6 Corporations Making Money From U.S. Aid to the Brutal Egyptian Military
Egyptian Army Soldiers during a military exercise with Spain and the U.S.
Photo Credit: USAF/Wikimedia Commons
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Most of the tanks, tear gas and bullets used to brutally clear the Muslim Brotherhood sit-ins in Cairo in mid-August were bought with American money. While there are a number of reasons why the U.S. continues to allocate an annual $1.3 billion in cash for the Egyptian military—Israel, access to the Suez Canal and counter-terrorism cooperation—the profits that go to American weapons companies are a major incentive.
Since 1979, the glue that has stuck the Pentagon and Egyptian military together has been cash. In total, America has given the Egyptian military nearly $42 billion since 1948, according to a Congressional Research Service report. Under the terms of the Foreign Military Financing deal struck with Egypt, the vast majority of the arms equipment the country buys is American. Currently, an estimated 80 percent of the Egyptian military's weapons purchases are covered by American military aid.
Here's how the financing system works: the money allocated for the military aid gets sent to the Federal Reserve Bank of New York. Then, it gets delivered to a trust fund at the Treasury Department, and is finally given to military contractors who make the tanks and bullets that have transformed the Egyptian armed forces into one of the most powerful forces in the Middle East.
This system benefits some of the most powerful American military companies like Lockheed Martin and General Dynamics.
“It’s clearly a major subsidy program for these companies,” said Shana Marshall, an expert on military aid to Egypt and associate director and research instructor at the Institute for Middle East Studies at George Washington University. “It’s kept open their production line when they would have otherwise been closed down and it’s a source of really reliable profits for them.”
In the aftermath of the military's massacre of supporters of the Muslim Brotherhood, these defense contractors are closely watching the unfolding debate about U.S. aid to Egypt. But they have little reason to worry.
While reports about the Obama administration reviewing the U.S. military aid package have emerged in recent weeks, there is little chance of an U.S. aid cut off, despite the fact that American law mandates one if a coup is implemented.
“Every time someone mentions a suspension of aid or rethinking the aid program, they send a team of defense industry lobbyists to Capitol Hill to knock on doors to make sure that there’s no suspension of the aid program,” said Marshall.
Further complicating any talk of an aid cut-off is the fact that contracts to provide equipment to the military extend far into the future. Penalties for breaking those contracts would be inflicted on the U.S. taxpayer.
So these military contractors will continue to rake in cash from the U.S.-Egypt relationship for the foreseeable future. Here's a look at six of them.
1. Lockheed Martin
The Maryland-based military company is a tried-and-true customer of the U.S. military. With gross profits of $2.7 billion in 2011, Lockheed Martin is one of the most cash-rich military companies. The vast majority of those profits come from U.S. government contractors to provide fighter jets, missile defense and more. It 's also benefited handsomely from the Egypt-US relationship.
In 2010, Lockheed Martin inked a $2.5 billion deal with the U.S. military to provide 20 F-16 fighter jets to the Egyptian military. Fourteen of the jets have been delivered to Egypt; under the terms of the deal, the remaining six are to be delivered by December 2014. But in the wake of the Egyptian military's violence against supporters of deposed President Mohamed Morsi, the Obama administration announced it would delay the delivery of the remaining jets. While it was a punitive measure in response to human rights violations, in the grand scheme of things it's only a symbolic step, given that it's a temporary suspension and that the vast majority of U.S. military equipment will continue to be sent to the country.