Is There a Future Market in Afghanistan and Iraq for U.S. Defense Contractors?
Now that the U.S. is beginning to seriously drawdown troops from Iraq and Afghanistan and scale back their missions the focus will move to building up those countries internal security and armed forces. Much of their training and equipment so far has been provided through the U.S. either by direct transfer, sales or funding. The removal of U.S. forces will accelerate these kinds of deals. Iraq, unlike Afghanistan, has its own funding available through its oil production which gives it a little more leeway in deciding what to buy.
The U.S. is committed right now to withdraw the last of its 47,000 troops from Iraq in this year. The two governments are in discussion of whether to extend the presence but no decision has been made yet. The British have already removed all of their forces. The end of that mission would mean security of the entire country of Iraq would belong to its Army and Ministry of Interior forces.
The U.S. has provided large amounts of equipment and training to Iraq. Much of this has been of Russian design although produced all over the world. Alliant Techsystems (ATK) for instance has been given contracts to provide “non-standard” ammunition. The company is the largest producer of ammunition in the U.S. and makes different types of bullets and shells for the U.S. military. “Non-standard” in this case means in the former Soviet Union sizes for use by Iraq and Afghan forces that tend to be equipped with AK-47 and Russian support weapons. ATK will use sources in Eastern Europe to provide them.
Afghanistan has also recently signed contracts with two U.S. companies for training helicopters and aircraft. MD Helicopters received a $186 million contract to build six light helicopters to train new Afghan rotary wing pilots. Initially six aircraft will be purchased but up to fifty-four could be. Cessna Aircraft, part of Textron (TXT), just won a fixed wing training contract worth about $88 million. This will be for six Cessna 182T and 26 208B aircraft for basic training.
One of the largest current contracts is through the U.S. State Department with DynCorp, privately held by Cerberus Capital. This is for training support to the Afghan military and police. The contract was controversial in that it was protested by then Blackwater who felt the billion dollar deal should have been awarded to them. This provides an example of the amount of money that is out there for these kinds of contracts.
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