RTX Corp (RTX), formerly Raytheon Technologies, a U.S. defense manufacturer, has terminated a significant multi-billion-dollar agreement with Scopa Defense, a Saudi firm. This decision was based on concerns that Scopa Defense was conducting business with companies from China, Russia, and Belarus that were subject to international sanctions.
In 2022, RTX and Scopa signed a memorandum of understanding to collaborate on establishing a factory in Saudi Arabia. The purpose of this factory was to produce air defense systems to protect Riyadh from aerial threats, including airstrikes.
The plan involved installing radar and multiple air defense systems, as reported by the Wall Street Journal. The total investment in the kingdom was set at $25 billion, with an anticipated $17 billion in sales.
Mohamed Alajlan, the owner of Scopa Defense, denied any involvement with sanctioned Russian companies. He claimed that any dealings with Chinese firms were limited to sourcing essential raw materials like copper and rubber for ammunition and armored vehicles.
Alajlan also mentioned that he established Tal Military Industries and Sepha Military Industries alongside Scopa. According to a document examined by WSJ, Sepha had explored opportunities such as marketing Russian ammunition, producing body armor and surveillance equipment in Saudi Arabia, assembling Russian attack helicopters, and manufacturing armored vehicles in collaboration with Russia’s Military Industrial Co.
The U.S. embassy in Riyadh was reportedly aware of discussions between Tal, Sepha, and Chinese and Russian companies as early as August 2022. U.S. officials warned Scopa Defense that such dealings could seriously impact its ability to enter into contracts with U.S. defense firms.
Scopa, Tal, and Sepha had planned to showcase Chinese drones and radars provided by BelTechExport, along with RTX air-defense systems and Beretta firearms, during the upcoming Riyadh defense exhibition in February 2024.
Price Action: RTX shares closed at $75.50 on Thursday.
