War in Iran is Chewing Through American Missile Stockpiles

The war in Iran has been fought almost entirely in the skies, with both offensive missiles, as well as anti-missile defense systems. But the math is brutal. The war in Ukraine has already put a dent in American stockpiles, and now it is proving costly to protect American bases and their allies in the region against Iranian drones. On this episode, we speak with Tom Karako, a senior fellow and director of the Missile Defense Project at the Center for Strategic and International Studies, a top defense think tank in Washington DC. We discuss the size and scale of the American arsenal, the supply chain constraints for building more missiles, and the Pentagon's general attempts to ramp up production. Subscribe to the Odd Lots Newsletter Join the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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• 1:44Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 1:49Tracy Alloway?

  And I'm Tracy Alloway.

• 1:50Joe Weisenthal?

  Tracy, you know, I think we're roughly maybe a little bit less than two weeks into the war in Iran. We are recording this March 12th, 2026. And there are, of course, extraordinary number of questions about the timing and the duration of the war. We know already that the economic impact has been quite significant, particularly if you just look at commodity markets. But one of the questions that sort of may help determine timing or outcome, 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 scale of the arsenals and how fast they can be replenished.

• 2:31Tracy Alloway?

  Right. Two things I know, war is logistics.

• 2:34Joe Weisenthal?

  Yes.

• 2:34Tracy Alloway?

  And also war is a racket. And the only reason I know that is because I just literally downloaded the book. So I'll know more about that in a second. But you're absolutely right. I do not like talking about war or conflict or military stuff in general, but I do enjoy talking about supply chains. And there's one crucial supply chain that we haven't really discussed in detail ever before, but it keeps coming up more and more in this conflict.

• 2:57Joe Weisenthal?

  Yeah, that's right. So obviously, you know, you see these numbers, and I don't know how real they are, but they're extraordinary. You know, it's like Iran can launch an attack against a military base and a nearby country, etc. So I'll just talk about the extraordinary efficacy of cheap drones and so forth. And then you hear about the extraordinary cost of missile defense.

• 3:20Tracy Alloway?

  Right. So putting on our old international relations hat.

• 3:24Joe Weisenthal?

  Yeah.

• 3:25Tracy Alloway?

  A lot of what we used to study was this idea of asymmetric warfare, right? And the classic examples that would come up would be guerrilla warfare, where, you know, you have a less well-equipped army that is engaging in exhausting skirmishes against like a better-equipped, larger army.

• 3:43Joe Weisenthal?

  Yeah.

• 3:44Tracy Alloway?

  And it's a way of like offsetting their own weaknesses against the strengths of another force. Nowadays, we don't really have that kind of ground conflict.

• 3:52Joe Weisenthal?

  Right.

• 3:52Tracy Alloway?

  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, $25,000 a pop for some of them, or putting mines 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.

• 4:31Joe Weisenthal?

  Yeah, and you hear, and you know, again, the math, the sort of missile math seems very lopsided. And then, of course, the question is just the pure numbers. And how many do you have? And what is the capacity to ramp up production, et cetera? All huge questions that are-

• 4:46Tracy Alloway?

  Where do missiles actually come from?

• 4:49Joe Weisenthal?

  Where are they made? That's right. Anyway, we have a ton of questions, and we don't have the answers. But we're going to learn a lot. We have the perfect guest, someone who knows about this intimately, someone who focuses on this entirely. We're going to be speaking with Tom Carrico, Senior Fellow and Director of the Missile Defense Project at CSIS. And he's going to walk us through all of this and how to think about the supply chain of these armaments. So, Tom, thank you so much for coming on Odd Lots.

• 5:14Speaker 06

  Hey, great to be with you all.

• 5:15Joe Weisenthal?

  Thank you so much. Why don't you tell us, just to begin, what do you do? What is the focus of your work?

• 5:19Speaker 06

  CSIS, Center for Strategic International Studies, I would say, is the main defense think tank in Washington DC. It's been around since, you know, I think the 60s and the Cold War. And within CSIS, there's sort of the department that focuses on hard power, focus on defense department centric things. And within that, I run the Missile Defense Project. And so basically, think mud to space, UAVs, cruise missiles, ballistic missiles, space sensors, you know, everything in that 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.

• 5:59Tracy Alloway?

  Actually, before we even get into missiles, this is a question I wanted to ask. But why do we have defense think tanks, anyway? Like, why do these exist? Because if you think about military conflict in the US, presumably, there should just be one actor engaged in military conflict with other states at any one moment of time. And that's the actual US government, the Department of Defense slash Department of War. Why do we need private actors opining on military tactics, strategy, supply chains at all?

• 6:31Speaker 06

  Yeah, that's a good question. That's a fair question. And I think I would answer it with what folks coming out of DOD always say, which is it's the world's largest bureaucracy. And quite literally, they don't have time to think. That is what senior officials say all the time. And when you go in, you also tend not to have new ideas. And so it's kind of 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 world is what I would put it rather.

• 7:16Speaker 06

  And they go out, they think, they write some things, they reflect on things and study things. And then they kind of perhaps go back in to govern.

• 7:27Joe Weisenthal?

  Let's talk about from the outside perspective. You know, you try to estimate the size of the arsenal of various different weapons that the US has. How transparent is the government about the size of stockpiles? And how much is one's job from the think tank world, from the outside, an exercise in triangulation inference and so forth to be able to understand these things? And then just like besides the sort of approach you take to measuring these things, what are some of the numbers that we're talking about right now?

• 8:00Speaker 06

  Yeah, so look, it's got to vary case to case. But I would say in many respects, although it's the government's job to keep a number of things secret so that the bad guys don't know exactly what we have or how many we have rather, I would nevertheless say that to a very large extent, we are a democracy. And a lot of detail is available in the budget books that go over to Congress every year when the budget request, the annual budget request comes out. And 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 decent amount of information out there about, you might say, the garden

• 8:42Speaker 06

  variety missiles, the garden variety capabilities that have to be 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 pretty close.

• 9:05Tracy Alloway?

  For those who haven't been following this as intensely as you have, can you paint a schematic of the kind of missiles we're talking about when we talk about the situation in Iran right now? And what exactly are the different missile types being used for? I know guys love talking about missile names, right? And being like armchair military strategist. So some people might know this already, but for the benefit of those of us who have it, you know, we just see a missile and it's a missile. What are the different types that are currently being deployed?

• 9:36Speaker 06

  Basically, there's platforms and there's projectiles, aircraft, ground vehicles, ships and this sort of thing. But basically, since the 1960s, there's been a high degree of emphasis on essentially guided missiles, precision-guided munitions of various kinds, and also standoff capability. And so 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.

• 10:16Speaker 06

  So basically, since the kind of the precision-guidance revolution in the 70s especially, just been an enormous amount of progress. And so, and frankly, this 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 have it. And so that's the baseline. And so there's, look, there's different kinds of missilery. And a missile, etymologically speaking, is simply that which is sent. There's ballistic missiles that 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.

• 11:01Speaker 06

  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 rich and diverse spectrum that has emerged over the years. And as a former Biden administration official said, and I like to repeat, 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 59 Tomahawks, that's a cruise missile, to go get them.

• 11:46Speaker 06

  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 a combination of ballistics. And a lot of these drones are essentially cruise missiles. When you're over 1,000 kilometers 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 polite society was conventional wisdom that it was impossible to hit a bullet with a bullet. Over the past, especially five years, that has been completely and utterly refuted.

• 12:28Speaker 06

  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 an Israeli Aero-3 system for ballistic missile defense, it has been a sea change. The demand signals, the supply and demand signal of long range standoff

• 13:13Speaker 06

  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 air and missile defense. They want so far as to put the Patriot launcher on their currency because it has basically kept them, kept them sovereign. And these are the top.

• 13:34Tracy Alloway?

  I didn't know that.

• 13:35Speaker 06

  It's fun. I've got, I've got one in my office.

• 13:37Tracy Alloway?

  Oh, right. The currency, not the missile, right?

• 13:39Speaker 06

  I'm still trying to buy a Patriot. They won't be dead, but I'm working on it.

• 13:58Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused and brief. Search Barclays Brief wherever you get your podcasts.

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• 15:54Joe Weisenthal?

  That was already extremely helpful, but just to go back, you used the word scary to talk about the sort of volume of activity that the US has or how much we've fired already. What did you mean by that? Unpack that statement a little bit.

• 16:08Speaker 06

  Yeah. So let me just say that missile defense will not win a war for you, but its absence will lose one or could lose one pretty quickly. And so I said a moment ago that Ukraine, that missile defense has helped keep Ukraine sovereign. If not for being able to thwart these incoming air and missile attacks, it would have been a very different situation. Let me go back to the last summer and the hundreds of missiles, 650 projectiles from multiple parts of the Middle East coming at Israel all at once during the 12-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.

• 16:53Speaker 06

  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 threw the Iranians a lifeline and said, "Hey, we're gonna stop." I said, that's gonna be a mistake. Because what's gonna happen is the Iranians are gonna rebuild. And then we're gonna come and we're gonna do this again in a year or so. And I was wrong, because it didn't take a year, it's only 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, I've got an op-ed coming out on this.

• 17:38Speaker 06

  The specter of going Winchester, of running out of defensive interceptors. And that would be a very bad day. And so when you talk, hundreds and hundreds of missiles are gonna require hundreds of interceptors. That was last year, again this year. And so that's the scary part, is the massive expenditure of these things. And I want to quote General Kane, the chairman of the Joint Chiefs, who said, who was 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, the complete numbers are not been released.

• 18:23Speaker 06

  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 THAAD, 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 gonna pivot to the Pacific since the Obama administration. We're still kind of waiting for that to happen. We keep, we keep lurching back to, to Europe and to the Middle East. And in fact, a lot of the administration officials in this Pentagon

• 19:08Speaker 06

  have been among those who said, hey, we gotta focus on China, we gotta focus on the, on the Pacific. And what they're doing right now is presiding over an extraordinary Vaporization of our inventory in a very short window of time. And so what I worry about, you've heard of the Davidson window, the former head of Indo PECOM, who said, hey, he worries that China would be ready to move against some of their neighbors by 2027. What I worry about most is that this extraordinary expenditure of staff 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.

• 19:49Tracy Alloway?

  Joe, I haven't heard the term going Winchester, or I'm Winchester, for years and years and years. Do you remember?

• 19:56Joe Weisenthal?

  I don't even know.

• 19:57Tracy Alloway?

  It's running out of ammunition.

• 19:58Joe Weisenthal?

  Yeah.

• 19:59Tracy Alloway?

  The only reason I know this is because my dad made me watch like an inordinate amount of military movies growing up. But, um, anyway, I'm very curious about something you said, which is that you can't win a war with missiles. And it seems like

• 20:14Speaker 06

  With missile defense.

• 20:15Tracy Alloway?

  Oh, I'm sorry, with missile defense, but with offense presumably you can, which seems to be the strategy right now.

• 20:21Speaker 06

  Well, and so let me speak to that. The Joint Force, the United States, and working with Israel hit, you know, I think it's up to 5,000 targets within the first several days of the war. Well, they were doing so from afar. They were doing so from standoff. And so while they're not releasing the numbers of the Tomahawk missiles, of the JASM, of the LRASMs and such, they're 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 out to be thousands.

• 21:06Speaker 06

  And that's, that's also part of the scary part.

• 21:08Tracy Alloway?

  Can you give a little bit more detail on, I guess, the procurement process for different types of missiles? Because I'm very curious about the thinking that goes behind, you know, someone saying that we want to have this many long range offensive missiles versus this many, you know, maybe shorter range defensive missiles. How do those decisions actually get made?

• 21:30Speaker 06

  That's a good question. You know, it fundamentally comes down to an idea, an idea of the order of battle of how a conflict may play out. And so, you know, this is the job of the military planners and the joint staff to kind of think that through. And I hypothesize this is how many, how many missiles we would need to have in theater, how many aircraft, how many ships, and this is how we might be able to marshal a force. And conversely, how we think the other side might be able to marshal their, marshal their forces. I will say that the Ukraine conflict especially made folks realize 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

• 22:15Speaker 06

  over the past year that ratify this in different ways, that in April of last year, the US Army quadrupled its objective acquisition number of how many Patriot PAC3 missiles it needed to buy over the, over the next coming years, quadrupled that number from like 3,000 and something to 13,000 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 sinking into, oh, in an actual conflict, this would ramp up dramatically. And so even before the 12 day war last summer between Israel and

• 22:55Speaker 06

  Iran and our 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 ATACMS and whether we could spare any ATACMS to give to Ukraine. And the Biden administration didn't at first, and then they eventually did. That was true with a lot of munitions over the past, past four years. Flash forward to last spring, incoming Deputy Secretary Steve Feinberg, who comes out of the private capital world, as your

• 23:34Speaker 06

  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, I respect his respect for hard power. And over the next six months, from a basically Memorial Day of 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, the, all

• 24:16Speaker 06

  that work was basically publicized, and at least in press releases. It said that Raytheon would ramp up five munitions. There's, there's more to come, by the way. Lockheed announced that and PAC3 Patriot, that they were going to quadruple THAAD and go on the Patriot side from 600 a year to 2,000 a year in production. And we're going to go from, by the way, from Tomahawk cruise missiles, from 57 requested last year, which is a pittance, to their goal is 1,000 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, to be applied.

• 25:02Speaker 06

  Break, that was all before we went to war with Iran. And so now, the ramp, it's called the munitions 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, or I guess, became law in early February last month, the report language said, oh, by the way, we know, we Congress, the appropriators know, that this appropriation is 28.8 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 28 billion and change shortfall for FLY26.

• 25:42Speaker 06

  And then, a, and because of that, we can't put things on contract adequately to start this seven-year process that is a good plan, very good plan. And 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, for ammunition supplemental in the very near term.

• 26:11Joe Weisenthal?

  So let's talk about the binding constraints to really ramping up production because there's clearly the political constraint and by political, I mean appropriations. Votes have to happen to say, we're going to allocate these dollars to defense. Okay, we understand that part. There's politics that's difficult. Let's talk about the binding physical constraint. So when you say, okay, you want to go from 57 to 1,000. 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

• 26:52Joe Weisenthal?

  number of missile defense capabilities, et cetera. We would like to not have to choose between Korea and the Middle East or the Gulf allies and so forth. But what are the physical constraints as you see them to ramping up production?

• 27:07Speaker 06

  Yeah, well, you mentioned there unlimited supply. If I'm not mistaken, there was a presidential tweet the other day saying that we had a virtually unlimited supply. And I would just say that is a statement that is problematic relative to reality. So, so look, you just listed off facilities, long lead items for production. I know you all like supply chain issues. There's also people. There's also the workforce. You know, there's basically one facility 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 the supply chain, it is in surprising degree, and there's been a

• 27:51Speaker 06

  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 sole source or some widget. And to the Pentagon's credit, over the past several years, there's been a lot of, I would say, naval gazing is a bad term, but a lot of introspection, trying to figure out and understand, to at least truly intellectually understand, what is the supply chain? And there is still some opacity to that. But nevertheless, the primes, the 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,

• 28:33Speaker 06

  a, I would say, a series of experiments, trying to, A, get private capital 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 advantage is, we're a wealthy country, but we have to leverage that private wealth. And I think there's a number of initiatives on that front that will direct, and are 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

• 29:14Speaker 06

  the 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 kind of, 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 SRMs, solid rocket motors, and one of them just got a billion dollar equity stake investment by the Pentagon. That is Altria Harris, that had Aerojet as a subsidiary. The other big one, of course, is Northrop Grumman, which owns an absoomed

• 29:58Speaker 06

  orbital 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 $216 million into Aerojet in Camden, Arkansas, which is actually one of the handful of places where we kind of keep it away from. A polite society, you don't want big things blowing up near cities, which is one of the challenges of production as well. A third type of experiment, and this is coming out of Steen 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.

• 30:44Speaker 06

  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, the DOD 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 DOD 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 buy long lead items, et cetera.

• 31:29Speaker 06

  And that's why you need multi-year procurement, that's why you need a seven-year window. And that's why this whole munitions plan makes sense if we can get it off the ground.

• 31:54Speaker 01

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• 32:23Speaker 02

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• 33:23Tracy Alloway?

  Joe, I was gonna say we should sound the monopsinny klaxon, but I don't think we want any loud noises on a podcast about missiles. Tom, what about if we can't ramp up production really quickly? There are existing missiles out there, although to your point, there's a dwindling stockpile. But are missiles like, I don't know, shoes or a jacket? Can you just like tap your allies and say, "Well, we loaned you a missile. Can we have it back and use it now?" And then if so, what does that actually mean for some of our allies who are still engaged in conflict like Ukraine? I see there's a headline out there right now saying that in recent weeks, Ukraine's F-16 jets have been starved of US-made missiles. And now we have other allies like the Gulf States

• 34:08Tracy Alloway?

  who need some of their missiles more than ever.

• 34:12Speaker 06

  So you raise a really good point, and I'll tell you, if I had a nickel for every time the Trump administration 1.0 or 2.0 said to our allies, "Hey, you need to spend more on defense, you need to be buying more American," there was just an executive order a couple of weeks ago saying, "We shall use the sale of American weapons to our allies as an instrument of foreign policy." We've always kind of done that, basically, since forever. But it was 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

• 34:50Speaker 06

  that hit bullets with bullets, to be sure. But there is also a problem. There are 18 countries, there used to be 19, now 18 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. It's not merely

• 35:34Speaker 06

  for US needs, but also to provide the deliveries that we want our friends and allies to be equipped with. And we want them to buy it, not just because we have some commercial interest, a lot of times US taxpayer, instead of footing the bill for some of these things, but because we want interoperability. We want Australia and Japan to be operating Tomahawk Aegis destroyers, so that our Aegis destroyers and our Tomahawk weapon system, they can all work together, and the whole be more than the sum 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 backyard, so it makes sense for them to be ponying up for their security.

• 36:19Speaker 06

  You know, the polls, Poland remembers the Soviet boot quite well, and they and a handful of other countries have been especially at the tip of the forefront 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 Sampti 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

• 37:01Speaker 06

  that stuff, and sometimes you need stuff sooner as opposed to the best.

• 37:06Joe Weisenthal?

  Can you talk about, you know, at the very beginning, we talked about the asymmetry of these very ostensibly very cheap drones and very expensive missile defense, and you just think if they're really, if the drones are as cheap as advertised, there could just be quite a lot of them, and you could shoot through that missile defense. How do you, talk to us about that math, how real are these numbers that you see, like $20,000 drone versus $4 million defense missile, because that seems pretty brutal, but how do you see that equation?

• 37:36Speaker 06

  I have to say, that has to be the most repeated cliche, that's put out there, the most repeated headline. You know, I think the Iranians' shaheds are a little bit more than 20,000. Of course, there's lots of really super small, short-range stuff, but when they're talking about going a couple of thousand kilometers, I think the number is quoted somewhere between 50 and 80,000. There's some poetic justice that we captured some of those shaheds and an American company reverse engineered them, they're called Lucas, Lucas drones, and we sent some of them back at Ukraine, and the quoted cost for that, I think was, I think was $30,000.

• 38:17Speaker 06

  So that's good, you need affordable mass, you need a tritable mass, and so that phenomenon, look, Ukraine is producing millions, millions per year of, now, 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 very 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 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.

• 39:02Speaker 06

  And so I think it is actually rather misleading to just look at the the the cost of the Patriot or the cost of the standard missile or what have you. If you had to throw a thousand drones to have the same effect as one 1,200 kilometer range Tomahawk missile, you you might not even be able to get there. Tomahawk missile is our longest range missile and it's got 500 pound warhead. These drones 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, it's the platforms and it's the whole operational cost that matters, including, by the way, the cost of operational failure. You know, I like to say, and I've had plenty of admirals say this on stage with me at

• 39:46Speaker 06

  CSIS over the years, because I always ask this this point. A ship captain, when he sees a cruise missile coming into his ship, is not going to pull out his slide rule or his pocket calculator and say, what's the cost of that Houthi drone? And what is the cost of the missile we're going to do that? No, they're going to protect the ship. They're they are going to go for mission success. And so now you say, well, that's that's value versus cost, and that's 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 Ford from Venezuela to the Middle East. It's going to be the people and all and the jet fuel and all of these other things.

• 40:28Speaker 06

  And by the way, the facility repair, those things are going to eclipse the the cost of the munitions. So nevertheless, defense is hard. It is hard to to hit an incoming screaming rantry vehicle from 1,200 kilometers away, for instance. And so defensive 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, all these other things as well. As I 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.

• 41:09Tracy Alloway?

  So you mentioned ending the threat just then. And this is the other big question that I and I imagine a lot of other people have at the moment. With, with a ground conflict, you can kind of envision an endpoint where, you know, an army comes marching into a state capital and that's pretty much the end of the conflict. With missile warfare, it seems like it can go on for a very long time. And I'm not quite sure what the defining point is at which two sides basically say, okay, we're done now. Someone's won and someone's lost.

• 41:48Speaker 06

  Yeah, well, and that was the case in the 1980s between the, between Iran and Iraq, for instance, lots of, lots of missiles going back and forth. So you've hit on a, a, a couple important points there. One, as is often observed, it's really hard to do everything with air power. It's, it's hard to know if you have destroyed things on the ground without being there. And that's why I've said, you know, there, there is at least going to be 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.

• 42:29Speaker 06

  Point two, you know, everybody, myself, other folks were getting nervous when day by day would go on and the Iranians kept launching. So the, the good news is that the curve is flattening. You have a phrase from the COVID, COVID years. To flatten the curve of the rate of fire. And so you take a look at the, the, the press conferences, that's a very good development. They've gone from hundreds a day to, you know, 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, that is a good sign. And add to that, that we've now gotten, this is the two most important words from one

• 43:14Speaker 06

  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. Thousand kilometer range tomahawks, because the Iranians don't have air defenses anymore. We can use gravity bombs, of which they are plentiful. Still have to fly them back and forth, and that's not cheap. But you can fly back your JDAMs, your small dammer 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 at 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. That's good. We can now do the stand-in, you know, flying over top and dropping things. But to your point, it's still hard to do all that from the air.

• 43:59Speaker 06

  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.

• 44:10Joe Weisenthal?

  Tom Karako, thank you so much for coming on Odd Lots. I learned a lot from this, really appreciate you taking your time.

• 44:17Speaker 06

  Thanks all, really enjoyed it.

• 44:31Joe Weisenthal?

  I never heard that trade, going Winchester. That's like, that comes up in movies.

• 44:36Tracy Alloway?

  You know, my dad's, he flew B-52 bombers in Vietnam, so I, yeah, I have very mixed feelings about all of this.

• 44:45Joe Weisenthal?

  Defense procurement strikes me as an extremely difficult, I don't know, game theory equilibrium problem to get right. And, you know, you, because you have the monopsony buyer. It's a monopsony buyer, but it's also political, and the political winds are going to change. You have, you know, companies that are naturally profit-seeking and profit-maximizing. And many of them, and he alluded to this, we didn't talk about it that much, are monopoly sellers, right? Like, if there's one component, and 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.

• 45:27Joe Weisenthal?

  Maybe there's like a shiny mirror or something, somewhere, that's only produced by one optical factory somewhere in the United States. Then you have the buy-American requirements, so that 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.

• 45:51Tracy Alloway?

  It's it's such a weird ecosystem of players in military procurement. And the other thing is like, most of the time, what you're planning for is a hypothetical

• 46:01Joe Weisenthal?

  Yeah.

• 46:02Tracy Alloway?

  conflict, right? If an actual conflict emerges, then I guess you have some more certainty to a degree about what you need to actually fight it. But, you know, if, just a few years ago, if you're sat there and you're going like, should we be buying stuff for war with Iran? Should we be buying stuff for China doing something with Taiwan? 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,

• 46:32Joe Weisenthal?

  Yeah.

• 46:32Tracy Alloway?

  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.

• 46:47Joe Weisenthal?

  Have you seen the photos? I mean, there are photos of the US packing up THAAD missile defense systems from South Korea.

• 46:56Tracy Alloway?

  I have not seen.

• 46:56Joe Weisenthal?

  Yeah, if you just search for it, it's kind of, it feels very, when you see the photos, you do not feel like, oh, we're a major superpower. It's like, oh, here are these missiles. Sorry, we're taking, we have to move them elsewhere because we don't have enough right now. It's pretty, it's pretty shocking, but, you know, like, it's, it's hard, it's hard to argue against the fact that we seem 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.

• 47:40Joe Weisenthal?

  The whole thing seems to spread very thin.

• 47:42Tracy Alloway?

  War is logistics and a racket.

• 47:45Joe Weisenthal?

  Yeah.

• 47:45Tracy Alloway?

  Shall we leave it there?

• 47:46Joe Weisenthal?

  Let's leave it there.

• 47:47Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 47:53Joe Weisenthal?

  And I'm Jill Weisenthal. You can follow me at TheStalwart. Follow our guest, Tom Carico. He's at Tom Carico. Follow our producers, Carmen Rodriguez at Carmen Arment, Dashal Bennett at Dashbot, and Cale Brooks at CaleBrooks. And for more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 48:17Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about where missiles actually come from, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 49:08Speaker 02

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