Raytheon lobbies for Lockheed’s $300 million Japan radar deal

Raytheon lobbies for Lockheed’s $300 million Japan radar deal
Raytheon’s pitch includes putting radar on Japanese vessels, whilst critics say doing so could tie up vital naval resources needed elsewhere. (Shutterstock)
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Updated 31 July 2020

Raytheon lobbies for Lockheed’s $300 million Japan radar deal

Raytheon lobbies for Lockheed’s $300 million Japan radar deal
  • Japan has bulked up its defense capabilities under Prime Minister Shinzo Abe amid tension with North Korea and China

TOKYO: US defense company Raytheon is lobbying Japanese lawmakers to replace Lockheed Martin Corp. as the supplier of powerful radar systems as Tokyo reconsiders plans for two Aegis Ashore missile defense sites, three sources said.

“It’s game on,” said one of the sources, who has direct knowledge of Raytheon’s lobbying campaign. Raytheon’s pitch includes a proposal to put its SPY-6 radar on refitted destroyers, as the US Navy plans to do. The company says that would save money and time as Japan tackles new missile threats, drones and stealth aircraft.
Lockheed Martin has a contract with Japan to build its $300 million SPY-7 radars at the two canceled Aegis Ashore sites, but says other sites or ships are possible.
But critics say dedicating ships to missile defense pulls them away from other duties, and new destroyers can cost hundreds of millions of dollars. Japan could also  face financial penalties if it pulled out if its contract with Lockheed Martin.
“We are looking at the various options available to us,” a defense ministry spokesman said.
A key battle for the two companies will be winning the support of former defense ministers and deputy ministers who will make recommendations to Prime Minister Shinzo Abe as early as next month.
That group, led by former defense minister Itsunori Onodera, formed in June after current defense chief Taro Kono suspended the Aegis Ashore plan. It will weigh in on missile defense and possibly propose that Japan acquire strike weapons for that mission, Japanese officials have said.
Japan has beefed up its military with stealth fighters designed to fly off carriers, longer-range missiles, new amphibious units and stronger air defenses meant to deter threats from neighbors, including North Korea and China.
Kono said that he had ordered the Aegis sites to be relocated because rocket boosters that accelerate interceptor missiles into space could fall on residents. Concern over mounting costs, however, was the main reason for that decision, according to the three sources.

FASTFACT

Lockheed Martin has a contract with Japan to build its $300 million SPY-7 radars at the two canceled Aegis Ashore sites.

China is rapidly expanding and improving its ballistic missile arsenal, and in 2017 North Korea tested a missile that flew over the Japanese island of Hokkaido.
With around three times the range of radar systems currently used by Japan, both SPY-6 and SPY-7 would greatly enhance Japan’s ability to detect multiple attacks.
One option for Japan that would avoid any political fallout would be to buy both radars, using SPY-6 on Aegis ships and deploying Lockheed’s SPY-7 as an early warning radar, one of the sources said.
Onodera’s backing would make that change more likely because he approved the Lockheed Aegis radar acquisition two years ago. At the time he was unaware that testing in Hawaii could add at least $500 million to Aegis Ashore’s $4 billion budget, separate sources told Reuters last year.
In an interview in the Asahi newspaper on Thursday, Onodera said the “ideal option” for Japan would be to find a safe ground-based location. He also noted that building Aegis ships would cost both money and manpower.
Onodera’s office declined an interview request, but one source familiar with his position on the radars described him as “flexible.”
Masahisa Sato, a former deputy defense minister who also served as a deputy minister of foreign affairs, said Japan’s choice is between SPY-7 at new sites, with the missile launchers deployed elsewhere, or building Aegis ships equipped with SPY-6.
“I am recommending an increase in Aegis ships,” he said. “SPY-7 is under development and there is a question about how it would perform in a new configuration,” Sato added.
Lockheed Martin said its system could be adapted to ships, and disputed questions about performance.
“SPY-7 radar is the most advanced radar in the world today and we believe it is the best solution for Japan’s defense needs,” the company said in an email.
Raytheon said the SPY-6 will be deployed on 50 US Navy ships, calling it the “most advanced radar technology in production today.”


WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range
Updated 24 January 2021

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

WEEKLY ENERGY RECAP: Despite long-term challenges, oil prices remain in healthy range

Oil prices have been stable since early January, with Brent crude price hovering around $55. Brent crude closed the week slightly higher at $55.41 per barrel,
while West Texas Intermediate (WTI) closed slightly lower at $52.27 per barrel.

Oil price movement since early January in a narrow range above $50 is healthy, despite pessimism over an increase in oil demand, while expectations of US President Joe Biden taking steps to revive energy demand growth are
still doubtful. The US Energy Information Administration (EIA) reported a hike in US refining utilization to its highest since March 2020, at 82.5 percent. The EIA reported a surprise weekly surge in US commercial crude stocks by 4.4
million barrels. Oil prices remained steady despite the bearish messages sent from the International Energy Agency (IEA), which believes it will take more time for oil demand to recover fully as renewed lockdowns in several countries weighed on oil demand recovery.

The IEA’s January Oil Market Report came as the most pessimistic monthly report among other market bulletins from the Organization of the Petroleum Exporting Countries (OPEC) and EIA. It forecast oil demand will bounce back to 96.6 million bpd this year, an increase of 5.5 million bpd over 2020 levels.

Though the IEA has lowered its forecast for global oil demand in 2021 due to lockdowns and vaccination challenges, it still expects a sharp rebound in oil consumption in the second half of 2021,
and the continuation of global inventory depletion.

The IEA reported global oil stocks fell by 2.58 million bpd in the fourth quarter of 2020 after preliminary data showed hefty drawdowns toward the end of the year. The IEA reported OECD industry stocks fell for a fourth consecutive month at 166.7
million barrels above the last five-year average. It forecast that global refinery throughput is expected to rebound by 4.5 million bpd in 2021, after a 7.3 million bpd drop in 2020.

The IEA monthly report has led to some short term concern about weakness in the physical crude spot market, and the IEA has acknowledged OPEC’s firm role in stabilizing the market.

Controversially, the IEA believes that a big chunk of shale oil production is profitable at current prices, and hence insinuated that shale oil might threaten OPEC market share.

It also believes that US shale oil producers have quickly responded to oil price gains, winning market share over OPEC producers. However, even if US shale oil drillers added more oil rigs for almost three months in a row, the number of operating rigs is still less than half that of a year ago, at 289 rigs.

The latest figures from the Commodity Futures Trading Commission show that crude futures “long positions” on the New York Mercantile Exchange are at 668,078 contracts, down by 18,414 contracts from the previous week (at 1,000 barrels for each contract).