War in Iran is Chewing Through American Missile Stockpiles

I guess you know when we talked about this in after the war in Ukraine started. Wars are about supply chains in large sense, and quite obviously, wars are about size and the scale of the arsenals and how fast they can be replenished.

the strengths of another force. Nowadays, we don't really have that kind of ground conflict knock on wood, but you're seeing it, some people say, play out in this arena of missiles, which is really where all this conflict is playing out is in the missile space. So you hear these stories about like Iran is launching these drones that cost I think twenty five thousand dollars upopo some of them, or putting minds in the Strait of Hormuz, which are

also very cheap relative to some other tactics. And meanwhile you hear things like, well, the UAE's missile defense system costs like millions of dollars per pop literally per pop against a drone. And meanwhile the US is firing you know, interceptor missiles or whatever that cost again millions and millions of dollars.

the Cold War. And within CSI asked, there's sort of the department that focuses on hard power to focus on defense department centric things, and within that I run the Missile Defense Project And so basically think mud to space, uads, cruise missiles, ballistic missiles, space sensors, you know, everything in that window, both offense and defense is what my team kind of studies, writes about, comments upon and hosts just a lot of events and commentary.

an opportunity for idea generation. And this is not my formulation, this is what you frequently hear from people who go in and out of government that they need those idea generation in a way to be contracted out by those people who have time. And so, having said that, a lot of people who go into government come from the think tank world, come from the policy worlds, I think

I would put it rather, and they go out. I think they write some things, they reflect on things, and study things, and then they kind of perhaps go back in to together.

to understand these things. And then just like after besides this sort of approach you take to measuring these things, what are some of the numbers that we're talking about right now.

so there is a pretty good amount of tracking. If you want to understand what kind of defense department you have, look at the money, and so there's a there's a decent amount of information out there about you might say, the garden variety missiles, the garden variety capabilities that have to be you know, deliberated, appropriated by Congress, and then

also built by industry. And so while exact numbers are kept sensitive, you can get pretty close in terms of these dollars and this number of rounds you can get. You can get pretty close.

What are the different types that are currently being deployed?

ships and this sort of thing. But basically, since the nineteen sixties there's been a high, high degree of emphasis on essentially guided missiles, precision guide of munitions of various kinds, and also standoff capability and so you know, indirect fire cannons, guns, this kind of thing began to be replaced by much more over the horizon capabilities that could fly out of good ways come back down, and especially in terms of terminal guidance, could then find a ship on the ocean,

or find using terrain mapping or what have you. So basically, since the kind of the precision guidance revolution in the seventies especially, just been an enormous amount of progress. And so frankly, this tech technological progress is no longer that a monopoly of the United States as it perhaps once was. It's ubiquitous even folks like Iran, North Korea and that

kind of thing habit. And so that's the baseline. And so there's Look, there's different kinds of missile ry, and a missile etymologically speaking, is simply that which is sent. There's ballistic missiles, the fly gravity's rainbow mostly unpowered for most of their flight, cruise missiles that are essentially aerodynamic and use lift and drag to travel, some kind of jet engine or what have you. And then there's these

new classes of things that are kind of blending. You know, people talk about hypersonic gliders that may start off with a ballistic push, but then have the maneuver the speed of a ballistic missile, but the maneuverability of a cruise missile or aircraft, you might say. And so it's a it's a rich and diverse spectrum that has emerged over the years. And as a former Biden administration officials said, and I like to repe missiles truly have become weapons

of choice. It's the thing for which we reach early and often in a conflict, and largely because of the combination of that precision guidance and that standoff capability. And so when the first Trump administration wanted to go hit Syria, you know, they sent fifty nine Tomahawks, that's a cruise

missile to go get them. And in this conflict there has been enormous, and I would say a scary amount of missiles expended on the part of the United States, hundreds and hundreds on the part of Iran lashing out basically all of their neighbors with the combination of ballistics, and a lot of these drones are essentially cruise missiles. When you're over one thousand colinars in range, you know it's essentially a cruise missile, these heads, for instance. And

so then you have the missile defense world. And you know, it wasn't that long ago when in polite society it was conventional wisdom that it was impossible to hit a

bullet with a bullet. Over the past especially five years, that has been completely utterly refuted, and in conflict after conflict in Ukraine, in the Red Sea operations, in the defense of Israel a couple of times now we've seen an extraordinary degree of missiles being defeated by a combination of effects, not just missile on missile, but a combination of effects. And now you know, we're kind of surprised

when we miss at some of these things. And what was once an American idiosyncrasy, the pursuit of this missile defense capability is now very much a global phenomenon. After the Ukraine conflict, especially in Europe, the European Sky Shield Initiative, Germany buying and Israeli Aero three system for ballistic missile defense has been a sea change. The demand signals, the supply and demand signal of long range standoff and the means to contend with it is very much a global phenomenon.

I'll say that the top two priorities for aid for Ukraine over the past four years were what long range fires, missiles and a defense. They went so fares to put the Patriot launch rot on their currency because it has basically kept them kept them sovereign. And these are the top I didn't know that.

would have been a very different situation. Let go back to the last summer in the hundreds of missiles six hundred and fifty projectiles from multiple parts of the Middle East coming at Israel all at once during the Twelve Day War. If those hundreds and hundreds of objects had arrived all at once as they were intended to do, in a place the size of New Jersey, it would have been catastrophic. Surprisingly enough, almost everything was defeated. And so it is missile defense buys time to end the

threat by other means, it does not end the threat itself. Now, what I said last summer after that conflict ended the Trump administration basically through the Iranians a lifeline and said, hey, we're going to stop. I said, that's going to be a mistake, because what's going to happen is the Iranians are going to rebuild, and then we're going to come and we're going to do this again in a year or so. And I was wrong because it didn't take a year nine months. And why that matters, and why

it's scary is because it's about capacity. Capacity of defensive interceptors buys time, but it takes a heck of a lot of time to produce that capacity. And so this gets to the specter an ope coming out on this, the specter of going Winchester, of running out of defensive interceptors, and that would be a very bad day. And so when you talk you hundreds and hundreds of missiles are going to require hundreds of interceptors. That was last year again this year, and so that's the scary part is

is the massive expenditure of these things. And I want to quote General Kaine, the Chairman of the Joint Chiefs, who said, who's asked do we have enough? And he said, we have enough for this conflict. That is not the same as saying that we have enough for the other tasks that we have around the world, most significantly deterring a conflict with China. And so we have now cut in very substantially to our total inventory of missile defense interceptors.

The numbers, complete numbers are not not been released. We've done a study on this from what it was last year, and it was a lot. And so why that matters. Right now, we're moving patriots and perhaps some FADO those missile defense systems from South Korea and Japan to the Middle East. That's significant because their job is to be in the Pacific and to deter to provide a defensive deterrent to Chinese adventurism or to North Korean adventurism or

what have you. And so you know, we've been saying different administrations have been saying that we're going to pivot to the Pacific since the Abomba administration. We're still kind of waiting for that to happen. We keep lurching back to Europe and to the Middle East. And in fact, a lot of the administration officials in this Pentagon have been among those who said, hey, we got to focus

on China, we got to focus on the Pacific. And what they're doing right now is presiding over an extraordinary vaporization of our inventory in a very short win of time.

And so what I worry about. You've heard of the Davidson window, the former head of Indo Pecon, who said, hey, he worries that China would be ready to move against some of their neighbors by twenty twenty seven, what I worry about most is that this extraordinary expenditure of stuff is not going to be replaced in a year, absolutely not, and that, in fact, this may kind of be a self fulfilling prophecy of encouraging, of tempting China to do something very bad.

They not releasing those. One may easily surmise that a significant number of those targets were serviced by these long range things, of which we have finite quantities, and so the offensive strike capabilities is also even more important as a deterrent, and we are chewing those up by at least the many hundreds, and it may I suspect turn not to be thousands, and that's also part of the scary war.

might be able to marshal their marshal their forces. I will say that the Ukraine conflict especially made folks realize so that our estimates of what we would likely need were dramatically too low. And so I'm just going to give one example, but I think you're going to see this, and in fact, there are news developments over the past

year that gratify this in different ways. That in April of last year, the US Army quadrupled its objective acquisition number of how many Patriot packed three missiles it needed to buy over the next coming years. Quadrupled that number from like three thousand and something to thirteen thousand and something.

And I think kind of behind the scenes, you're seeing a recognition, as we've seen the Ukrainians and the Russians use enormous numbers of projectiles or missiles of different kinds, kind of a sinking in that oh, in an actual conflict, this would ramp up dramatically. And so even before the Twelve Day War last summer between Israel and Iran and are being involved. Even before that, the Pentagon began to

do a few things, some really important things. The Biden administration had been ramping up a number of missiles of offensive and defensive, of various stripes. You probably remember the discussion about attackers of whether we could spare any a tackles to give to Ukraine, and the Bide administration didn't at first, and then they eventually did. That was true with a lot of munitions over the past four years.

Flash forward to last spring. Incoming Deputy Secretary Steve Feinberg, who comes out of the private capital world as as you listeners no doubt know, came in and began to call in the CEOs of a number of defense companies, and I will say metaphorically grabbed them by the lapels and shook them to say, we need to maximize production.

You know, I respect his respect for hard power. And over the next six months, from a basically Memorial Day last year, over the next six months you began to see a lot of drills and a lot of figuring out of just how many Tomahawks and all these offensive and defensive missiles and how much solid rocket motor production we could do on and on and so over the past two months since in January and February of this year, all that work was basically publicized, and at least in

press releases it said that rethum of ramp up five munitions. There's more to come. By the way, Lockeyed announced bad and Pack three Patriot that they were going to quadruple fad and go on the Patriots side from six hundred a year to two thousand a year in production. And we're going to go from by the way, from tomahawks cruise missiles from fifty seven requested last year, which is a pittance to their goal is one thousand a year

of tomahawks. And what I would say is that those are all very sensible moves, very belated by the way, that are properly allowing the lessons of the past a couple of years to be applied. Break that was all before we went to war with the Roan. And so now the ramp it's called the munition's ramp, hasn't yet begun. And the other kind of scary thing is it hasn't begun because the money wasn't there, and the appropriations bill that came out in January, I guess became law in

early February last month. The language said, oh, by the way, we know we Congress, the appropriators know that this appropriation is twenty eight point eight billion with a b short of what the Pentagon requested just for munitions. And so there's a couple of things going on here. One, we already had that twenty eight billion and change shortfall for Fly twenty six and then and because of that, you can't put things on contract adambly to start this seven

year process. That is a good plan, very good plan. And on now we have just gone and vaporized many billions of dollars and hundreds and probably thousands of missiles over the past two weeks. And so you put that together and it's not a very good picture. And so at the very minimum, Congress is going to have to step up, I believe it for a communition supplemental in the very near time.

the binding physical constraints. So when you say, okay, you want to go from fifty seven to one thousand, what are we talking about in terms of the facilities that we have the natural resources I imagine rare earth metals, and certain key commodities, maybe choke points or bottlenecks in this process. We all would love, I presume, to have an infinite number of missile defense capabilities, etc. We would like to not have to choose between Korea and the

Middle East, of the golf allies and so forth. But what are the physical constraints as you see them to ramping up production?

in Tucson, Arizona that cranks out tomahawks. For instance, There's a small number of things, and so actually, when you start looking at the supply chain, it is a surprising degree and there's been a number of papers written on this, although there's a lot more to ascertain is there's a lot of bottlenecks, So there's a lot of soul source for some widget and to the Pentagon's credit, over the past several years, there's been a lot of I would say, not naval gazing is a bad term, but a lot

of introspection trying to figure out an understand to at least truly intellectually understand what is the supply chain. And there's still some opacity to that. But nevertheless, the primes that defense, prime companies and the Department have been looking into this and I think has been illuminating in terms of the bottlenecks and sole source issues. And so you've seen, for instance, I would say, a series of experiments trying to a get private capital and involved the Office of

Strategic Capital. When that was first being stood up, I asked the guy in charge of it, I said, I really want to know one thing, are you going to be big enough to matter? You know, America's asymmetric advantage to use that phrase, America's asymmetric advantages. We're a wealthy country. We have to leverage that private wealth, and I think there's a number of initiatives on that front that will direct and helping to direct private capitals to the supply

chains for things that matter to defense. The other thing, a couple of experiments going on here are investment in, for instance, solid new solid rocket motor producers. Everybody knows SpaceX and space launch side of the things. There's also a lot of kind of new startup companies for solid rocket motors. I think this is good. I think this is necessary, and if they are big enough to matter,

then we should absolutely be doing all that. At the same time, there is the risk that we're I like to say, fiddling with the base and the treble knobs and not turning up the volume. And that essentially means. There's two big companies that do SRM solid rocket motors, and one of them just got a billion dollar equity stake investment by the Pentagon. That is Al three Harris

that has had Aerojet as a subsidiary. The other big one of courses is North of Grumman, which owns and assumed or ATK in the past and so on the solid rocket motor front, there's these experiments going on and these investments. The Biden administration put two hundred and sixteen million dollars into aerojet in Canden, Arkansas, which is actually one of the handful of places where we kind of keep it away from polite society. You don't want big things blowing up near cities, which is one of the

challenges of reduction as well. A third type of experiment, and this is coming out of steam Feinberg in particular, is that in this plan, this initiative to get this munitions ramp, he's doing something very different, which is he's asking the primes to lean in on their own dime. And when I say lean on their own dimes, I mean a lot of dimes, because we're talking about double

digit billions. He's basically asking the companies to pony up out of their internal funds, publicly traded companies again to

on spec begin to invest in these facilities. Now, if you're a publicly traded company, that's sticking your neck out, and there has been the customer here, THEDOD is a monopsony in terms of buying things that blow up the customer has not been very reliable over the years, and of all the things DD buys, munitions has been a sine wave up and down, lots of very cyclical and so that hurts the certainty of industry to be able to invest and hire and buylong lead items, et cetera.

And that's why you need multi year pro caumer That's why you need a seven year window, and that's why this whole ammunitions plan makes sense if we can get it off the ground.

have it back and use it now? And then, if so, what is that actually mean for some of our allies who are still engaged in conflict like Ukraine. I see there's a there's a headline out there right now saying that in recent weeks Ukraine's F sixteen jets have been starved of US made missiles, and now we have other allies like the Gulf States, who need some of their missiles more than ever.

of done that basically since forever. But it was, you know, a little bit of chest beating and saying, hey, you our friends need to buy more American made products. And there's good reason for that. America makes the best of the kind of exquisite Crown jewels, capabilities for seekers and things that hit molt with bullets, to be sure, But

there is also a problem. There are eighteen countries there used to be nineteen, now eighteen countries that operate the Patriot Missile Defense System globally, and the Biden administration had to suspend the deliveries of Patriot missiles to basically everybody a couple of years back because they had to send

more to Ukraine. Right, So, in terms of our allies, it's actually that on the one hand, we're telling them buy more of American stuff, and then the second thing is, oh, but we might not be able to fulfill your orders of the things you already bought. Like that's the problem.

That's one of the big reasons why this ramp needs to happen is not merely for US needs, but also to provide this the deliveries that we want our friends and allies to be equipped with, and we want them to buy not just because we have some commercial interest a lot of times US taxpayer and set footing the bill for some of these things, but because we want

interact operability. We want Australia and Japan to be operating Tomahawk and just destroyers so that our just destroyers and our Tomahawk weapons system they can all work together and the whole be more than more than the s of its parts. So there has been a lot of leaning on the Europeans to send stuff to the Ukrainians, and look, it is their backyards. It kind of makes sense for

them to be ponying up for their security. You know, the polls pull into remembers the Soviet boot quite well, and they in a handful of other countries have been especially at the tip of the forefront to help to help the Ukrainians. So this is very much a global phenomenon and there are to your point, a lot of entangling relationships in terms of the deliveries of systems the

acquisition of systems. You know, Denmark, for instance, just decided they were going to buy a French Stamptee air defense system rather than Patriot, not because Patriot was better, and frankly it wasn't because of the whole Greenland thing. It was because of schedule, because there's a long queue of partners that want that stuff and sometimes you need stuff sooner as opposed to the best.

do you talk to us about that math? How real are these numbers that you see, like twenty thousand dollars drone versus four million dollar defense missile, because that seems pretty brutal, But how do you see that equation?

in an American company reverse engineered them. They're called Lucas Lucas drones, and we sent some some of them back at Ukraine, and the quoted cost for that I think was I think was thirty thousand dollars. So that's good. You need affordable mass, you need a treatable mass, and so that phenomenon. Look, Ukraine is producing millions millions per year of many of them are very very small, but millions of drones, I mean, it's darkening the sky as

it were. Most of them don't last there long. Most of them may only fly once, for instance, and so that is certainly a phenomenon, a major trend. But you know, going back to the cost per round, people like to count the cost of a missile because it's kind of

easy to count. The things that are harder to count, that are frankly bigger is often the massive quantities of jet fuel that are used to drop much cheaper gravity bombs, and so I think it is actually rather misleading to just look at the cost of the Patriot or the cost of the standard missile or what have you. If you had to throw one thousand drones to have the same effect as one twelve hundred kilometer range Tomahawk missile,

you might not even be able to get there. Tamahawk missiles are longest range missile and it's got five hundred pound warhead. These drums don't have that kind of warhead, so therefore they don't have the kind of effect. So there's a It really comes down to what is it you're trying to do? And oh, by the way, the platforms and it's the whole operational cost that matters, including,

by the way, the cost of operational failure. You know, I'd like to say I've had plenty of admirals say this on stage with me at Suisias over the years, because I always asked this point. A ship captain, when he sees a cruisemuscile come into his ship is not going to pull out his slide role or his pocket calculator and say what's the cost of that hoo the drone and what is the cost of the missile? We're going to do that. No, they're going to protect the ship.

They are going to go for mission success. And so you say, well, that's value versus cost, and that's true. But the cost, the real cost of the Iran operation is not going to be the munitions. It's going to be the enormous steaming of the USS forward from Venezuela to the Middle East. It's going to be the people and all in the jet fuel and all of these other things. And by the way, with the facility repair, those things are going to eclipse the cost of the munitions.

So nevertheless, defense is hard. It is hard to hit an incoming screaming rantry vehicle from four hundred klometers away, for instance, And so defense of the interceptors are going to be more expensive than offensive ones. That's just a fact. And that's again why missile defenses won't win a war. They can only buy you time to win that to end the threat by other means. And that's why you

have all these other things as well. And I'd like to say, you could throw a thousand cheap UAVs into the sky and it won't do the job of a single patriot. Interceptor. Capability matters too.

we're done. Now someone's one and someone's lost.

the need. Whether that need is met or not, there's going to be the need to have some forces on the ground, could be special forces, could be partners from other countries, but there's going to be that felt need to figure out did we hit that underground missile city for instance, uh point two. You know, everybody, myself, other folk. We're getting nervous when day by day would go on

and the Iranians kept launching. So the good news is that the curve is flattening was a phrase from the cod COVID years to flatten the curve of the rate of fire. And so you take a look at the press conferences, that's a very good development that they've gone from hundreds a day to smaller numbers. That reflects that we are somehow doing something, hitting the launchers, hitting the missiles, hitting the command and control or at least the commanders,

perhaps decentralized commanders. That is a good sign. And add to that that we've now gotten This is the two most important words from one of the recent press releases from Chairman General Kane is he said the words munitions transition, which is to say, we don't have to keep using one thousand range Tomahawks because the Rangeys don't have air defenses anymore. We can use gravity bombs, of which they are plentiful. Still had to flying back and forth, and

that's not cheap. You can fly back your jadeams, your small damar bombs. And there was a press release i think over the weekend that we were transferring a bunch of munitions to Israel, and when you look at it and you look what's in that list, it was gravity bombs. And the reason that we've gotten there is we no longer have to do the standoff stuff. It's good we can now do the stand in you know, flying over

top and dropping these things. But to your point, it's still hard to do all that from the air, and there is going to be that uncertainty, which is why, frankly, you're not going to have perfect military certainty from the air. To really end this, you're going to have to have, I would say, a political change.

to change. You have, you know, companies that are naturally profit seeking and profit maximizing, and many of them, and he alluded to this and we didn't talk about it that much, are monopoly sellers, right, Like, if there's one component, if they're in we know all about how with advanced supply chains of complicated things, you might have millions or thousands of parts that go into it and some of

these parts may be produced by one company. Maybe there's like a shiny mirror or something somewhere there's only produced by one optical factory somewhere in the United States. Then you have the buy American requirements. So then further narrows supply chains, et cetera. So you have monopolies and monopsonies facing off. And then you know, how do you get sustained spending, sustained procurement through the ebbs and tides of a war. Extremely difficult challenge.

Like these are very different theaters of war. And I imagine that if you're a procurement officer, like the temptation must be to you always want to have the best, like newest, shiniest stuff, and so I'm just fascinated by how people actually make those decisions in the face of both monetary limits and physical reality and political reality as well, which we kind of we glided past, but for obvious reasons.

to be spread very thin these days. The war in Ukraine continues to go on, obviously, there's this new war in Iran, and then as you mentioned, you know, at least since the Obama administration, they've been talking about the pivot to Asia and so forth, and that keeps not happening. But there are obligations on the ground there. The whole thing seems to spread very thin.