TURKEY APPROVES BILLION DOLLAR F-16 UPGRADE

S E C R E T SECTION 01 OF 02 ANKARA 002529

SIPDIS

STATE PLEASE PASS TO EUR/SE

E.O. 12958: DECL: 04/29/2015
TAGS: PREL PGOV MASS TU
SUBJECT: TURKEY APPROVES BILLION DOLLAR F-16 UPGRADE
PACKAGE BUT BROADER DEFENSE COOPERATION STALLED

REF: A. ANKARA 2024


B. ANKARA 1588

C. ANKARA 1557

Classified By: Ambassador Eric S. Edelman, reasons 1.5 (b) and (d).



1. (S) SUMMARY: Turkey's signature of a one billion dollar
Foreign Military Sale (FMS) F-16 aircraft upgrade package
with Lockheed Martin Aero as the prime USG contractor
provided the pretext for Minister of National Defense Vecdi
Gonul to publicly reinforce the importance of the US/TU
bilateral relationship in general and defense industrial
cooperation in specific. During a joint April 26 press
conference with the Ambassador and at a pre-meeting, Gonul
emphasized the importance of the bilateral relationship to
Turkey and acknowledged Government of Turkey (GOT)
responsibility to communicate that to the public. Ambassador
highlighted the recent offer of a classified communication
link between the US Central Command's operation in Iraq and
the Turkish General Staff (TGS) as US recognition of the
importance of the coalition effort in Iraq to Turkey and
another US step to combat the PKK. While noting US
appreciation for the F-16 modernization package, Ambassador
requested a separate meeting to discuss widespread US defense
industry concerns about participating in the Turkish defense
market. END SUMMARY.

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FIRST US DEFENSE INDUSTRY WIN IN YEARS
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2. (C) Minister of National Defense Vecdi Gonul organized a
joint press conference with the Ambassador and the local
Lockheed Martin (LM) Aero representative to trumpet the
$1.098B agreement for the USG through LM to upgrade 117 Block
30s, 40s and 50s. DefMin Gonul's efforts to publicize this
good news story were a welcome response to repeated US
requests for the GOT to publicly acknowledge the importance
of the bilateral relationship. However, while the agreement
was a positive step to strengthen our bilateral defense
cooperation relationship, it came only after significant
negotiation by the TU Undersecretariat for Defense Industries
(SSM) and LM Aero over a separate contract to meet a 60%
direct offset requirement, and at a time when other US
defense contractors are re-evaluating the merits of
participation in the Turkish market. This is the first
significant FMS agreement won by a US defense contractor
since Boeing won a bid for an Air Early Warning and Control
System (AEW&C) in 2002. There have been no significant
direct commerical sale contracts won by a US firm since 2002.
In 2004 three direct commercial tenders (UAVs, Main Battle
Tanks, ATAK Helicopter) were canceled. The UAV tender was
re-issued in 2004 and the US contender, General Atomics, lost
to an Israeli firm in part due to its inability to meet the
tender's onerous terms and conditions (T&Cs) imposed by SSM.

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ONGOING US DEFENSE INDUSTRY FRUSTRATIONS
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3. (C) The ATAK Helicopter tender, reissued in February 2005,
was issued under strict new "standard" Terms and Conditions
that would prohibit US firms from participating (reftels).
Following Bell Helicopter's withdrawal from the competition
and Boeing's threat to do likewise, SSM Aviation Department
Head Sedat Guldogan notified Deputy PolMilCouns on April 26
that SSM has decided to issue a revised tender in the coming
weeks that softens some of the liability clauses and to
extend the bid submission deadline from June to Fall 2005.
However, given the extent of problems with the initial
tender, Boeing's Ankara representative is skeptical that the
revision will meet all of Boeing's concerns and allow the
company to bid. At the same time, Sikorsky has been involved
in lengthy and difficult negotiations with SSM over a $400
million proposal for 12 additional Seahawk helicopters.
Beyond the onerous terms of each individual tender, local US
defense industry and Embassy representatives agree that SSM
approaches every deal as a win/lose proposal, pressing for
further concessions from the companies even after a contract
is signed, and viewing any concession on their part as a
loss. At a meeting before the press conference, DefMin Gonul
agreed to arrangement of a subsequent meeting to discuss
these issues with the Ambassador.

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US ACTION AGAINST THE PKK
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4. (S) Also at the meeting with Gonul, the Ambassador,
recalling the constant barrage of negative Turkish press
accusing the US of doing nothing to combat the PKK,
highlighted another positive development in the bilateral
relationship -- the US offer of a TGS link into the US
Central Command's CENTRIX (Combined Enterprise Regional
Information Exchange System),a hard-wired computer system in
which coalition partners can share data, and the addition of
a list of PKK High Value Targets provided by TGS to CENTRIX
to aid Multi-National Force - Iraq (MNF-I) forces to identify
and detain them if encountered during normal MNF-I
operations. In raising the issue, the Ambassador underscored
that it is inaccurate and unreasonable for the GOT to say
that the US has done nothing to combat the PKK. While
accepting that more could be done, he urged that the
government acknowledge those positive steps the US has taken.


EDELMAN