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Pentagon Restarts $100 Million Fund to Speed Arms Exports

The U.S. Defense Department has restarted a fund designed to speed exports of military gear to allies, with $100 million for initiatives such as stockpiling equipment for resale to partners.

The Defense Security Cooperation Agency, which oversees foreign military sales, won congressional approval in this year’s budget to revive the Special Defense Acquisition Fund to “provide speed and flexibility to the Foreign Military Sales” program, agency spokesman Charles Taylor said in an e-mail in response to questions.

The Defense Department will coordinate with other U.S. departments in advance and use the fund to buy military equipment from U.S. suppliers, such as body armor, night-vision devices, armored vehicles and small patrol boats in anticipation of demand from allies and partners, Taylor said. Otherwise, the agency must wait for a buying nation to sign a letter of agreement with the U.S. before it can place orders, he said.

Top U.S. suppliers of such equipment include body-armor maker Ceradyne Inc. (CRDN) of Costa Mesa, California; Exelis Inc. (XLS) of McLean, Virginia, a maker of night-vision gear; and Oshkosh Corp. (OSK) of Oshkosh, Wisconsin, which makes armored trucks.

The export fund was established in 1981 and stripped of money when defense budgets were trimmed in the 1990s “as part of the peace divided,” Taylor said.

The Pentagon fund has been used in the past to export items such as radios, ammunition, anti-tank missiles, Stinger missiles, and trucks to countries in the Middle East during Operations Desert Shield and Desert Storm, according to the Pentagon agency’s website.

Export Teams

Defense Secretary Leon Panetta has said it’s critical to improve the capacity of U.S. allies and partners around the world to police their neighborhoods. The Pentagon’s strategic guidance issued in January calls for “sharing the costs and responsibilities of global leadership.”

The Pentagon created Expeditionary Requirements Generation Teams last year that send “acquisitions experts abroad to help our allies better define and better streamline their requests,” Panetta said in a June 28 speech in Washington.

The teams help allies draft letters of request for U.S. equipment and assist in obtaining the material, Taylor said. Teams have completed missions in Uzbekistan and Bulgaria, he said.

The teams generated 33 letters of request for Uzbekistan and Bulgaria, of which four orders were completed, author Susan McClure wrote in an article published last year by the Defense Institute of Security Assistance Management. The Pentagon’s Defense Security Cooperation Agency didn’t specify what items were delivered to both countries when asked in an e-mail.

To contact the reporter on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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