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

  • 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.”


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.