Forbes
May 23, 2022

Expanded NATO Will Shoot Billions To US Defense Contractors

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See also: Davos: Stoltenberg gives keynote speech, meets Schwab, hails “freedom over free trade”

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Raytheon Manufacturing Company and other US weapons manufacturers are set to win big with expanded NATO Alliance

Two more Nordic countries are joining the North Atlantic Treaty Organization. The real winners are American defense companies.

Finland and Sweden officially applied last week to join NATO. If admitted they would join their Nordic neighbors in the alliance, and open up a big new market for American defense contractors.

It would be a big win for Raytheon (RTN), Lockheed Martin LMT +2.1% (LMT) and Northrop Grumman NOC +3% (NOC).

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Treaty obligations will a mean significant increase in defense spending. Finland has already ordered 64 new F-35 warplanes, the elite joint strike fighter developed by Lockheed Martin, Northrop Grumman and BAE Systems (BAESY). The JSFs cost between $110 million and $135.8 million.

More importantly, aligning with NATO is a commitment to interoperability with the American defense ecosystem. This directly benefits the big U.S. contractors. The market for their goods is expanding and they will face no competition for the foreseeable future.

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In early April the U.S. Department of Defense said that 7,000 Javelins had been deployed to Ukraine. For perspective, another DoD procurement document notes that Raytheon has never been able to produce more than 6,480 units during any 12 month span.

The F-35-ification of European armies might be a bigger deal, though. In addition to the cost of the units, corresponding ground support, spare parts and maintenance, there is lock-in factor. Europe is now committed to America-made gear for decades to come.

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If Finland and Sweden are accepted into NATO the countries would join their Nordic neighbors, Denmark, Norway and Iceland. The five countries currently work together under the Nordic Defense Cooperation pact. Bringing NORDEFCO inside NATO would facilitate joint planning, cut off Russian maritime access to St. Petersburg, and strengthen defense of the North Atlantic and Artic sea routes.

American defense contractors are…backed-up by the largess of the U.S defense budget, a record $810 billion in 2021. There is no appetite politically to decrease military spending. And that sentiment is spreading globally….