Linda Pearson: It’s time for us to disrupt banking on the bomb


Writer and activist Linda Pearson looks at the business of nuclear weapons and how it can be stopped

IN recent months the world has watched the escalating tensions between North Korea and the US with growing alarm. 

North Korea has continued to develop its nuclear weapons programme, since first testing an intercontinental ballistic missile (ICBM) on 4 July. The US has flown B1-B bombers in a simulated, live-fire attack on North Korea and conducted massive war games with South Korea, while US President Donald Trump has threatened military annihilation from his golf course, his Twitter account and the United Nations.

Many experts say that while it’s unlikely that either side is planning to start a nuclear war, the situation could escalate out of control and lead to a conflict involving nuclear weapons. 

This would have unthinkable humanitarian and environmental consequences. Yet the arms companies which would make such a conflict possible are benefitting from the increased threat of nuclear war, along with their investors.

Nuclear war threat boosts arms stocks

During his presidential election campaign, Trump promised to greatly increase military spending.

Arms company stocks rallied after his 8 November 2016 victory and have been on a general upwards trajectory since. The share prices of major nuclear weapons producers have gone up in line with each escalation of the US-North Korean crisis. 

Increased interest in missile defence technology has the potential to increase the sales and profits of companies like Lockheed Martin and Raytheon, making them attractive to investors. The “vast amounts” of taxpayer money being spent on the US nuclear triad is another drawcard; President Trump is continuing Barack Obama’s trillion-dollar upgrade of US air, land and sea-launched nuclear weapons, with several major contracts announced in August.

The share prices of major nuclear weapons producers have gone up in line with each escalation of the US-North Korean crisis. 

On 4 July, North Korea tested an intercontinental ballistic missile (ICBM), which it claimed would be capable of delivering a nuclear strike against the US. On 8 August, after reports emerged that US intelligence agencies believed this claim, Trump warned that North Korea would be “met with fire and fury like the world has never seen” if it continued to threaten the US.

Major US share price indexes, the Dow Jones Industrial Average, Nasdaq and S&P 500, fell after Trump’s inflammatory comments, but shares in multinational arms giants, Lockheed Martin, Northrop Grumman and Raytheon, hit record highs.

Shares in the firms received a further boost after North Korea fired a ballistic missile over Japan on 29 August and Trump warned that “all options are on the table”, and again on 5 September when North Korea claimed to have successfully tested a hydrogen bomb. Raytheon shares hit another all-time high that day.

Major beneficiaries

Lockheed Martin is a key player in the nuclear weapons business in the US and in the UK. The company manufactured and now maintains the Trident nuclear missiles carried on US and UK submarines. It is one of three companies running the British Atomic Weapons Establishment, where the UK’s nuclear warheads are manufactured.

Lockheed also builds the Terminal High Altitude Area Defense system (THAAD), which has been deployed by the US in South Korea and Guam, and sold to the United Arab Emirates and Oman. 

After Trump’s “fire and fury” comments, a representative of Lockheed told Reuters that interest in missile defence technology had increased and discussions were “now at the prime minister and minister of defence level”. On 3 October, the prime minister of Australia announced that his government would buy Lockheed’s Aegis missile defence system for its nine new warships and on 6 October the US Government approved the sale of THAAD to Saudi Arabia.

In August this year, Lockheed was awarded a $900m contract for the development of the US Air Force’s new Long-Range Standoff (LRSO) nuclear missile. In July, the company reported a 4.78 per cent increase in profits compared to the same period the previous year, as well as an increase in sales.

Raytheon is a subcontractor involved in the manufacture of the THAAD missile defence system. The company is also involved in maintaining the US’s Trident nuclear missiles and, like Lockheed, was recently awarded a $900m contract to develop the LRSO.

In July, Lockheed Martin reported a 4.78 per cent increase in profits compared to the same period the previous year, as well as an increase in sales.

In July 2017, Raytheon reported a 4.2 per cent increase in quarterly sales and raised its profit forecast for the year. On 10 August, a senior Raytheon executive reportedly told financial analysts that “Raytheon’s market areas are the hottest he’s ever seen, even going back to Cold War days”.

Northrop Grumman is also heavily involved in the nuclear weapons industrial complex. It is currently developing the US’s new B-21 nuclear-capable stealth bombers, set to cost $550m each, and the company was recently awarded a $328.6m contract by the US Air Force to develop a new ground-based ICBM. 

Northrop’s share price has increased by 26 per cent in the past year and the company reported in July that its second quarter profits were up seven per cent on the same period the previous year.

The UK’s own £205bn “modernisation programme” – the renewal of the Trident nuclear weapons system – is a boon for arms companies and their investors. In August, BAE Systems, which is building the new nuclear-armed “Dreadnought” submarines, reported an increase in profits and sales. It was revealed in October that BAE plans to cut nearly 2,000 jobs but analysts predict that the company will continue to outperform the market, and will pay investors nearly three per cent more in dividends this year than it did in 2016.

The company’s half-yearly report noted that “submarine activity is increasing with the Astute and Dreadnought class submarines now both in production and major redevelopment of the Barrow, UK, site to deliver the Dreadnought programme under way”.

Analysts say the company will likely pay investors nearly three per cent more in dividends this year than it did in 2016.

Financing the apocalypse

With high levels of government spending on nuclear weapons upgrades, and the prospect of lucrative new sales contracts, many investors and financial analysts view investment in nuclear weapons producers as a “prudent choice”

Indeed, Scottish council pension funds have nearly half a billion pounds invested in arms companies involved in nuclear weapons production, including Lockheed, Raytheon and Northrup. But it is a choice that could help to bring about mass humanitarian and environmental devastation.

We know the effects of dropping just one nuclear bomb on a city because of the US bombings of Hiroshima and Nagasaki in 1945. In Hiroshima alone, around 80,000 were killed within a few hours of the bomb being dropped, with tens of thousands more dying later from the effects of radiation sickness, burns and other injuries.

There are nearly 15,000 nuclear weapons in the world right now, most of them considerably more powerful than the bombs used in Hiroshima and Nagasaki.

There are nearly 15,000 nuclear weapons in the world right now, most of them considerably more powerful than the bombs used in Hiroshima and Nagasaki. A conflict involving North Korea and the US could draw in Russia and China. Combined, these four countries possess roughly 95 per cent of the world’s nuclear weapons. 

Authoritative scientific research has shown that a “limited” nuclear war, fought with 100 Hiroshima-sized nuclear weapons, would cause a sharp drop in global temperatures and rainfall lasting years. This would make food production impossible in some regions, leading to a global famine which would put two billion people at risk of starvation.

Nuclear ban treaty

Investing in companies which produce nuclear weapons also means choosing to finance activities which 122 countries recently voted to outlaw at the United Nations. 

The Treaty on the Prohibition of Nuclear Weapons prohibits state parties from possessing, developing, producing, testing and stockpiling nuclear weapons, and from stationing nuclear weapons on their territory. The nine states which possess nuclear weapons boycotted the treaty negotiations, including the UK.

It was a growing awareness of the humanitarian consequences of nuclear conflict that provided the impetus for negotiation of the Treaty. The International Campaign to Abolish Nuclear (ICAN) weapons, a coalition of civil society organisations from around the world, convinced a majority of states that the only safe way of dealing with nuclear weapons is to eliminate them completely.

It argued that a global ban treaty was necessary because nuclear weapons states have failed to live up to their disarmament obligations under the Nuclear Non-proliferation Treaty.

READ MORE: UK isolated and campaigners vindicated by UN nuclear weapons ban

The Treaty was signed 20 September and in October, ICAN was awarded the 2017 Nobel Peace Prize for “its work to draw attention to the catastrophic humanitarian consequences of any use of nuclear weapons and for its groundbreaking efforts to achieve a treaty-based prohibition of such weapons”.

Many of ICAN’s member organisations wanted the treaty to include a provision explicitly banning the financing of nuclear weapons activities, and this was endorsed by the UN working group established in 2015 to take the negotiations forward. 

However, more general language was agreed upon at the treaty negotiations, which were concluded in July 2017. Under the final text, state parties agree not to “assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a state party under this treaty”. 

This is similar language to that used in other treaties, such as the Convention on Cluster Munitions. According to Dutch NGO Pax, there is a growing understanding in the international community that “assisting” with prohibited activities includes financing, and several states made it clear that they will interpret the ban treaty provision in this way.

During the ratification process, states parties will incorporate the treaty into domestic law and may choose to explicitly prohibit financing at this stage.

READ MORE: Campaigners celebrate Nobel Peace Prize for International Campaign to Abolish Nuclear Weapons

According to Pax’s 2016 Don’t Bank on the Bomb Report on the global financing of nuclear weapons producers, $498bn was invested by financial institutions in nuclear weapons-producing companies between January 2013 and August 2016. This figure does not include amounts invested by other institutions, such as governments and universities, nor amounts invested by individuals.

Several British institutions featured in the report’s “hall of shame” because they had provided financing to companies involved in nuclear weapons production during this period, including Barclays, HSBC, the Royal Bank of Scotland and Lloyds Banking Group. They had financed the activities of BAE, Lockheed, Raytheon, Serco and Northrop, among other firms, through shareholdings, revolving credit facilities, corporate loans and assistance with bond and share issuing.

Critics of the nuclear weapons ban treaty have argued that it will be ineffective because the states which possess nuclear weapons are not party to the treaty and are therefore not bound by its prohibitions. However, the ban on assistance provides a way for the treaty to have a direct practical and normative impact on the activities of nuclear weapons states.

In 2012, two years after the Cluster Munitions Convention entered into force, four major British banks and insurance companies, including Lloyds, stopped allowing shareholdings in companies that were involved in making or supplying cluster munitions. 

The Royal Bank of Scotland banned new lending to the blacklisted companies, which included Lockheed Martin and US firm Textron. This action was taken after intense pressure from human rights groups, and the financial institutions cited the Cluster Munitions Convention as a reason for their new policies.

READ MORE: Nicola Sturgeon signs pledge in support of Nuclear Weapons Ban Treaty

Lockheed Martin stopped producing cluster munitions components and in 2016, the last remaining manufacturer of the weapons, Textron, said that it would also cease production. In a 2016 statement to the US Securities and Exchange Commission, Textron said that demand had diminished and the “current political environment has made it difficult” to obtain the government approvals necessary for sales of the weapons.

The nuclear ban treaty is therefore a powerful new tool that campaigners can use to build on existing efforts to persuade financial institutions to divest from nuclear weapons producers. British financial institutions could be persuaded to follow the example of the Amalgamated Bank, which became the first US bank to announce such a policy on the day that the treaty was signed.

Divestment would cut off financing for nuclear weapons production and upgrades. As the example of cluster munitions shows, it would also further stigmatise nuclear weapons possession and force arms companies to think twice about their involvement in nuclear weapons production.

Picture courtesy of International Campaign to Abolish Nuclear Weapons

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