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Turkey Defense Deal Goes to China Company Sanctioned Over Iran

Sept. 27 (Bloomberg) -- Turkey picked a state-run Chinese company over U.S. and European rivals to co-produce missile defense systems as it seeks partnerships capable of growing domestic arms production amid a military buildup in the region.

While the company, China Precision Machinery Import-Export Corp., or CPMIEC, has been sanctioned by the U.S. for alleged missile sales to Iran, the multibillion dollar partnership will boost Turkey’s defense industry and serves the nation’s goal of diversifying arms suppliers, according to Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara.

Turkey approved CPMIEC’s lowest bid of about $3 billion amid questions over the Chinese system’s compatibility with NATO-owned early warning systems, Hurriyet Daily News reported today. Milliyet newspaper said yesterday that the project would cost around $4 billion.

“Turkey has already been cooperating with China in production of short-range missiles and the latest decision underlines its eagerness to develop its own military technology,” Ozcan said. “Turkey clearly opted for a cheaper option while eliminating possible political snags over supplies and their use.”

NATO Ties

Turkey, which has the second-largest army by personnel numbers in the Western military alliance, has had friction with the U.S., which has NATO’s biggest military, in defense ties in the past. No U.S. companies bid for a Turkish attack helicopter contract in 2006 after Turkey insisted on full access to specific software codes, which the U.S. considers a security risk. Turkey partnered with Italy instead in a $3 billion project to co-produce 50 attack helicopters for its army.

Turkey selected CPMIEC’s HQ-9 SAM system over Patriot missile interceptors from a U.S. partnership between Lockheed Martin Corp. and Raytheon Co., S-300 missiles from Russia’s state-run arms trader Rosoboronexport and the Aster 30-based SAMP/T SAM system by French-Italian partnership Eurosam.

CPMIEC and its affiliates were banned in 2006 from doing business in the U.S. for allegedly selling missile technology to Iran, according to the U.S. State Department. A unit of the state-owned company “made nearly 300 illegal shipments to U.S. firms since a ban was imposed on CPMIEC and its affiliates,” according to an analysis of shipping records by the Wisconsin Project on Nuclear Arms Control, a nonprofit proliferation watchdog, the Wall Street Journal reported on Jan. 4, 2010.

Turkey’s decision on long-range missiles comes amid increasing concerns over risks emanating from Syria’s civil war as well as missile programs in Iran and Cyprus, Ozcan said. Production would take years, he said.

NATO allies including the U.S., Germany and the Netherlands earlier this year placed Turkey under the protection of six Patriot missile batteries deployed on its 900-kilometer (560-mile) border with Syria.

To contact the reporter on this story: Selcan Hacaoglu in Ankara at shacaoglu@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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