Ukrainian…..

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