WASHINGTON - The Pentagon announced on Friday that it had reached a deal to sell $3.48 billion worth of missiles and related technology to the United Arab Emirates, a close Middle East ally, as part of a massive military buildup in the Middle East to counter Iran's growing arsenal of ballistic missiles.

The deal includes a contract with Lockheed Martin to produce the highly sophisticated Terminal High Altitude Area Defense, or THAAD, weapon system for the UAE.

Lockheed Martin said in a statement it was the first foreign military sale of the THAAD system.

Wary of Iran, the US has been building up the military capabilities of its allies, including a $1.7 billion deal to upgrade Saudi Arabia's Patriot missiles and the sale of 209 Patriot missiles to Kuwait, valued at about $900 million.

On Thursday, the Obama administration announced the sale of $30 billion worth of F-15SA fighter jets to Saudi Arabia.

The announcement came as US officials weighed a fresh threat from Teheran, which warned this week it would disrupt traffic through the Strait of Hormuz, a vital Persian Gulf oil transport route, if Washington levies new sanctions targeting Iran's crude exports.

Iran's senior navy commander denied state media reports that the Islamic Republic had test-fired long-range missiles during a naval drill on Saturday, saying the missiles would be launched in the next few days.

Mahmoud Mousavi told Iran's English-language Press TV that "the exercise of launching missiles will be carried out in the coming days".

The 10-day naval drill in the Gulf began last week as Iran showed its resolve to counter any attack by enemies such as Israel or the United States.

During military drills in 2009, Iran test-fired its surface-to-surface Shahab-3 missile, which is said to be capable of reaching Israel and US bases in the Middle East.

Washington has expressed concern about Teheran's missiles, which include the Shahab-3 strategic intermediate range ballistic missile with a range of up to 1,000 kilometers and a Shahab-3 variant known as Sajjil-2, which has a range of up to 2,400 km.

Tensions with the West have risen since the UN nuclear watchdog reported on Nov 8 that Iran appears to have worked on designing an atomic bomb and may still be pursuing research to that end.

Besides UAE and Saudi Arabia, the Obama administration is also moving ahead with the sale of nearly $11 billion worth of arms and training, including advanced fighter jets and battle tanks for the Iraqi military.

While the United States is eager to beef up Iraq's military as a hedge against Iranian influence, there are also fears that the move could backfire if Baghdad ultimately aligns more closely with the Shiite theocracy in Teheran than with Washington, according to New York Times.

In the wake of the withdrawal of American troops from Iraq, there is growing concern that the Shiite Prime Minister al-Maliki's attempt to marginalize the country's Sunni minority could set off a civil war.

On Dec 19, he ordered an arrest warrant for the country's highest-ranking Sunni official and threatened to exclude the rival sect's main political party from his government.

Analysts said the sale will be a boost for Obama's re-election campaign this year. A White House spokesman said the Saudi arms sales alone would give the US economy a $3.5 billion annual boost, bolstering exports and providing 50,000 jobs.

AP-Reuters-China Daily