Turkey cancels military projects worth billions to U.S. firms

Monday, May 17, 2004

ANKARA Turkey has canceled a series of major military projects worth billions of dollars in a move that could strain relations with the United States.

In a surprise move, Turkey's Defense Ministry canceled tenders for the procurement of attack helicopters, unmanned air vehicles and main battle tanks. The projects were estimated at being worth more than $7 billion.

"New requests for proposals, with an emphasis on new procurement models based on higher local industrialization, will be issued," a statement by the Executive Committee of the Turkish Defense Industries Undersecretariat said on May 14.

The most far-reaching move was the Defense Ministry's decision to cancel the multi-billion dollar tender to coproduce attack helicopters. The decision ended more than two years of negotiations between Turkey and the United States for the transfer of mission computer technology and helicopter production lines.

Turkey's Defense Ministry failed to draft a contract with the frontrunner in the tender, the U.S. firm Bell Textron. Bell Textron was faced by an Israeli-Russian consortium composed of Kamov and Israel Aircraft Industries.

The defense committee was chaired by Prime Minister Recep Erdogan and included Chief of Staff Gen. Hilmi Ozkok, Defense Minister Vecdi Gonul and Turkish Defense Industry Undersecretary Murat Bayar. Officials said Turkish military and political leaders agreed that Ankara would launch a system-wide review of major military projects that would stress requirements and the benefits for Turkey's defense industry.

Turkey had sought to coproduce 50 attack helicopters. The Bell Textron offer was said to have been about $2.5 billion and the IAI-Kamov offer about $2.1 billion.

Bell-Textron expressed disappointment with the Turkish cancellation of the program. The Turkish move was also expected to upset U.S. defense officials who had been promised in 2003 that Ankara would soon launch the helicopter project.

In late 2003, Bayar relayed his recommendation for the helicopter coproduction project in a memorandum to the military's General Staff. Officials said Bayar had recommended that neither the U.S. frontrunner, Bell Textron, with its AH-1Z King Cobra, nor the IAI-Kamov bid of the Ka-50-2 be accepted.

In the memo, Bayar questioned Kamov as a reliable supplier, officials said. They said Bayar also expressed doubt whether Kamov could meet deadlines and asserted that the company did not have enough Ka-50-2s for immediate procurement.

Bayar opposed the King Cobra on grounds that the United States has refused to transfer critical technologies, officials said. The U.S. technologies denied to Turkey were said to have included the software for the mission computer.

The Turkish committee also decided to cancel existing tenders for purchase of UAVs. Turkey had invited companies to bid on the production of a tactical UAV and a strategic UAV.

The U.S.-based General Atomics as well as Israel's Elbit Systems had been competing for the $1 billion UAV deal. Officials said the UAV project would be revived.

Ankara also formally canceled a project for the production of 1,000 main battle tanks. That project, estimated at $4 billion, was suspended in 2001 during Turkey's fiscal crisis and never revived.

In its statement, the committee said the projects were canceled because they could not be completed under existing models. The committee did not say whether another tender would be issued.

The committee also decided to form new procurement models that would be based on domestic production, original design as well as maximum use of national capabilities. The panel decided that Turkey's military would meet its requirements through these models and provide facilities for local and foreign joint ventures.

Copyright 2004 East West Services, Inc.

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