If Turkey finalizes the deal with the Chinese manufacturer, its entire defense cooperation effort with Western counterparts, including defense and non-defense companies, could be jeopardized.
Specifically, officials with Turkish company Aselsan are concerned that its connection to the deal could harm its corporate relations with Western banks.
In September, Turkey selected China Precision Machinery Import-Export Corp. (CPMIEC) to construct the country’s first long-range air and anti-missile defense system. The Turkish government said it opted for the Chinese solution based mainly on deliberations over price and technology transfer.
The Chinese contender defeated a US partnership of Raytheon and Lockheed Martin, offering the Patriot air defense system; Russia’s Rosoboronexport, marketing the S-300; and Italian-French consortium Eurosam, maker of the Aster 30.
Turkish officials said if contract negotiations with CPMIEC fail, talks would be opened with the second-place finisher, Eurosam. Next in line would be the US bidder. The Russian option has been eliminated.
But NATO and US officials have said any Chinese-built system could not be integrated with Turkey’s joint air defense assets with NATO and the United States.
They also have warned that any Turkish company that may act as local subcontractor in the program would face serious US sanctions because CPMIEC is on a US list of companies to be sanctioned under the Iran, North Korea and Syria Nonproliferation Act.
In December, Aselsan, potentially CPMIEC’s main Turkish partner in the contract, became the first casualty of the US sanctions. Bank of America Merrill Lynch, a US investment bank, pulled out of a joint bid to advise Aselsan on its second listing on Istanbul’s stock exchange.
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