Pentagon lists 66 countries as eligible to buy US drones

Wed Sep 5, 2012 8:09pm EDT

* Congress, State Dept have yet to agree to Pentagon plans

* Northrop Grumman CEO says frustrated, eyes more exports

* Policy needed to allow such exports-Pentagon offical

* Export revenue needed to offset federal spending cuts

By Doug Palmer and Jim Wolf

WASHINGTON, Sept 5 (Reuters) - As many as 66 countries would be eligible to buy U.S. drones under new Defense Department guidelines but Congress and the State Department, which have a final say, have not yet opened the spigots for exports, a senior Pentagon official said on Wednesday.

The 66 countries were listed in a Defense Department policy worked out last year to clear the way for wider overseas sales of unmanned aerial systems, as the Pentagon calls such drones, said Richard Genaille, deputy director of the Pentagon's Defense Security Cooperation Agency. He did not name them.

"We don't really have a comprehensive U.S. government policy" on such exports, he told an industry conference called ComDef 2012. "It hasn't moved quite as fast as we would like, but we're not giving up."

Northrop Grumman Corp chief executive Wes Bush on Wednesday praised the Obama administration for what he described as significant moves to boost arms exports, but voiced frustration at delays in codifying them in a new export policy.

"I wish we were further along in getting that done. It's slow, it's painful, but we're doing the right things to move in that direction," Bush told Reuters.

U.S. arms makers are looking abroad to help offset Pentagon spending cuts spurred by U.S. deficit-reduction requirements.

Northrop Grumman's ability to boost its overseas arms sales, which now account for less than 10 percent of its overall revenues, hinges largely on streamlined export controls, Bush said.

U.S. defense and high-technology exporters have long complained about the complex web of regulations governing exports of weapons and "dual-use" goods that have both civilian and military applications. They believe the rules disadvantage them versus foreign competitors.

GLOBAL HAWK PLANES

Of particular concern to Northrop Grumman are restrictions on exports such as the company's high-altitude Global Hawk surveillance planes.

The administration last year began informally consulting Congress on plans to sell Global Hawk to South Korea before withdrawing the proposed sale for reasons that have not been publicly disclosed.

Japan, Singapore and Australia also have shown interest in acquiring the aircraft, a Northrop Grumman spokeswoman told Reuters last year.

Bush said that failure to allow such exports could spark a repeat of the 1990s, when strict curbs on U.S. commercial satellite sales prompted other countries to develop rival hardware and software. Those efforts eventually eroded the market share of U.S. satellite producers from more than 70 percent to just around 25 percent.

"The consequences of the decisions that were made in the early '90s were devastating for the US industrial base, and ultimately did nothing to enhance security, and in fact, were detrimental to our security," he said.

EXPORT CONTROLS

The Obama administration, over the objections of some Republicans in Congress, is aiming to create a single list of items subject to export controls overseen by a single licensing agency, instead of the two separate lists now administered by the State Department and the Commerce Department.

Jim Hursch, director of the Defense Department's Defense Technology Security Adminstration, speaking at the ComDef event, said the administration was well into the overhaul but still had significant work to do.

Government agencies, as interim steps toward creating the single unified list, have worked their way through the 21 categories of the U.S. Munitions List administered by the State Department to see what items can be moved to the Commerce Department's Commercial List, Hursch said.

"We'll see what happens in November and what the victors of that election want to do to move forward on that," Hursch said.

Beth McCormick, deputy assistant secretary for defense trade and regional security, said she hoped the reforms would continue whether President Barack Obama is reelected on Nov. 6 or Republican challenger Mitt Romney.

"Regardless of what happens in November, we should continue this work and bring it closure," McCormick said.

The Obama administration has already put proposed revisions to nine categories of the munitions lists out for public comment and faces some hard decisions moving ahead.

"There are some categories that by their basic nature are very, very difficult," including one that encompasses both night-vision technology and fire control, she said.

In deciding what items to move to the commercial list, "we obviously have to think about the type of technology that we use on the battlefield, where obviously the control of the night has been something that's been very, very important to us," McCormick said.

Kevin Wolf, assistant secretary of Commerce for export administration, said moving an item from the munitions list to the commercial list did not mean it was "decontrolled."

It does give the U.S. government more flexibility in allowing exports to close allies, while maintaining a strict arms embargo on other countries such as China, he said.

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