Beijing’s announcement of sanctions against Lockheed Martin is a diplomatic gesture that is unlikely to hurt the US weapons supplier’s bottom line given it holds a negligible share of the mainland China market, analysts said.
Following the US state department’s approval last week of a deal to sell US$620 million worth of arms to Taiwan to extend the operational life of its US-supplied Patriot Advanced Capability-3 (PAC-3) missiles, Beijing said on Tuesday it would impose sanctions on the American firm.
“The Chinese side has decided to take the necessary measure by imposing sanctions on Lockheed Martin Corporation, which is the chief contractor in the arms deal,” foreign ministry spokesman Zhao Lijian said.
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The sanctions were in line with China’s national interests, he said, without specifying what form they would take, or how and when they would take effect.
Whatever the details, Taiwanese military expert Chi Le-yi said the move would have a minimal impact on the US firm as it rarely sold any weapons to mainland China, which traditionally buys from Russia or makes its own.
“US and mainland Chinese arms specifications are quite different, as are their operational standards, training and maintenance,” he said.
According to figures from Bloomberg, the Asia-Pacific market accounted for 9.7 per cent of Lockheed Martin’s revenue last year, with the bulk of that coming from US allies Japan, South Korea and Singapore.
While China was not listed by Bloomberg as a buyer, other media outlets have suggested Lockheed Martin might derive as much as 2 per cent of its revenue from China through its subsidiary Sikorsky Aircraft, which operates Shanghai Sikorsky Aircraft – a joint venture with a firm based in the east China city.
Lin Yin-yu, a research fellow at the Association of Strategic Foresight in Taipei, said the sanctions were intended more as a diplomatic gesture than a trade penalty.
“China is not a major customer. Lockheed Martin has many clients in the rest of the world, so it remains doubtful if such sanctions will work at all,” he said.
As one of the world’s largest arms suppliers, Lockheed Martin has sold warplanes and missiles to Taiwan, but the latest deal was more about an intergovernmental agreement, a representative for the company said.
“Foreign Military Sales are government-to-government transactions and we work closely with the US government on any military sales to international customers,” Trent Perrotto, director of Lockheed Martin’s global media relations, told Taiwan’s semi-official Central News Agency.
Any questions or discussions about sales to foreign governments were best addressed by the US government, he said.
The US state department identified Lockheed Martin as the main contractor when it announced the deal on Thursday.
Taiwan’s foreign ministry condemned Beijing for imposing sanctions on Lockheed Martin, saying the mainland’s aggressive moves in sending warplanes and ships close to the self-ruled island in recent months posed a serious threat to peace and security in the region.
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This article Beijing’s sanctions on Lockheed Martin diplomatic but not damaging, observers say first appeared on South China Morning Post