DSCA DIRECTOR LTG KOHLER'S DISCUSSIONS ON TURKISH

C O N F I D E N T I A L SECTION 01 OF 04 ANKARA 006661

SIPDIS

STATE PLEASE PASS TO EUR/SE

E.O. 12958: DECL: 11/19/2029
TAGS: MASS MARR OVIP TU
SUBJECT: DSCA DIRECTOR LTG KOHLER'S DISCUSSIONS ON TURKISH
DEFENSE PROCUREMENT POLICY

REF: ANKARA 6239

Classified By: Ambassador Eric S. Edelman, reasons 1.4 (b) and (d).


1. (C) Summary: DCHOD Basbug told visiting DSCA Director LTG
Jeffrey Kohler on November 18 that the attack helicopter
program was one of TGS' most important priorities. SSM
Undersecretary Bayar underscored Turkish interest in US
participation in the attack tender, which should be issued by
year's end, and agreed to work with the USG to craft RFP
language that would meet USG technology transfer
requirements. TGS J-5 LTG Babaoglu noted Turkish efforts to
slightly reduce the price of Sikorsky Seahawks and expressed
concerns about the limited time left in the EXIM facility for
the purchase. On the US request to establish a cargo hub at
Incirlik Air Base, Basbug suggested that the two sides should
meet to discuss this and other recent USG requests which the
Turkish government viewed as part of a package. At TGS, MND
and SSM, General Kohler heard complaints that the US was not
living up to its obligations to provide assistance under the
DECA and was presented with suggestions to remedy that
situation through technology transfer and/or use of Turkish
facilities for maintenance and repair of USG vehicles
operating in Iraq. LTG Kohler took exception to claims of US
non-assistance to Turkish industry in recent years and
emphasized the responsibility of Turkish industry to prove
its capabilities and competitiveness. He pointed to the
Defense Industrial Cooperation (DIC) meeting in January as
the appropriate venue for Turkish industry to showcase its
abilities and stressed the importance of Turkish industrial
participation. End Summary.

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JOINT STRIKE FIGHTER PROGRAM
--------------


2. (C) Defense Security Cooperation Agency (DSCA) Director
Lieutenant General Jeffrey Kohler discussed the US/Turkish
defense industrial relationship and broader bilateral
cooperation under the 1980 Defense and Economic Cooperation
Agreement (DECA) on November 18 with Turkish Deputy Chief of
the General Staff (DCHOD) Ilker Basbug, Turkish General Staff
(TGS) Plans and Policies Chief LTG Aydogan Babaoglu, Ministry
of National Defense (MND) Deputy U/S for Economic and
Technical Matters MG Omer Inak and Turkish defense
procurement agency (Savunma Sanayii Mustesarligi - SSM)
Undersecretary Murad Bayar. General Kohler, accompanied by
Office of Defense Cooperation (ODC) Chief General Sutton and
Defense Attache Roman Hrycaj, and joined by the Ambassador at
TGS and SSM, underscored in each meeting the continued US
government and business interest in partnering with Turkey,
but added that it was the responsibility of Turkish companies
to demonstrate their ability to deliver quality products at
the right price and on time. He noted the Joint Strike
Fighter (JSF) program and said that US industry research and
development expenditures far exceed those of other countries
and the US is proceeding rapidly in the development of new
technologies and applications that would facilitate the US
Armed Forces transformation already underway. Turkish
companies would need to reach out to US firms to demonstrate
their ability to sell comparable quality products. MND's
General Inak lamented that Turkish technology was not
developed enough to compete and said Turkey would need
assistance to pursue technological advancements. In his
view, Turkey's level of participation in the JSF program was
disappointing. General Kohler pointed out that Turkey had
been given the opportunity to compete for almost USD 500
million worth of projects but had only submitted bids for a
small portion of this. He also noted that Turkey had only
invested USD 38 million of the USD 175 million it had
committed. SSM U/S Bayar acknowledged that many Turkish
companies were too small and under-developed to compete for
JSF projects but noted his support for Turkish participation
in projects like JSF, where it could get in on the ground
floor. Given the small size and limited development of many
Turkish companies, he requested USG efforts to steer business
to Turkey. In his view, it would be better to be an
Acquisitions, Technology and Logistics (AT&L) partner and
participate in production than to be a DSCA customer and buy
off-the-shelf equipment. Bayar did, however, inquire about
the availability of FMF-type financing for JSF purchases, and
noted the likelihood that Turkey would require some financial
assistance for its prospective purchase of 100 planes.


3. (C) During General Kohler's meetings at TGS, DCHOD Basbug
listed the Joint Strike Fighter as a TGS priority, after
attack helicopters, tank modernization, UAVs and naval
helicopters. General Kohler told Basbug he had recently
visited Lockheed Martin's JSF facility and that it was a
fantastic program incorporating innovative cost-saving
measures in the building of an extremely capable aircraft.
The US wants Turkey to be an active partner in the program.
Basbug said TGS would like to develop an international JSF
training and/or logistics support hub in Turkey. General
Kohler responded that that was an interesting idea. Later,
Babaoglu also raised the F-16 upgrade, commenting that the
price was still "too high," and that Turkey might have to
"cancel some requirements" in order to bring it down.
General Kohler noted that Turkish and American officials were
discussing this program that day in Dayton, Ohio at the F-16
Program Office. He also noted that the best way to contain
cost increases would be to lock in the requirements and price
as soon as possible.

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CARGO HUB
--------------


4. (C) Picking up on Basbug's mention of a "hub," General
Kohler inquired about our proposal to establish an OEF/OIF
logistics hub at Incirlik Air Base. Basbug reported that
this was awaiting a decision by ministers whom he believed
had bundled all our requests for Incirlik (logistics hub,
weapons training deployments, permanent basing of F-16s)
together and were struggling with how to respond. He said he
believed the US and Turkey needed to discuss these
proposals. The Ambassador responded that we were ready to do
that at any time. General Kohler noted in several meetings
the current USG review of multiple "future force" basing
options and underscored his hope that Turkey would not miss
the train by failing to act on possible cooperation
opportunities (e.g. cargo hub, Weapons Training Deployment,
etc.)

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ATTACK HELICOPTERS
--------------


5. (C) Basbug called the ATAK attack helicopter program one
of the most important priorities for Turkish armed forces.
Despite the cancellation of the previous tender, the
requirement remained valid and the military was pushing SSM
to move forward. At SSM, U/S Bayar said Turkey had every
intention of seeing US firms compete in the new tender that
was expected to be issued before the end of the year. Turkey
wanted to create a level playing field in order to ensure
sound bids from American, European and other firms. To avoid
a repeat of the problems that resulted in cancellation of the
original attack helicopter tender earlier in the year (Note:
the requirement for 100 pct of mission computer source code.
End Note.),Turkey was trying to formulate wording for the
new Request for Proposal (RFP) that would meet USG technology
transfer requirements. Turkey wanted to hold the "key" to
the system and would create proprietary systems technology of
its own. In the RFP, it would be looking for a platform onto
which it could place its system, just as it had placed
proprietary components onto the F-4 and F-16 planes
previously purchased. Bayar welcomed an offer from ODC to
meet informally at the project officer level to craft wording
to address interoperability issues and Turkish add-on
requirements before the RFP is issued.

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TANK MODERNIZATION
--------------


6. (C) For Basbug, the tank modernization program was next in
priority. Turkey was seeking to acquire a tank that was more
than third generation now, and could be upgraded to
fourth-generation technology later. General Kohler offered
to organize a US Army briefing for TGS on future combat
systems that could help inform the Turks as they continue
their own feasibility study of developing an indigenous main
battle tank. With the US investing $45-48 billion in defense
R&D and the rest of the world totaling something like $10
billion, whatever the US does will determine tomorrow's
technologies. Later to Babaoglu, General Kohler noted that
the US no longer produced tanks, but that Egypt had an active
M1A1 production line, that might provide an opportunity for
Turkey-Egyptian cooperation.

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UAVS AND NAVAL HELICOPTERS
--------------


7. (C) UAVs were next on Basbug's list of priorities,
followed by naval helicopters. Referring to on-going
negotiations between SSM and Sikorsky about Turkey's
acquiring more Seahawk helicopters, Basbug said the
sticking points were price and financing. Babaoglu returned
to this issue in a follow-on session, explaining that SSM was
working to "reduce the price a little bit," and that the time
limitations in the EXIM Bank facility for the Seahawk buy
would cause problems with the Turkish Treasury. General
Sutton observed that as a direct commercial sale, there was
nothing the USG could do about the price. The Ambassador
recalled the serious difficulties encountered during the
previous extension of the EXIM facility, suggesting any
further extension might not be possible. With regard to all
procurements, General Kohler observed that while politics
might argue in favor of buying from diverse suppliers, mixing
similar systems from different suppliers (e.g. Sikorsky and
European naval helicopters) increased the maintenance
complexity and cost for the military. Babaoglu noted that
TGS makes this point to SSM, but the results of various
competitions was "out of our hands."

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TURKISH DEFENSE INDUSTRY RESTRUCTURING
--------------


8. (U) U/S Bayar said the initial set-up of Turkish
government/industry joint ventures such as Turkish Aerospace
Industry (TAI) had been short-sighted, relying on government
contracts to keep them afloat, and never actively pursuing
business on their own. General Kohler noted that when he
asked TAI several years ago about it's future business plans,
company management was confident the Turkish government would
take care of it. This was in sharp contrast to his recent
vist to Korean Aerospace Industries (KAI),where a production
line transitioned from producing F-16s to making niche parts
for commercial jets. In Bayar's view, with no business
prospects beyond F-16 production, TAI did not have a bright
future. This was in contrast to TUSAS Engine Industries
(TEI),which had been able to establish a long-term
relationship with its US partner, General Electric. As a
result, some joint ventures would be restructured to meet the
current business environment. As he had announced at the
September Defense Industry Conference jointly sponsored with
the American-Turkish Council (see reftel),Bayar said that
with the restructuring, Turkey expected to develop a more
balanced partnership with foreign firms. Specifically Bayar
said Turkey wanted to participate in the development of
equipment, including software and computer systems.
Regarding current projects, he expressed an interest in the
amount of co-production to be included the F-16 upgrade
package that would be signed this year. Both at SSM and MND,
General Kohler underscored that the DIC meeting scheduled for
January in Washington would be a good forum for Turkish firms
to demonstrate their capabilities and prove their
competitiveness. On this score, Turkish meetings with
OSD/AT&L representatives would be critical. General Kohler
welcomed the opportunity to meet again with Bayar and Inak in
Washington and offered to arrange visits for Turkish
government and business officials to see US defense
industries firsthand.

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TECHNOLOGY TRANSFER/DECA OBLIGATIONS
--------------


9. (C) At MND, General Inak stated that, since signing the
DECA in 1980, the US had not fulfilled its obligations under
the agreement to provide defense economic support to Turkey
with one exception - the joint F-16 production program
started in the mid-1990s. Inak suggested the US could do so
by assisting Turkey to increase its technological
capabilities in order to better compete in the international
defense market. He believed that Turkey suffered from US
unwillingness to share technology, in contrast to the
technological assistance he said the US had provided to other
countries, such as Italy, Germany, France, Spain, the United
Kingdom, Belgium, Korea and Indonesia. However, when pressed
by General Kohler for specific examples, General Inak
provided none. He went on to complain that Turkey was always
on the side of the US but the US did not always reciprocate,
and opined that the bilateral relationship was suffering.
Turkey carried many burdens as a NATO member and US Ally and,
as a result, had gained new enemies and lost trade with
neighboring countries. He admonished that, unless
cooperation increased, the two countries would grow more
distant and military sales would be further reduced.


10. (U) In contrast, U/S Bayar at SSM said that Turkey should
be less demanding with respect to technology transfer. He
said he had come to the view that requesting extensive
technology transfer was unproductive and that Turkey should
internally attempt to build upon its current technology base.
Bayar and General Kohler concurred that TAI and other
Turkish joint ventures were very capable but would require a
huge influx of capital in order to substantially increase
their technological base across a wide spectrum. For that
reason, Bayar said Turkish industry should specialize in
certain components, such as wing technology, rather than
attempt to build an entire airplane.


11. (C) General Babaoglu, at TGS, also registered
dissatisfaction with the USG's assistance to the Turkish
military as required by the DECA. According to Babaoglu,
Foreign Military Finance assistance had dropped considerably
from the early 1980s, and Turkey now had an FMF debt of $4
billion plus the burden of high interest rates. Moreover,
although the DECA states that the US's use of bases in Turkey
is to be within a NATO context, Turkey has tried to
accommodate our use outside of NATO, such as in support of
operations in Iraq. Regarding the use of Incirlik Air Base
for training, Babaoglu stated that anything allowable under
the DECA would be easy, but anything outside the terms of
that agreement would require a decision by ministers.


12. (C) Babaoglu noted that Turkey has many good repair and
maintenance facilities available to support US
units and equipment in the region, such as providing
depot-level maintenance for F-16s, AH-1s, UH-1s or armored
vehicles. The US military's availing themselves of services
here would serve to increase our industrial cooperation, he
added. At SSM, U/S Bayar also suggested that Turkey might be
able to support US efforts in Iraq through the maintenance
and repair of equipment and ammunition sales. Acknowledging
that such a partnership could potentially save US transport
costs, General Kohler agreed to pursue the issue further in
Washington. ODC Security Cooperation Directorate Chief
suggested that an upcoming MKEK (Turkey's Machinery and
Chemical Industry Corporation) meeting with Picatinny Arsenal
officials in New Jersey might provide an opportunity to
further such talks. (Note: MKEK has the ability to produce
any caliber round for the US and would like the opportunity
to fill the munitions shortfall projected by the US Army for

2005. End note.)

EDELMAN