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Trade disputes have not spilled into defense industrial base, Pentagon's No. 2 official says

Key Points
  • "We haven't seen that so far," Patrick Shanahan, deputy secretary of defense, told CNBC when asked if intensifying trade disputes are affecting the defense industrial base.
  • Shanahan's comments come amid tit-for-tat tariffs between the world's two largest economies, and increased sanctions on Russia.
The F-35 Lightning II production line at Lockheed Martin's facility in Fort Worth, Texas. 
Lockheed Martin

WASHINGTON — The Pentagon official in charge of financing America's current and future wars downplayed concerns that trade disputes were spilling into the industrial base.

"We haven't seen that so far," said Patrick Shanahan, deputy secretary of defense, Wednesday to a small group of reporters.

"As you know, the way I tend to think about that is that these relationships are very complex. They're not monolithic," explained Shanahan, the Pentagon's No. 2 official, adding that the Defense Department works closely with the State, Commerce and Treasury departments to navigate the economics of foreign military sales.

"So while there's an issue maybe over here on one type of trade, you know, it's how do we keep it from spilling over, or in some cases, it's intended to get tied together so that it can create a different form of leverage," he added.

Shanahan's comments come amid intensifying trade tensions between the U.S. and China, the world's two largest economies, and increased sanctions on Russia.

On Friday, Indian Prime Minister Narendra Modi signed a $5 billion deal with Russian President Vladimir Putin for the S-400 missile system, a deal that may peeve Washington but fall short of financial consequences.

The Russian-made S-400 system is believed to have a longer range than the U.S.-made THAAD missile system and is estimated to cost significantly less.

"The dilemma with India is forever the Indians bought equipment from Russia," Shanahan said before to the deal between New Delhi and Moscow. "So you have to buy spare parts, you have to maintain it and it's not like you cut that off," he added, nothing that Congress is able to provide a waiver for certain military purchases with Russia.

A Russian S-400 surface-to-air missile system.
Sergei Malgavko | TASS via Getty Images

What's more, Turkey is also interested in buying the Russian-made system, a move that has put the NATO partners' F-35 Joint Strike Fighter aircraft in jeopardy.

Last year, Ankara signed an agreement with Moscow for the S-400 system, a deal reportedly worth $2.5 billion. All the while, Turkey has helped finance America's most expensive weapons system, the F-35 fighter.

In short, these two big-ticket weapons systems that Turkey hopes to add to its budding arsenal can be used against each other.

The S-400 system, which is equipped with eight launchers and 32 missiles, is capable of targeting stealth warplanes like the F-35 fighter. Turkey's march toward procuring the Russian missile system has raised concerns among NATO partners and Washington, who are wary of Moscow's increasing military presence in the region.

Turkey is slated to receive the S-400 next year and is expected to have the system ready for use by 2020.

Meanwhile, Turkey, an F-35 program partner, is currently slated to receive two jets by March of next year. That delivery of fifth-generation fighters is the start of what Ankara hopes will eventually amount to an arsenal of 100 of the stealth aircraft.

In June, the U.S. defense giant held a formal hand-off ceremony at its F-35 facility in Fort Worth, Texas. After the ceremony, Lockheed ferried the aircraft to Luke Air Force Base in Arizona where Turkish pilots began training alongside U.S. airmen.

A U.S. Air Force F-35 Lightning II joint strike fighter approaches at Eglin Air Force Base, Florida.
U.S. Air Force photo by Samuel King Jr.

"The situation with Turkey is, as you know, continues to play out," Shanahan began. "They haven't taken delivery in country of F-35s but I think that we're all trying to solve that problem, because it's more than just the equipment being delivered to the Turks. There's a supply chain associated with that, there's a substantial amount of manufacturing and support that's done in Turkey."

Secretary of Defense James Mattis is currently working to provide lawmakers with a report assessing Turkey's ambition to buy the F-35 Joint Strike Fighter, a sale that has recently come under scrutiny. The report, to be completed in 90 days, was added to the colossal $717 billion National Defense Authorization Act.

"Turkey remains a committed partner. They pay all of their cost-share responsibilities on time. Their industrial base provides multiple parts on every F-35 and continues to provide quality industrial participation to us," Vice Admiral Mat Winter, executive officer of the F-35 program, told a small group of reporters earlier in the week.

"I don't see any indication at this time of any change to the delivery of their 100 jets," he added, noting the program awaits further direction from lawmakers.