Raytheon reaches deal worth reported $7 billion with Poland
Even as the United States cuts its military spending, insurgencies in Eastern Europe and civil wars in the Middle East are raging. It is a disaster for world peace but an opportunity for US arms makers such as Waltham-based Raytheon Co.
In the past six months, Raytheon has made three overseas sales of its Patriot missile defense systems. The company’s latest win was revealed Tuesday, when the government of Poland chose the Patriot over a host of American and European rivals.
The Polish paper Gazeta Wyborcza, which first reported the deal, estimated its value at $7 billion. But Raytheon spokesman Michael Doble said the exact terms of the sale, including price, are still being worked out.
“We’ve been selected, but the contract has not been written,” said Doble. “We don’t know the dollars . . . now we have to negotiate the terms and conditions of the contract.”
A statement issued by the Polish government on Tuesday said Poland plans to acquire eight Patriot batteries by 2025, including two to be deployed in the first three years of the deal. The Polish government will also require Raytheon to share its technical know-how with Polish companies, which will assist in building and maintaining the Patriot system.
According to Bloomberg News, the Patriot deal is part of Poland’s $38 billion effort to upgrade its military, in response to Russia’s annexation of Crimea and its support of separatist rebels in Ukraine. But Michael O’Hanlon, senior fellow at the Brookings Institution in Washington, D.C., said that the Patriot system would offer little protection if the Russians were to move against Poland.
“I don’t believe that the Patriots are a smart or effective way to counter the Russians militarily,” said O’Hanlon. “The Russians have too many missiles.”
Instead, O’Hanlon said the deal is really about strengthening Poland’s ties to the United States. “Politically, the Poles obviously want to lock in their alliance with us,” he said. “For them, there is a value in buying weaponry that the United States provides, that we also use in our own military.”
Indeed, the US Embassy in Poland issued a statement praising the selection of Patriot, calling it “an important moment in the security partnership between Poland and the United States.”
The embassy said Poland’s choice will simplify joint training exercises with other nations of the North Atlantic Treaty Organization, which also use the Patriot system.
With the winding down of military engagements in Afghanistan and, at least initially, in Iraq, and across-the-board budget cuts to rein in the federal deficit, overall US defense spending has declined by 20 percent since 2010, according to the Stockholm International Peace Research Institute. But the institute said military spending is climbing in much of the world, driven by the Ukraine crisis and by terrorist violence and civil wars in the Middle East and Africa.
“Missile defense systems are in big demand in the Middle East and Asia.” said Peter Arment, a defense industry analyst at the investment firm Sterne Agee in New York. “The fact that peace and prosperity’s not breaking out tends to keep their systems in high demand.”
The world’s top arms makers are vying for a share of the market. In Poland, Raytheon fended off bids from American rival Lockheed Martin,
Raytheon has had considerable success in selling Patriot to foreign buyers. Last week, the company announced a $2 billion sale to an undisclosed foreign government. In March Raytheon got an $815 million contract to upgrade existing Patriot systems in South Korea. And last December Raytheon won a $2.4 billion deal to provide Patriots to Qatar, an Arab nation.
Thanks to contracts like these, Raytheon generated $8.4 billion in foreign sales last year. That is 29 percent of the company’s total revenues, a higher percentage than any other major US military contractor.
Hiawatha Bray can be reached at email@example.com.