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Gulf States Continue to Invest in U.S. Hardware

Over the past two weeks some major deals were announced between Gulf States and the U.S. defense industry. These contracts continue the Saudi and Emirates investment in their military to provide greater defensive capability most likely due to the continuing threats emanating from Iran.

The U.A.E. followed through on earlier discussions with a contract to purchase two Terminal High Altitude Area Defense (THAAD) missile defense systems. The THAAD is a ground based system developed by the U.S. Army that provides longer range engagements and protects larger areas then the earlier PATRIOT PAC-3 system. THAAD relies on a missile from Lockheed Martin (LMT) and a large radar from Raytheon (RTN). The overall contract including support and services is almost worth $2 billion.

Image from Bundeswher-Fotos Wir.Dienen.Deutschland.’s Flickr photostream.

The THAAD deal had been supposedly agreed two last year but in the summer the U.A.E. was seen as perhaps not going through with it but now obviously they decided they needed to.

The other contract is an even larger one with Saudi Arabia for F-15 fighter aircraft, engines and the necessary support. The Kingdom already operates the F-15 and this contract will add 84 more aircraft as well as modernize the existing ones. The value is in the range of close to $30 billion. Boeing (BA) is the primary manufacturer of the F-15 which in the U.S. will slowly be replaced with F-22 and F-35 aircraft.

Saudi Arabia is also reportedly not complete with their planned purchases for their armed forces. This will be a good thing for the U.S. and European defense industry who are facing reduced opportunities at home. These kind of contracts will help make up cuts in domestic defense spending.

The U.A.E. is also trying to decide on a major fighter buy themselves. Originally it was though they would go with the French Rafael aircraft but at the Dubai airshow last month it became clear that they may not choose that aircraft. This could open up the contract to competition to a wide variety of companies.

It can be expected that further contracts of this type and size will be announced for the next several months as Saudi Arabia, the U.A.E., Qatar, Kuwait and other Gulf States continue to invest in military equipment to upgrade and improve their capabilities.

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