The business of war: Who profits from the war on Iran? — This is America

[0:08] This is America, and this is Huntsville, Alabama, known as America's rocket city. [0:15] Historically, this place was known as a center for rocket development, [0:19] helping NASA with missions to the moon. But increasingly, it's become a powerhouse for [0:24] the US defense industry. With more money being spent on weaponry, you can't underestimate the [0:30] impact on places like this. I'll have more on that in a minute. But first, let's head to our [0:35] Washington, D.C. studio and Cyril Vanier. Richard Gaysford, thank you very much. [0:41] Earlier this week, we started the show with the idea that in the U.S.'s war against Iran, [0:45] no one has yet won or lost. And that is true on the battlefield. But from a money standpoint, [0:51] financially, the opposite is true. Some businesses have already won big, the U.S. defense [0:56] industry, American oil and gas, while American consumers have so far lost out. Today, we look [1:01] at the business of war and whether it shapes wartime decisions. So, Al Jazeera's Manuel [1:07] Rapallo is on Capitol Hill, where Congress will be considering a record increase in military spending. [1:12] And Rosalind Jordan is with us in the studio to discuss the influence, Ros, that the defense [1:16] industry has or doesn't have on policymaking. That's coming up in a little bit. [1:20] So, war has very real implications for those who are in the firing line. And the reality is that with [1:26] every military move, some companies are making money. It's no secret that the defense industry [1:31] profits. That's their business model. As conflict depletes America's weapon supplies, money needs [1:36] to be spent to make more. And those missiles or planes or ships, they don't come cheap. [1:42] Providers of autonomous systems, cybersecurity and artificial intelligence systems go hand in hand [1:47] with defense as the nature of conflict evolves to include advanced technologies. And while some energy [1:52] supplies are hurting because their oil cannot get out of the Strait of Hormuz, American producers [1:58] are making money hand over fist. U.S. exports of crude oil just hit a record high last week. [2:04] Also, times of global uncertainty typically see a rush to buy up safe haven assets like precious [2:10] metals and government bonds. Well, gold has seen quite a bit of volatility, but at the end of the day, [2:16] it is up 40 percent over the last year. These are all things that the president likely has to factor [2:22] into his decisions. And Donald Trump is bullish about this war, about the economy and about his [2:28] ability to sustain hostilities indefinitely. Number one, buy oil from the United States of America. [2:35] We have plenty. We have so much. We've never had so much ammunition. Our ships are loaded. [2:41] I call them locked and loaded. They're locked and loaded. They're ready to go. [2:45] We have much higher quality equipment than we did when we first started the war. But frankly, [2:50] I thought the oil prices would go up more and I thought the stock market would go down more. [2:55] It hasn't been nearly as severe as I thought. I think they have confidence in maybe the American [3:01] president. Now, defense industry spend ups have been something of a gift for towns and cities where [3:07] contractors are based. But is there a danger perhaps of over relying on these war dividends? [3:13] Richard Gaseford is in Alabama to find out. This is a key part of America's defense industrial base. [3:21] It might not look much as you drive around Huntsville, but billions of dollars have been [3:26] invested here by some of the biggest defense contractors in the U.S. Technology developed [3:33] in Alabama is playing a key role in the conflict in the Middle East. And the companies making it [3:39] in what's known as Rocket City are bringing highly paid jobs that boost the economy. [3:44] We do see a lot of them coming in from cities like Washington, D.C., Colorado, a lot of different [3:51] places. So there's a lot of growth that the defense industry is bringing here, certainly, and continues [3:56] to. It's been wonderful for our business. Real estate, we rely on the people moving here, [4:02] people changing jobs, changing homes, upgrading, downgrading. [4:08] The defense secretary wants to increase military spending by 40 percent next year. [4:13] We're rebuilding a military that the American people can be proud of, [4:16] one that instills nothing less than unrelenting fear in our adversaries and the utmost confidence [4:21] in our allies. We fight to win in every scenario. [4:27] But the city council doesn't want to rely just on money from the defense industry. [4:32] My goal really is, in terms of growing a diverse economy, making sure that it supports [4:38] a wide variety of income opportunities. You know, when we talk about long-range planning, [4:43] we're thinking one year, five years, 10 years, 20 years in advance. [4:47] Space and defense, though, is ingrained here in the economy. This calm and quaint Alabama city, [4:54] a beneficiary of global instability. Richard Gaysford, Al Jazeera, Huntsville, Alabama. [5:02] It's worth noting that right now the Trump administration is pushing for the United [5:05] States' biggest ever military budget, one and a half trillion dollars. That is what the president [5:11] wants the U.S. to spend on defense next year. A 42 percent increase, as you heard Richard report [5:16] a second ago, 42 percent compared to the U.S.'s current defense budget. His administration describes [5:22] the request as a, quote, generational investment that would unleash the American arsenal of freedom. [5:28] So, Al Jazeera's Manuel Rapolo is on Capitol Hill for more on this. Manny, the president doesn't [5:32] actually approve the budget. Congress does that. The administration is asking for a huge amount of [5:38] military spending. Is Congress likely to approve that? Cyril, defense spending is actually one of [5:44] the few areas where bipartisan support still exists here in Washington. But that doesn't mean that [5:50] President Trump is not going to face pushback, specifically when it comes to how this money is [5:55] going to be spent. I want to zero in on some of those numbers that we've been hearing for our [5:59] viewers since this show began. The United States already spends almost a trillion dollars annually [6:05] on matters of national defense, representing somewhere around 4 percent of GDP. And as you [6:11] mentioned already, that budget that President Trump wants, 1.5 trillion dollars to build what he, [6:17] in his own words, has referred to as his, quote unquote, dream military for fiscal year 2027, [6:22] doesn't even take into account the 200 billion dollars that the Pentagon is asking for in [6:27] supplemental funding to continue the ongoing military campaign in Iran. But the United States [6:34] Congress, where we are right now, this Capitol Hill, represents the biggest challenge that the [6:40] Trump administration is going to face when it comes to securing that budget moving forward. [6:45] Not because of partisan differences, but because of differences in how that money is being spent, [6:51] and where that money is going to go. A large bulk of that money is going to be going to private [6:58] defense contractors. And we know that there are many on Capitol Hill who want more oversight, [7:02] not just of the Pentagon, but of defense contractors. Now, in all likelihood, the Trump [7:06] administration will be securing at least some of that funding, but not before navigating a very [7:12] divided Congress, particularly as it relates to these differences on how that money is being spent. [7:17] Al Jazeera's Manuel Rapolo from Capitol Hill. Thank you very much. Let's bring in Rosalind Jordan [7:23] into this conversation. Rosalind, you've covered the Pentagon, the State Department, not to mention [7:27] the White House under multiple U.S. presidents. You know this town better than most. Many of our viewers [7:36] will listen to our opening statement on the fact that some rich and powerful companies are making [7:42] more money when the U.S. goes to war. Those companies we know have access to the federal [7:48] government, access to the White House, to the State Department. They have influence. The question is, [7:54] do they influence U.S. policy, maybe even wartime decisions? It would be controversial to say [8:04] that these companies influence wartime decisions, but certainly they do have an integral impact on the [8:13] shape of the U.S. military. They bring forward new ideas, new technologies, new ways of fighting war, [8:21] and then spend a lot of time and a lot of money, 171 billion dollars in 2024 alone, with more than a [8:29] thousand lobbyists here in Washington to convince the Pentagon and the administration in power to [8:36] use these technologies, to build these technologies. And when you consider that some 1.1 million American [8:44] workers work for some company that has a link to the military-industrial complex, as Dwight Eisenhower [8:51] called it back in 1961, that's a lot of people depending on on this work, depending on these [8:59] public tax dollars being spent on whether it's a missile, a ship, a fighter jet, even the components [9:07] that build all of these things in the Pentagon's arsenal. And we're just talking with Manuel about [9:13] the budget that Donald Trump would like to see approved, 1.5 trillion dollars. That's a lot more than [9:18] the U.S. currently spends on its military, and it already spends a lot. The question being, does the [9:23] U.S., I appreciate this is not an easy question to answer, does the U.S. need to spend that amount of [9:29] money? Does it need to build up its military this much? This comes down to a philosophy that this [9:36] president has on dealing with the war. He sees global threats not just from non-state actors such as [9:44] al-Qaeda and ISIL, but there's also been an ongoing debate here in Washington about what to do [9:50] about North Korea, what to do about China, what to do about Russia, if anything. And so part of this [9:57] military buildup is trying to respond to potential threats that could be coming from these countries [10:03] and from non-state actors. Is it worth 1.5 trillion dollars? Well, that's for Congress to decide. [10:09] Ross and Jordan, thank you very much for joining us in the studio today. So what kind of numbers are we [10:15] talking about when it comes to industry profits and company performance? Alex Baird has been looking [10:20] into the size and scope of corporate revenue. Waging war is big business. And for some industries here, [10:27] the war with Iran has been a moneymaker. The oil industry had been broadly in line with the S&P 500. [10:34] That's the benchmark for America's biggest listed companies. And then the war began. That soaring line [10:40] is the XLE stock market fund that tracks America's biggest energy companies. Think Exxon Mobil and [10:46] Chevron. By the end of March, it hit a 52-week high. And today, while the S&P 500 is only up around 4.6% [10:54] since the beginning of the year, that energy industry tracker is up more than 30%. What does that mean? [11:02] Well, during the first month of the war, the world's biggest oil and gas companies are estimated to have [11:07] made around 30 million dollars in extra profit every hour. And how about LNG? Natural gas, [11:15] that big earner for the Gulf countries. Here, you're seeing the S&P 500 market again, but now we've got [11:21] that against two of the biggest American LNG exporters. Once the war began their market performance, [11:28] well, it speaks for itself. There's been a bit of a tumble since that peak, but the numbers are still [11:34] pretty dramatic. Venture Global's stock price up more than 90% since January. [11:39] That golf-sized hole in the LNG industry being plugged by US exporters, leading to record export [11:46] volumes. And then there's the obvious when you think war. The defence industry. Let's look at the [11:51] five biggest companies and how much they made in the first quarter of this year compared to last year. [11:57] Lockheed Martin is the odd one out. They did sell more missiles and defence systems, [12:02] but its profits fell because of other costs. Then there are the windfalls. [12:07] RTX. Earnings up 34%, more than half a billion dollars more than last year. Northrop Grumman, [12:15] the most impressive, up more than 80%. General Dynamics also having a good year for the bank [12:21] balance. And then there's Boeing. Its defence segment earning more than 50%. All of those numbers, [12:28] meaning something pretty simple. Billions of dollars in the pocket and a very healthy pay [12:33] packet for many American companies. With us now, Dan Grazier, Senior Fellow and Director of the National [12:40] Security Reform Program at the Stimson Center. And Paolo Von Chirac, President of the Global Policy [12:47] Institute. Thank you very much, gentlemen, both of you for being with us. The real basic question here, [12:52] we've detailed, we've laid out that some companies in some sectors of the US economy, they do well out of war. [12:58] They do well when the US President decides to pull the trigger. Namely, obviously the defence industry, [13:05] oil and gas in this particular war, but that is often the case, and some parts of the tech industry [13:10] in particular. The big question is, is that a problem? Dan Grazier. Cyril, thank you for having me. [13:17] Yeah, I do believe it's a problem. You know, the United States has essentially been on a permanent war [13:21] economy footing, a permanent war footing for 25 years since September 11th. And, you know, [13:27] the war on terror drastically increased defence spending. And so a lot of companies in the United [13:33] States and a lot of people just writ large in the national security establishment really got used to [13:37] having high defence budgets. And so, and it's not easy to off ramp that now. And so the best way to [13:45] increase, you know, to keep defence spending high is to have another war. And so what we're seeing right [13:51] now is we're seeing a lot of, a lot of missiles and bombs being dropped, and those are going to have [13:57] to be replaced. And that's a lucrative prospect for companies like Lockheed Martin and RTX. [14:02] Paolo Von Chirac, to the same question, is it a problem that you have entire sectors of the US [14:07] economy that stand to benefit from going to war? Well, I don't know that I would call it a problem, [14:14] so it's an incentive for them. And consider also this, the defence manufacturers have their plans [14:22] spread around many states, which means they have political support because Senator so-and-so would [14:29] say, hey, this company is in my, in my state, we want to, or in my district, if it's a congressman, [14:34] there are, I don't know how many employees, so there is a, there is a... And we just saw it with [14:39] our correspondent in Huntsville, Alabama, is one of the many cities whose economy relies almost [14:45] exclusively on the defence industry. However, if we put this in context, overall defence spending in [14:52] the United States is now about three percent of GDP. In the bad old, good old days of the Cold War, [14:57] it was six percent, seven percent, even nine percent at some point. In other words, as a percentage of [15:03] national wealth, the, the resources that are devoted to defence, in, in a broader sense, are not what [15:11] they used to be. In fact, they've been steadily declining, which led to a, how can I say, shrinking [15:17] of the defence industrial base. And even though we have a defence budget which is close to a trillion [15:23] dollars, and, and the request by the administration is to, for a massive increase in the next fiscal year, [15:31] well, that is significant. Oh my God, that's almost a trillion dollars. Well, look at the stock [15:36] valuation. 1.5 trillion is the budget that the administration wants. We don't know if they'll get [15:40] it. Yeah, the fact is this, look at the stock valuation, say, of, uh, uh, Apple or Meta or Google, [15:48] trillions of dollars. I mean, we're, there is, there are other sectors. Are we comparing like with like? [15:53] Well, no, but I'm talking what counts more in America, the tech industry, uh, writ large, [15:59] or the defence industrial base. I don't want to diminish that the, there are, as we just said, [16:04] powerful constituencies supporting defence spending and all that. But also let's consider [16:11] that, that the part of the defence budget that goes to procurement is, what is it, maybe my colleague [16:16] here knows better than I do, 20%, 25%. The rest, most of the money goes to operations, keeping this whole [16:23] thing going. Most of the money goes to salaries. You have to pay an old volunteer force and you have [16:29] to provide salaries that are reasonably competitive with the private sector. If you want to recruit [16:35] people to, to serve in the U S military. So definitely the defence sector is significant, [16:42] but I wouldn't go as far as saying, oh, the defence sector wants war every other day, [16:47] because that's the only way to prosper. I'm sure that they make money. Absolutely. And they have [16:53] an incentive in that sense. And that especially now, considering that we draw, we, we drew down the, [16:59] the, uh, inventory of smart weapons, of missiles, of patriots, of interceptors, et cetera, [17:05] in a very, very large amount, we need to replace. The question is not just in an, in an, [17:12] you know, devoid of context, whether they make money or lose money. I think the question and many [17:17] viewers will be asking themselves that question is whether that creates something you could almost [17:21] describe as a nationwide conflict of interest between these powerful companies and then the [17:26] political decisions that are made. And you know, who's the first person who actually famously warned [17:30] about this was, this was 60 years ago. You're, you're, I think, you know, our U S president, uh, [17:35] Dwight Eisenhower, 1961, the term military industrial complex. He was the one who popularized it. [17:41] He used it, uh, more than 60 years ago and it was his last public address to the nation. [17:45] He warned about the growing power of the defense industry. Listen to this. [17:50] In the councils of government, we must car guard against the acquisition of unwarranted influence, [17:56] whether sought or unsought by the military industrial complex, [18:02] the potential for the disastrous rise of misplaced power exists and will persist. [18:09] So Dan Grazier, this was a U S president more than half a century ago saying careful, [18:13] careful what this could do maybe to your government and to tend to political decisions. [18:18] Yes. And it's, and it's very profound that it was Dwight Eisenhower that said that too. [18:22] He would know as well as anybody, you know, cause he was famously, you know, [18:25] the five star general who, you know, led American forces, uh, or led, led all the allied forces, [18:31] you know, in the war in Europe, uh, during world war II, he was absolutely correct. Uh, and, [18:36] and if anything, it's actually gotten worse. Uh, I actually don't even use the military [18:40] industrial complex that phrase, you know, that phrasing anymore. I call it the national security [18:44] establishment because what Eisenhower warned about has metastasized and it is now a permanent [18:49] part of the American economy. Uh, and I would, I would actually argue when, when, uh, the, [18:56] when we pulled out of Afghanistan in August of 2021, there were plenty of, of defense industry [19:02] CEOs who were complaining that their revenue streams, uh, were going to decrease. [19:07] 20 years. Right. And they were going to have to readjust their, you know, their business model. [19:11] Now they were thrown a lifeline just a couple of months later when Russia invaded, uh, invaded [19:15] Ukraine and the United States started, started sending a whole bunch of weapons in support of, [19:19] uh, of the Ukrainians. And if you remember when president Biden, uh, spoke in the oval office [19:24] about this, the last thing that he said during, and this is in an oval office address, he was making [19:30] the national security establishment argument in favor of that because he said that all the money that [19:35] was going to be allocated to support Ukraine was really going to be spent in the United States by [19:40] our own, uh, our own defense industry. By the way, you're a veteran. Yes. You were an officer in the [19:45] U S Marine Corps. Correct. You served in Iraq and Afghanistan. So you're not anti U S military. Um, [19:51] do you, do you want the U S military to get the amount of money that Donald Trump is asking for? [19:56] I want the U S military to get the right amount of money to build an effective force. [20:00] And that's not what's happening right now. The very fact that we're spending, no, [20:04] it's not because if you look, let's just take one example, the, the F 35 program, [20:08] it's, it's the most expensive weapons program in history to over $2 trillion over its expected [20:14] lifespan. That's a failed program. It is a 30, the, the F 35 program, 25 years nearly after it, [20:20] after Lockheed Martin won the contract, the, the, the F 35 program has a 30% full mission capable rate. [20:27] That's abysmal. That number should be 90% for an effective program. So we've spent, [20:33] we spent hundreds of billions of dollars on that program already, and we don't have much to show [20:38] for it. The F 35 has not been very effective in, in Iran. That's where we're, you know, [20:42] talking about F 15s and, and eight tens. And that's going to continue, uh, you know, to move forward [20:48] as we keep spending these obscene amounts of money on the military, because the services make a lot of [20:53] poor decisions. Imagine, imagine if you're a teenager, if you're going away for the weekend, [20:57] and you just give your teenager a credit card and say, Hey, you need to, you know, here's buy [21:01] whatever you need, uh, until we get back on Sunday, your teenager's gonna make a lot of really poor [21:06] decisions. But if you just gave them $50 and said, this is all you get, then they're gonna make much [21:10] more prudent, prudent decisions. But ever since September 11th, when defense spending has been [21:15] increased, the services has made a lot of really bad decisions. There's a lot of failed programs in the [21:19] last 25 years, F 35, littoral combat ship, uh, the army's future combat system. There's a whole [21:24] bunch of things. And that is all born out of, uh, out of fiscal in discipline. [21:30] I want to share with our viewers numbers on lobbying spending. The amount spent by interest [21:35] groups to lobby the federal government has increased last year, really across every sector. But one of the [21:39] highest areas of growth was the defense lobby plus 20% relative to the previous year. That means [21:44] organizations spent a combined $191 million to push policies favorable to weapons manufacturers. [21:52] Now look at the energy and natural resources sector. It spent a combined $485 million. I'll say that [21:58] number again. That's almost half a billion dollars spent on supporting policies that serve the specific [22:03] interests of oil and gas companies. So Paulo von Chirac, when you see that half a billion dollars, [22:10] right, for lobbying from big oil, do you think that influences policy, number one, [22:17] and does it influence policy in a way that wakes, that makes war more likely? [22:23] Well, does it influence? Of course. Yeah. This is what companies spend money for. That's why they pay [22:29] all these highly placed lobbyists to do their bidding and to make sure that their interests are protected [22:36] in the decision-making process. And of course, the budget is the salient moment in which the [22:42] administration has to choose its priorities and say, well, how much money do we want for this and [22:46] for that? And so these numbers, people say, oh my God. But what's the biggest lobby in Washington? [22:52] The defense industry's lobby? No, it's the American Association of Retired People, the pensioners. [22:59] The AARP is the biggest lobby in America. That's a gargantuan force. So I'm not saying that because [23:08] of that, then the lobbying by the defense industries or the energy companies doesn't count. [23:14] Well, because we're competing interests. That's what I'm trying to say. Everybody's vying for attention. [23:19] And everybody says, oh, there's a limited pot of federal dollars for next fiscal years. Me, [23:26] me, me, me. Me first. Me first. And everybody's fighting for a bigger share. [23:31] Yeah. Except pensioners, if they are fighting for their interests, that doesn't trigger wars. [23:37] Whereas you will understand that people will look at half a billion dollars spent and think [23:41] that that creates a big incentive, right, for companies that benefit from war. We see that they're [23:48] spending that amount of money to defend their interests and their interests are tied to war. [23:56] But again, if we look at the politics, and we know that now we are in a very strange moment here, [24:02] because let's remember, Mr. Trump became president saying no more wars, right? That was his, [24:09] on his flag. I am, I'm enough of all this forever wars. America first. Essentially, [24:16] some kind of a new isolationist position. We take care of our own interests, perhaps of the interest [24:22] in our hemisphere, hence, maybe interest in Greenland, you know, whatever. We'll see what [24:28] happens to that. But not certainly we want to do another war in the Middle East. That was not [24:33] certainly on the agenda of Mr. Trump as he run for reelection. And millions of people who voted for him [24:41] say, yes, yes, America first, no more wars, etc. So there's a bit of a disconnect between the [24:47] political success of this president and his entourage. And as you point out, the interest of the [24:56] of the defense industrial complex, that wants, you know, to push the notion of we are under threat, [25:03] we need to do this, we need to do that. So please give us more money, more weapons, more this, [25:09] more that. And I fully agree with Dan here. We're not buying the right stuff. The war in Ukraine, [25:14] if we can get to that, shows us that the future warfare is entirely focused on different types of [25:20] weapons that we aren't really focusing enough on in terms of how the dollars are spent. [25:26] We have less than a minute left. So real quick, and I appreciate this is not a real quick kind of [25:30] answer. If there were one thing to fix about this system, what would it be? [25:35] Oh, the US military needs to buy simpler weapons. We need to we need to focus less on on exquisite [25:41] weapons like F 35s. And we need to focus on simpler designs for things that actually work in the [25:46] field, in the hands of our service members. Thank you very much, gentlemen, to both of you, [25:51] Dan Grazier, Senior Fellow and Director of the National Security Reform Program at the Stimson Center, [25:57] and Paulo von Chirac, President of the Global Policy Institute. Thank you very much to both of you. [26:02] Thank you very much. That's all from the team here in Washington. And in a moment, [26:06] we'll hand back to Al Jazeera's global headquarters in Doha. But first, [26:09] back to Richard Gaseford with a look ahead to our next show. [26:14] Thanks, Cyril. On the next edition of This Is America, Friday marks 60 days since Donald Trump [26:20] informed Congress of military operations starting against Iran. That's twice as long as he first [26:26] suggested it might well take. We'll look at what's been achieved and how long it can be sustained. [26:32] That is 18.30 GMT, 2.30 p.m. Eastern Time here in the United States. For now, from Huntsville, Alabama, goodbye.