Identifier
Created
Classification
Origin
05ANKARA2890
2005-05-20 15:11:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

SIKORSKY SEAHAWK SALE TO TURKEY CONTINGENT ON EXIM

Tags:  MASS MARR PREL EFIN BEXP TU EXIM 
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C O N F I D E N T I A L ANKARA 002890 

SIPDIS

STATE FOR EUR/SE, PM/DTTC AND EB

E.O. 12958: DECL: 05/10/2015
TAGS: MASS MARR PREL EFIN BEXP TU EXIM
SUBJECT: SIKORSKY SEAHAWK SALE TO TURKEY CONTINGENT ON EXIM
FACILITY EXTENSION

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

C O N F I D E N T I A L ANKARA 002890

SIPDIS

STATE FOR EUR/SE, PM/DTTC AND EB

E.O. 12958: DECL: 05/10/2015
TAGS: MASS MARR PREL EFIN BEXP TU EXIM
SUBJECT: SIKORSKY SEAHAWK SALE TO TURKEY CONTINGENT ON EXIM
FACILITY EXTENSION

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


1. (C) SUMMARY: Sikorsky Aircraft Corps, after three years of
negotiation, may be closing in on an agreement with Turkey
for the sale of Seahawk helicopters to the Turkish Navy.
According to the local Sikorsky rep, the Turkish Naval Forces
Commander wants an agreement finalized before the Prime
Minister and Deputy Chief of the General Staff (DCHOD),go to
Washington in early June. Since the Turkish Undersecretariat
for Defense Industries (SSM) recently submitted a counter to
Sikorsky's stated "Best and Final Offer," it is debatable
whether an agreement will be signed before June. However, if
it is, SSM will insist that the existing EXIM facility --
which has already been extended once -- be extended yet
again. END SUMMARY.


2. (C) After years of negotiation with the Ministry of
National Defense and SSM on both the package components and
the approx. $400M price tag for 12 Seahawk helicopters with
an option for an additional five (Lot 2 of a 1992 sale won by
Sikorsky),Sikorsky submitted a letter to SSM on April 5
stating that its offer presented on February 16, 2005 was its
Best and Final Offer. Subsequently SSM responded with what
has been characterized as a "frosty" response, accepting some
of the items offered in the Feb. 16 offer but requesting
others that had been rejected by Sikorsky or never discussed.
Sikorsky's local rep told PolMilCouns that he advised
Sikorsky headquarters to stick to their guns and to send a
letter reminding them that the 16 Feb. offer is final.
Through his contacts in the Turkish Navy, the Sikorsky rep
understands that Turkish Naval Forces Commander, Admiral
Ornek, would like to see this agreement signed before DCHOD
Basbug addresses the annual American-Turkish Council
Conference in Washington from June 6-8. According to
Sikorsky, Admiral Ornek may also consider this agreement a
deliverable for Prime Minister Erdogan, who will be in
Washington during the same time frame and has requested a
meeting with President Bush.


3. (C) Sikorsky Lot 1 and Lot 2 helicopters were to be
covered by an extraordinary $1.366B EXIM facility under the
1990 Foreign Operations Appropriations Act, which was due to
expire in June 2001. After a very difficult process, this
facility was extended to allow helicopter delivery and
payment by May 15, 2008. The loan repayment deadline
remained December 31, 2011. The lengthy negotiations on Lot
2 have eaten into the validity of the facility and, if an
agreement is signed this year, Sikorsky will be physically
unable to deliver 12 helicopters by mid-2008. Additionally,
the Turkish Treasury has requested a 10-year repayment period
through 2015. Under the current facility, Turkey's exposure
fee will significantly increase after 2011. We understand
that SSM intends to make EXIM facility extension a
pre-condition to contract effectivity and executability and
will hold Sikorsky accountable for its approval.


4. (C) COMMENT: According to the local Sikorsky rep, when he
and others in the company pulsed several high-ranking EXIM
officials, they received a clear message that it would be
extremely difficult to get a second extension of the loan
facility. Throughout the negotiation process, both Sikorsky
and the mission have emphasized repeatedly to SSM and Defense
Minister Gonul that Turkey needed to make a decision in 2004
in order to ensure the sale could be implemented under the
existing facility, and underscored that an extension was
highly unlikely. However, SSM discounts the threat of no
EXIM extension as it does the claims by Sikorksy and other US
defense contractors that any offer is the company's "Best and
Final." Both are viewed as just another opportunity for
further negotiation. Discounting the difficulty of achieving
the first EXIM loan extension, SSM points to the fact that it
was in fact granted, and therefore presumably could be
extended again. In addition to selling these 12 (potentially
17) helicopters, Sikorsky would like to remain in the market
to participate in a general helicopter tender and other
tenders expected later this year. If it gets the nod from
SSM, Sikorsky will try its best to meet SSM's requirement for
a second EXIM loan extension. END COMMENT.
EDELMAN