U.A.E. Considering Reducing THAAD Buy?

by: Matthew Potter
August 25, 2011

Category: Business Line, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, development program, Events, FMS, Lockheed Martin, missile defense, production program, Raytheon, Services, U.S. Army, UAE | RSS 2.0

In the last year the Gulf State United Arab Emirates (U.A.E.) announced that it was making two major purchases of U.S. missile and air defense equipment. First it was placing a large order with Raytheon (RTN) for PATRIOT PAC-3 systems which provide local defense against enemy aircraft and ballistic missiles. Second that it would be the first overseas buyer of the longer ranged THAAD system manufactured by Lockheed Martin (LMT). The deal for the Terminal High Altitude Area Defense (THAAD) equipment was estimated at close to $7 billion.

Now there are reports that the U.A.E. is considering reducing its total investment in THAAD. No absolute figures have been given but it may be a substantial reduction in what is being purchased and spent by the U.A.E. government. A reduction in this contract will not only affect Lockheed’s bottom line but also the price the U.S. will pay for its equipment as the lack of this contract will reduce quantities and raise the price for the U.S. Army.

With the expected pressure on the U.S. defense budget to save costs and reduce investments overseas sales like this will become more important to U.S. defense contractors especially of existing systems like THAAD. A cut back in spending by the Gulf States which in the last ten years have heavily invested in new equipment across the spectrum may have a major effect on U.S. and European defense contractors.

No reason was given for the consideration of the cut to the purchase but it may be that the U.A.E. after refinement has found that less THAAD systems may provide the necessary performance then originally thought or it could just be good old budget cutting.

If this becomes a trend it will be a serious issue for the world’s defense industry and not just the American one.

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