The Economic Impact of Unplanned Arms Exports

The Biden Administration started its term with a declaration that surprised many in the defense industry: a halt to offensive arms sales to Saudi Arabia and several other Gulf Nation countries including the United Arab Emirates (UAE) 1. This policy shift was announced in February 2021 after a significant increase in defense exports to the Middle East partners under the Trump Administration. The new stance was explained as an effort to prioritize human rights through restriction of offensive weaponry to the region and address the Saudi’s involvement with the Yemen Civil War. While hordes of big four defense firm lawyers were eagerly developing a litigation strategy, it left many smaller defense companies with a set of denied export licenses, angry customers, and a general feeling of “what next?”

That question was answered two months later when the Biden Administration decided to move forward with a $23 billion weapons sale to the UAE initiated by the Trump Administration which includes “50 F-35 Lighting II aircraft, up to 18 MQ-9B Unmanned Aerial Systems, and a package of air-to-air and air-to-ground munitions.2” In case you weren’t sure, Hellfire Missiles, JDAMS, and various configurations of the Paveway kits cross the “offensive” weaponry line.3 That particular sale showcased a strong sense of solidarity and support, but the approval of this Foreign Military Sales (FMS) case left many of the smaller companies who were impacted by the shift in foreign policy to once again wonder where they stood.

The approval of the FMS case is a clear signal that given enough lobbying power and “economic impact”, that the sale, regardless of offensive versus defensive categorization, has low risk of failure. If the sale is approved and there is no movement or clear guidance provided to the other contractors about exporting to the region (i.e. licenses continue to get denied), then it would appear that only the economically-significant deals that major contractors can singularly achieve will proceed. As a result, smaller defense companies would be forced to cancel much-needed contracts because they are unable to obtain the required licenses to export their products, services, or information.  They would face devastating economic impacts as they start the long process of developing business with new customers, which will likely not realize any revenue for several years.

This scenario is not unheard of given the trends seen in the defense trade industry of years past. FMS (U.S. Government’s program for transferring defense articles to international partners) comprise a significant portion of the defense trade industry, and Lockheed Martin, Boeing, and Raytheon Technologies accounted for $87 billion, more than 75%, of the FMS deals made in 2020 4.

One thing should be made clear—these types of sales should not be opposed overall. After all, the person reading this post likely works in the defense industry and understands the significant and potential benefits of conducting sales similarly. End-users and the use of these types of commodities should always be thoroughly vetted, understood, and agreed to before a sale proceeds. If that procedure is conducted properly, allies and partners should absolutely be armed responsibly to defend both themselves and U.S. interests. This assessment of the recent shift in foreign policy may be proved wrong in the coming months, and smaller defense companies may see the opportunities in the Middle East region reopen after the initial stagnation at the beginning of Biden’s presidency. Time will tell if this is a policy that applies to all or some.

1. Zengerle, Patricia, and Mike Stone. “Exclusive: Biden Team Considering a Halt to ‘Offensive’ Arms Sales for Saudis,” Reuters. Reuters, February 26, 2021.

2. Zengerle, Patricia. “Biden Administration Proceeding with $23 Billion Weapon Sales to UAE.” Reuters. Reuters, April 14, 2021.

3. PM-CPA. (2020, November 10). UAE – MQ-9B Remotely Piloted Aircraft FMS Approval. Retrieved from Defense Security Cooperation Agency:

4. Yousif, Elias, and Hartung, William. “U.S. Arms Sales Trends 2020 and Beyond, from Trump to Biden.”  Security Assistance Monitor, April 2021.


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