WASHINGTON, Jan 26 (Reuters) – The Pentagon unveiled a 2013 budget plan that would cut $487 billion in spending over the next decade by eliminating nearly 100,000 ground troops, mothballing ships and trimming air squadrons in a bid to create a smaller, agile force with a new strategic focus.

The funding request, which includes painful cuts that will be felt across the country, comes at a historic turning point for the military as it winds down 10 years of war in Afghanistan and Iraq and shifts its strategic focus to the Asia-Pacific region and the Middle East.

The budget plan, sharply criticized by some lawmakers, sets the stage for a new struggle between President Barack Obama’s administration and Congress over how much the Pentagon should spend on national security as the country tries to curb its trillion-dollar budget deficits.

“Make no mistake, the savings that we are proposing will impact all 50 states and many districts, congressional districts across America,” Defense Secretary Leon Panetta told a news conference at the Pentagon on Thursday.

“This will be a test of whether reducing the deficit is about talk or action.”

Panetta, previewing a budget to be made public Feb. 13, said he would ask for a $525 billion base budget for the 2013 fiscal year, the first time since before the Sept. 11, 2001, attacks that the Pentagon has asked for less than the previous year. That compares with $531 billion approved this year.

Panetta said he would seek $88.4 billion to support overseas combat operations, primarily in Afghanistan, down from $115 billion in 2012 largely due to the end of the war in Iraq and the withdrawal of U.S. forces there at the end of last year.

WASHINGTON (Reuters) – The Pentagon unveiled budget cuts on Thursday that would slash the size of the U.S. military by eliminating thousands of jobs, mothballing ships and trimming air squadrons in an effort to shift strategic direction and reduce spending by $487 billion over a decade.

The funding request, which includes painful cuts for many states, sets the stage for a new struggle between President Barack Obama’s administration and Congress over how much the Pentagon should spend on national security as the country tries to curb trillion-dollar budget deficits.

“Make no mistake, the savings we are proposing will impact all 50 states and many districts across America,” Defense Secretary Leon Panetta told a news conference at the Pentagon. “This will be a test of whether reducing the deficit is about talk or action.”

Panetta, previewing plans that will be formally announced next month, said he would ask for a $525 billion base budget for the 2013 fiscal year, the first time since September 11, 2001, that the Pentagon has asked for less than the previous year.

Panetta said he would seek $88.4 billion to support combat operations in Afghanistan, down from $115 billion in 2012 largely due to the end of the war in Iraq and the withdrawal of U.S. forces there at the end of last year.

The budget begins to flesh out a new military strategy announced by the Pentagon earlier this month that calls for a shift in focus from the ground wars of the past decade towards efforts to preserve stability in the Asia-Pacific region and the Middle East.

It would delay the purchases of weapons like Lockheed Martin’s F-35 Joint Strike Fighter, the Pentagon’s largest procurement program, as well as submarines, amphibious assault ships and other vessels.

WASHINGTON, Jan 19 (Reuters) – Lockheed Martin Corp (LMT.N: Quote, Profile, Research) said on Thursday it planned to forego any challenge to the Pentagon’s $3.48 billion choice last month of Boeing Co (BA.N: Quote, Profile, Research) to keep its decade-long role as prime contractor for the U.S. long-range missile shield. Lockheed, the Pentagon’s No. 1 supplier by sales, “does not intend to protest the Missile Defense Agency’s decision for the Ground-based Midcourse Defense Development and Sustainment contract,” Lynn Fisher, a company spokeswoman, said by email. “We will honor the decision that the Missile Defense Agency

(MDA) has made,” she added.

MDA is the Pentagon arm building a layered shield against ballistic missiles that could be fired by countries like North Korea and Iran. It said Dec. 30 that it was retaining Boeing as prime contractor for the system’s hub with a $3.48 billion, seven-year contract to develop, test, engineer and build out.

A team led by Lockheed and Raytheon Co (RTN.N: Quote, Profile, Research) had vied against Boeing, the Pentagon’s No. 2 contractor, and partner Northrop Grumman Corp (NOC.N: Quote, Profile, Research) for the work. Lockheed receive an MDA debriefing on the loss on Jan. 11, Fisher told Reuters. The company then had up to 10 days to launch a formal challenge through the Government Accountability Office, a non-partisan U.S. congressional arm. Fisher declined to elaborate on why Lockheed was foregoing a bid protest, a frequent fall-back for companies that lose competitions for federal purchases of goods and services.

The contract value to Boeing of the Ground-based Midcourse Defense, or GMD, has been about $18 billion from January 2001, when it formally became the system’s prime contractor, through the end of December, Boeing has said. GMD uses radar and other sensors plus a 20,000-mile fiber optic communications network to cue interceptor missiles in silos at Fort Greely, Alaska and Vandenberg Air Force Base, California. The shield has been shaped initially to guard against ballistic missiles that could be fired by Iran and North Korea. It is the only U.S. defense against long-range missiles that could be tipped with chemical, biological or nuclear warheads.

(Reporting By Jim Wolf; Editing by Tim Dobbyn)

((jim.wolf@thomsonreuters.com)(+1 202 898 8402)) Keywords: LOCKHEED MISSILEDEFENSE/USA

WASHINGTON (Reuters) – Booming Middle East purchases of U.S. fighter jets will be a bright spot in what is expected to be a sluggish economy in 2012, possibly paying dividends for President Barack Obama’s bid for a second term.

Beneficiaries include Lockheed Martin Corp and Boeing Co, whose respective F-16 and F-15 production lines are being extended by U.S. government sales to Iraq, Saudi Arabia and Oman, among other rich arms deals announced in recent weeks.

The foreign sales will help offset expected cuts in big-ticket purchases by the Defense Department, which is set to lose at least $450 billion in previously projected funding through 2021 as part of a deficit-reduction push. Additional cuts totaling another $500 billion to $600 billion over the same period are scheduled to kick in next year unless a new deficit-reduction plan is adopted by Congress.

The sales of fighters, missiles and other advanced U.S. weapons will help provide jobs as the United States heads into an election campaign expected to focus on the domestic economy. It has been growing at only half the pace needed to get the jobless rate down from 8.6 percent, a problem for Obama as the incumbent.

The Obama administration announced last week it had finalized a record $29.4 billion Boeing F-15 sale to Saudi Arabia, dwarfing previous individual U.S. arms deals and supporting jobs by increasing exports.

Deliveries of 84 of the most advanced F-15 fighters are expected to start in 2015 with upgrades to 70 others expected to start in 2014, the administration said. Congress had cleared the sale in the fall of 2010, setting the stage for the freshly completed negotiations on the government-to-government contract.

Josh Earnest, a White House spokesman, portrayed the deal as shoring up Saudi air defenses in a region rattled by Iran’s disputed nuclear program as well as supporting more than 50,000 U.S. jobs at a time of high unemployment.

WASHINGTON (Reuters) – The United States has signed a $3.5 billion sale of an advanced antimissile interception system to the United Arab Emirates, part of an accelerating military buildup of its friends and allies near Iran.

The deal, signed on December 25 and announced on Friday night by the U.S. Defense Department, “is an important step in improving the region’s security through a regional missile defense architecture,” Pentagon press secretary George Little said in a statement.

The U.S. Congress had been notified of the proposed sale in September 2008 by former President George W. Bush’s administration. At that time, the system built by Lockheed Martin Corp had been projected to involve more missiles, more “fire control” units, more radar sets, all at a cost roughly twice as much to UAE.

It marks the first foreign sale of the so-called Theater High Altitude Area Defense (THAAD), the only system designed to destroy short- and intermediate-range ballistic missiles both inside and outside the Earth’s atmosphere.

The United States, under the government-to-government deal, will deliver two THAAD batteries, 96 missiles, two Raytheon Co AN/TPY-2 radars plus 30 years of spare parts, support and training with contractor logistics support to the UAE, Little said.

“Acquisition of this critical defense system will bolster the UAE’s air and missile defense capability and enhance the already robust ballistic missile defense cooperation between the United States and the UAE,” he said.

Lockheed Martin did not immediately respond to a request for its delivery timetable for THAAD, part of a layered bulwark being built by the Obama administration in Europe and the Middle East against Iran’s growing missile capabilities.

WASHINGTON (Reuters) – The United States will sell $29.4 billion in fighter jets to Saudi Arabia, in a deal the White House said would support more than 50,000 jobs and help reinforce regional security in the Gulf amid mounting tension with Iran.

The sale covers 84 new Boeing F-15 fighters with advanced radar equipment and digital electronic warfare systems plus upgrades of 70 older F-15s as well as munitions, spare parts, training, maintenance and logistics.

While the sale was previously okayed by Congress, the White House announcement comes at a moment of rising tensions in the Gulf region.

Both the United States and Saudi Arabia, which sees Iran as a significant potential threat, are worried over Iran’s nuclear program. Iranian officials this week repeated threats to close the Strait of Hormuz in response to mounting U.S. and European economic sanctions.

The sale also comes as President Barack Obama prepares to accelerate his campaign for reelection in November 2012, a campaign likely to be fought over the U.S. economy and job growth.

A White House spokesman said the Saudi arms sales would give the U.S. economy a $3.5 billion annual boost and help bolster exports and jobs.

The Obama administration cleared with Congress more than a year ago the potential sale of more than $60 billion of military hardware to Saudi Arabia over 10 to 15 years, including the F-15s, helicopters and related equipment and services.

WASHINGTON (Reuters) – North Korea likely is closer to mounting nuclear warheads on its ballistic missiles than generally reported, possibly only one or two years away, the Congress’s former top expert on the issue has concluded.

Larry Niksch, who tracked North Korea for the nonpartisan Congressional Research Service for 43 years, concludes in a new paper that the North probably would need as little as one to two years to miniaturize and mount a nuclear warhead atop its medium-range Nodong missile once it has produced enough highly enriched uranium as the warhead’s core fuel.

A North Korea armed with nuclear-tipped missiles would rattle East Asia and present new policy and military challenges to the United States and its allies.

Trying to determine when Pyongyang will reach that threshold has long been a challenge for the U.S. intelligence community. Niksch’s timeline, if correct, puts out a new marker for strategists.

Last January, then-U.S. Defense Secretary Robert Gates said the North was within five years of building an intercontinental ballistic missile that, paired with its nuclear program, would be “a direct threat” to the United States.

North Korea has staged relatively few missile tests in recent years, suggesting it is still working on perfecting the needed technologies even as it has cooperated with Iran to do so.

Its nuclear and missile capabilities are once again in the spotlight as power passes to North Korea’s designated young leader, Kim Jong-un, after the December 17 death of his father, Kim Jong-il.

WASHINGTON (Reuters) – The head of the U.S. Central Command is urging Pakistan to share a map of its facilities and installations near the Afghan border to help avert episodes like the one that killed 24 Pakistani forces last month.

U.S. Marine Corps General James Mattis, the commander, said in a statement on Monday the chief lesson from the strike was “that we must improve border coordination and this requires a foundational level of trust on both sides of the border.”

He told the allied commander in Afghanistan, General John Allen, to develop steps to prevent “friendly fire” incidents and share them with Pakistan’s military when possible.

The orders were disclosed on the Central Command’s web site along with a 30-page report of the U.S. military’s findings on the November 25-26 nighttime airstrike that deeply angered Pakistan.

The incident has derailed already uneasy Pakistan-U.S. cooperation in the American-led fight against Islamic militants who zig-zag the border, known as the Durand line, to destabilize the Afghan government of President Hamid Karzai.

After the airstrike, Pakistan closed routes used to supply U.S. forces in Afghanistan and booted the United States from an air base used to launch remotely piloted drone aircraft.

The Pentagon report outlined last week said investigators found that U.S. forces had failed to verify the location of Pakistani units before ordering the attack but blamed Pakistani forces for firing first.

WASHINGTON (Reuters) – The Obama administration cleared the way for states to legalize Internet poker and certain other online betting in a switch that may help them reap billions in tax revenue and spur web-based gambling.

A Justice Department opinion dated September and made public on Friday reversed decades of previous policy that included civil and criminal charges against operators of some of the most popular online poker sites.

Until now, the department held that online gambling in all forms was illegal under the Wire Act of 1961, which bars wagers via telecommunications that cross state lines or international borders.

The new interpretation, by the department’s Office of Legal Counsel, said the Wire Act applies only to bets on a “sporting event or contest,” not to a state’s use of the Internet to sell lottery tickets to adults within its borders or abroad.

“The United States Department of Justice has given the online gaming community a big, big present,” said I. Nelson Rose, a gaming law expert at Whittier Law School who consults for governments and the industry.

The question at issue was whether proposals by Illinois and New York to use the Internet and out-of-state transaction processors to sell lottery tickets to in-state adults violated the Wire Act.

But the department’s conclusion would eliminate “almost every federal anti-gambling law that could apply to gaming that is legal under state laws,” Rose wrote on his blog at www.gamblingandthelaw.com.

WASHINGTON (Reuters) – Even as the last F-22 fighter jet rolls out of flag-draped doors at a Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz) assembly plant on Tuesday, the Air Force has taken steps that leave open an option to restart the premier plane’s production relatively cheaply.

The Air Force is preserving the hardware used to build the jet, not scrapping it, although it insists this is solely to sustain the fleet over its projected 30-plus years’ “lifecycle.”

The F-22 is “easily the most capable fighter aircraft ever built, period,” said Richard Aboulafia, a combat plane expert at the Teal Group aerospace consultancy.

“You don’t know what the economy and the strategic picture will look like in a decade,” he said. “And if one gets better and the other gets worse, you could see a restart.”

A lunchtime ceremony feting F-22 program employees will mark the emergence of the 187th and final production model from the Marietta, Georgia, plant, 14 years after the most advanced and most costly per-plane U.S. fighter began flight tests.

F-22 supporters maintain it was terminated prematurely.

The fleet, as conceived during the Cold War, was to have been 750. That dropped to 381, then 243, before former Defense Secretary Robert Gates capped it at 187 in a belt-tightening move over program backers’ strong objections.