U.S. arms sales seen booming in 2009

WASHINGTON Mon Dec 15, 2008 8:08pm EST

Vice Admiral Jeffrey Wieringa, director of the U.S. Defense Security Cooperation Agency, briefs reporters on the latest developments of weapons sales monitored by his agency during the Reuters Aerospace and Defense Summit in Washington December 15, 2008. REUTERS/Mike Theiler

Vice Admiral Jeffrey Wieringa, director of the U.S. Defense Security Cooperation Agency, briefs reporters on the latest developments of weapons sales monitored by his agency during the Reuters Aerospace and Defense Summit in Washington December 15, 2008.

Credit: Reuters/Mike Theiler

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WASHINGTON (Reuters) - U.S. government-to-government arms sales are on track to total as much as $40 billion in fiscal 2009, up from a bumper $36.4 billion last year, despite a sharp drop in oil prices that typically tracks with reduced demand, the Pentagon's top official for such deals said on Monday.

Among likely big sales are Patriot missile defense systems made by Raytheon Co (RTN.N) and Lockheed Martin Corp (LMT.N), said Vice Admiral Jeffrey Wieringa, head of the Pentagon's Defense Security Cooperation Agency, told the Reuters Aerospace and Defense Summit in Washington.

The United States already has concluded $11.8 billion in arms sales since fiscal 2009 began October 1 and expects to deal with 208 countries or organizations, the Pentagon agency said.

Wieringa said he conferred last week with a transition team from President-elect Barack Obama, whose administration ultimately will decide which deals may move forward under the U.S. Foreign Military Sales program.

The New America Foundation, a nonprofit research group, has called on Obama, who will be sworn in January 20, and the new U.S. Congress to consider multilateral efforts to curb "destructive and destabilizing" weapons exports.

More than half of the top 25 U.S. arms purchasers in the developing world were "undemocratic governments or regimes that engaged in major human rights abuses," in 2006 and 2007, the foundation said in a report last week.

Wieringa did not address such criticism but said he would "move, or not, as directed."

He said his organization had found a 92 percent "correlation" between rising oil prices and rising U.S. arms sales.

But the projected boom in fiscal 2009 appeared likely even as oil and other commodity prices decline under pressure from global economic woes, he said. Arms makers including Lockheed and Raytheon have attributed strong overseas demand for their products to tensions surrounding Iran, North Korea and other regional disputes.

Wieringa said potential buyers of the Patriot system included South Korea, Poland, Turkey and unspecified others.

In addition, he said, "billions of dollars (in U.S. arms sales) is flowing to Iraq."

The U.S. Defense Department also is working closely with Saudi Arabia on a naval modernization program valued at $15 billion to $20 billion that could be concluded next year, he said.

The Saudi program could include the small, agile Littoral Combat Ship, under development for the U.S. Navy, Wieringa said. Lockheed and General Dynamics Corp (GD.N) are developing separate versions of the new ship. Israel is considering buying the Lockheed version, Lockheed officials have said.

Wieringa said the Saudi deal also may include the H-60R Seahawk multimission helicopter built by Sikorsky Aircraft, a unit of United Technologies Corp (UTX.N); unmanned Fire Scout helicopters built by Northrop Grumman Corp (NOC.N); and the P-8 maritime surveillance plane being built by Boeing Co (BA.N).

"We're trying to help the Saudis with their Saudi naval expansion program," Wieringa said. "That would be very exciting."

Asked about rival bids from Boeing and Lockheed to meet India's request for 126 new fighter aircraft, he said he could not judge either's prospects in the competition with Russian and European warplane makers.

"There's questions asked, answers given... I feel good about the dialogue," Wieringa said.

The No. 1 remaining issue with India, he said, was "in-use monitoring," under which the United States reserves a right to make sure U.S. arms sold abroad are used for their intended purpose and that the technology does not leak to third countries.

"We have a standard condition of sale in the contract the U.S. has with another sovereign country, and that has been a sticking point for a while," he said.

India is also interested in ships and other equipment, Wieringa said.

"They have some very interesting ideas about initial production in U.S. shipyards and then transferring production to Indian shipyards and right now I'm just letting the Navy have those discussions with India."

(For summit blog: summitnotebook.reuters.

(Reporting by Jim Wolf, Andrea Shalal-Esa, Jui Chakravorty Das; editing by Tim Dobbyn)

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