6 Corporations Making Money From U.S. Aid to the Brutal Egyptian Military
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.
A month after the fighter jet deal was reached, a Lockheed Martin subsidiary in Florida was awarded a $46 million contract to provide night vision sensor systems for Apache helicopters for Egypt.
2. General Dynamics
This major military company has also benefited from the Egyptian-American military relationship. Specifically, it is the source for key parts needed to build Egypt's M1A1 tanks, a vehicle that the U.S. has delivered to the country since the late 1980s. In total, Egypt's military has acquired more than 1,000 of these tanks—far more than the armed forces actually need—for over $3.9 billion.
Since 1992, General Dynamics has provided components for tank kits for M1A1 vehicles. In 2011, the U.S. military awarded the company a $395 million deal to provide these tank kits to Egypt. The parts are shipped to a production facility in Egypt—an example of how the military relationship with the U.S. also benefits Egyptian military engineers and provides some jobs for Egyptians. (Other contracts have similar arrangements, where some of the production of military goods occurs in the U.S. and the other portion occurring in Egyptian factories.) The deliveries of these specific tank kits will take place from July 2013-January 2016.
In 2012, General Dynamics signed another contract, this time for $37 million, related to M1A1 tanks.
3. L-3 Communications
Known for its prowess in the production of communications, surveillance and reconnaissance equipment for the U.S. government, L-3 Communications brings in billions of dollars in profits each year. Some of the money comes from its contracts with the U.S. military to provide Egypt communications equipment.
This year, L-3 Communications was awarded a $10.5 million contract to provide high-frequency transceivers for Egypt's military.
In 2010, L-3 Communications received even more benefits from the U.S. aid package to Egypt. The company made $24 million to assemble a sonar system for the Egyptian navy. “L-3's sonar provides long range and detection capability under the harshest of sea state conditions, and we are honored to provide the Egyptian Navy with our high-performance solution,” crowed Jerry Ozovek, the president of L-3's Ocean Systems.
4. General Electric
General Electric has its hands in everything: energy, computers, digital cameras—and U.S. military contracting, specifically in the aviation field.
In August 2013, General Electric signed a $13.6 million deal with the U.S. Air Force to give Egypt's air force “service life extension kits” for the F110 jet fighter engine used in the Lockheed Martin-produced F16s.
“Orders like these translate into stable employment for years,” a GE spokesman told an Ohio newspaper.
While this company is a relatively small name in the world of military contractors, Exelis does well for itself. The Virginia-based company made nearly $6 million last year. The Washington Post describes it as specializing in “electronics and communications equipment such as radios, as well as technical services such as cybersecurity and intelligence offerings.”
This year, it inked a $24 million deal with the U.S. Navy to produce “six radio frequency repeater systems for the government of Egypt.”
Boeing is the second largest military contractor in the world. Its relationship with the Egyptian military stretches back years.
In 2000, Boeing agreed to upgrade 35 of Egypt's Apache helicopters for $400 million. Nine years later, Boeing signed a $820 million contract to provide more Apache aircraft. The U.S. is set to deliver some of the remaining helicopters from that 2009 deal next month.
And in 2010, Boeing signed yet another contract to provide Apache helicopters, this time for $22.5 million.