By Mike Stone
(Reuters) - The U.S. State Department approved a possible $10.5 billion sale of Raytheon Co's (N:RTN) Patriot missile defense system to Poland, the Pentagon said on Friday.
NATO member Poland has sped up efforts to overhaul its military following Russia's annexation of Ukraine's Crimea peninsula in 2014 and in response to Moscow's renewed military and political assertiveness in the region.
Defense Minister Antoni Macierewicz said in March that Poland expected to sign a deal with Raytheon to buy the Patriot missile defense system by the end of the year.
Patriot missile defense interceptors are designed to detect, track and engage unmanned aerial vehicles (UAVs), cruise missiles and short-range or tactical ballistic missiles.
The proposed sale includes 208 Patriot Advanced Capabilty-3 (PAC-3) Missile Segment Enhancement missiles, 16 M903 launching stations, four AN/MPQ-65 radars, four control stations, spares, software and associated equipment.
In addition, Poland is authorized to buy U.S. government and contractor technical, engineering and logistics support services as well as range and test programs for a total estimated potential program cost of up to $10.5 billion.
A Raytheon representative said "it is Raytheon's experience that the estimated cost notified could be larger than the final negotiated contract amount," signaling that the final price could be lower as negotiations on a final amount proceed. Raytheon added that is "will work closely with the U.S. and Polish governments to ensure Poland is able to procure Patriot at a mutually agreeable price."
The Pentagon said the sale will take place in two phases.
If a deal is finalized, it would allow Poland to conduct air and missile defense operations with NATO allies the Netherlands, Germany, Spain, and Greece, which currently have the Patriot system, a U.S. State Department official said.
The contract still requires approval from the U.S. Congress, because it involves a purchase of advanced military technology for which special permission must be obtained.
Poland, which had said it was planning to spend around $7.6 billion on the whole project, said the negotiations are not over.
"This does not mean that this amount ($10.5 billion) is the final value of the LOA (Letter of Offer and Acceptance)," the Polish Defense Ministry said in a statement, adding it has a "good track record" in negotiating similar offers.
The Defense Security Cooperation Agency, which implements foreign arms sales, said it had delivered notification to Congress on Tuesday.
U.S. lawmakers have 30 days to block the sale, but that rarely happens.
In addition to Raytheon, the prime contractors will be Lockheed Martin Corp (N:LMT) and Northrop Grumman (N:NOC).