Lockheed Martin (LMT, $300.95) walks away from $15 billion Saudi arms deal

Lockheed Martin, best known for the F-35 fighter, has been awarded a $945.9 million down payment on a $15 billion missile-defense agreement for Saudi -- called the Arabia Terminal High Altitude Area Defense (THAAD) -- by the Pentagon. This move could potentially alleviate the long standing tensions between Saudi and the Western governments. It is also the first step in a larger deal struck last year between the U.S. and Saudi Arabia that will eventually benefit the Saudi kingdom with 44 THAAD launchers, missiles and affiliated equipment.

Tensions between the Saudi and the U.S government had increased over the Saudi-linked killing of the journalist Jamal Khashoggi last October amidst criticism of Saudi’s role in an on-going civil war in Yemen. This led to a rethinking of the U.S.-Saudi relationship over military deals. But this new deal could be a good sign that the THAAD deal will proceed uninterrupted. The $15 billion THAAD agreement was one of the few specific deals reached as part of a comprehensive $110 billion U.S./Saudi arms package negotiated in 2017.

The THAAD system is designed to shoot down short- and medium-range ballistic missiles on their descent. Its successful operations include deterring Korean rockets over the Pacific last year. It is also a potential deterrent to Iran, which is why the system is of interest to both Saudi Arabia and Israel among other U.S. allies in the region.

Even though the THAAD deal appears safe, others have not been so lucky. A case in point is General Dynamics whose land-systems business was significantly impacted by diplomatic issues between Canada and an unnamed customer. General Dynamics (GD) in December launched a public campaign against attempts by Canadian government officials to block a $13 billion sale of Canada-made armoured vehicles to the Saudis.