Tensions seen boosting U.S. missile defense exports

FARNBOROUGH (Reuters) - Overseas sales of the U.S. Army's core missile defense system appear set to boom, spurred by tensions surrounding Iran, North Korea and other regional disputes.

Poland, Taiwan, Kuwait, Turkey, South Korea, Saudi Arabia and Qatar are among countries that could spin off billions of dollars in related revenue over the next five years, according to Raytheon Co (RTN.N), the army's primary contractor for the Patriot air and missile defence system.

Raytheon Chief Executive Bill Swanson said in April that sales could be in the "big billions" by 2013 or 2014 for what the company calls the world's premier system of its kind.

The name "Patriot" is an acronym of Phased Array Tracking Radar to Intercept Of Target. Currently, one version or another is used by the U.S. Army and partners in 10 countries: Germany, Greece, Israel, Japan, Kuwait, Netherlands, Saudi Arabia, Spain, Taiwan and South Korea, which became the latest addition last year.

Patriot competitors are made by companies in Israel, Russia and France.

Separately, Lockheed Martin Corp (LMT.N), the Pentagon's No. 1 supplier by sales, is the prime contractor for an upgraded Patriot Advanced Capability PAC-3 missile and its launch containers that may be integrated into the Patriot system.

Waltham, Massachusetts-based Raytheon is highlighting the system at the Farnborough air show, a biennial arms bazaar and aviation showcase that opened on Monday near London.

The company said Tuesday it had received more than $200 million in its latest wave of Patriot-related contracts, including deals involving Kuwait, South Korea and the U.S. Army.

This added to a total of roughly $500 million in contracts announced since late last year by Raytheon, the world's biggest missile maker.

"In Asia, Europe and the Middle East, the market for Patriot upgrades is big and getting bigger," said Joseph Garrett, a retired Army major general who is a Raytheon vice president for Patriot programs.

"We also expect several countries that do not currently use Patriot to join those now using it, with new sales possibly starting as soon as next year," he said in an interview.

Paul Nisbet, a defence industry analyst at JSA Research Inc, predicted Raytheon Patriot-related revenues of at least $1 billion annually for the foreseeable future, up from what he figured had been about $700-800 million annually.

"With the increasing threats of the Iranian and North Korean missiles," he said in an email interview, "we would not be surprised to see demand for new and upgraded Patriot systems well beyond what we have been forecasting."

Robert Stevens, Lockheed Martin's chief executive, said Sunday that sales of his company's Patriot PAC-3 missiles also were being driven by perceived threats.

"We feel that that is an area in our company that is likely to experience continued and sustained growth," he said at a London dinner on the eve of the Farnborough show.

Dennis Cavin, a Lockheed Martin vice president for international air and missile defence strategic initiatives, said in an interview that Lockheed expected to announce new PAC-3 missile sales within the next three to six months.

The Patriot system is designed to defeat short- to medium-range ballistic missiles, enemy warplanes and cruise missiles -- a shield for high-value targets.

Iran, at odds with the United States and others over its nuclear program, test-fired a volley of ballistic missiles last week, including one it said had a range of 2,000 kilometers carrying a payload of 1 ton. If confirmed, this would be a significant range increase over previous such tests.

The Bush Administration used the test-firings to push plans to expand into Eastern Europe a layered U.S. anti-missile shield that includes the Patriot system along with other defenses tied to sensors on land, sea and in space.

The Patriot system is at the heart of a U.S. drive to persuade Poland to host 10 silo-based two-stage anti-missile interceptors as a hedge, chiefly against Iranian missiles.

Poland wants four to six Patriot fire units to counter what it views as a concomitant threat rise on its borders if it agrees to host the two-stage U.S. interceptors in defiance of Russia, which deems them destabilizing, a person familiar with the matter said.

Taiwan, concerned about Chinese missiles on the opposite side of the Taiwan Strait, is seeking up to six more fire units to defend its central areas and southern ports, said this person, who asked not to be identified because of the matter's sensitivity.

India, which has fought three wars since independence from Britain in 1947, has put out a request for price quotations for a medium-range surface-to-air missile system expected to attract international interest.

Raytheon is looking at Patriot as a potential solution for India's requirement, Raytheon's Garrett said.