R&D HIGHLIGHTS THE 18TH TURKISH/AMERICAN DEFENSE

UNCLAS ANKARA 003593 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: MARR MASS MCAP PREL TU SUBJECT: R&D HIGHLIGHTS THE 18TH TURKISH/AMERICAN DEFENSE INDUSTRIAL COOPERATION MEETING REF: 2005 ANKARA 1565 ¶1. (SBU) SUMMARY: The 18th Defense Industrial Cooperation (DIC) meeting and subsequent Defense Industry Day ON May 23-24 underscored a continued impasse over the barriers to US defense industry participation in Turkish defense contracts but highlighted R&D as a potential area for closer cooperation. Depot-level maintenance, performance-based logistics, and defense space cooperation were also addressed. MND Deputy U/S MG Inak listed Turkey's defense procurement priorities and challenged both governments to find a way to work together. DOD Acquisition, Technology and Logistics (AT&L) Director of Armaments Cooperation Robert Bruce noted that this was only the second DIC to be followed by an industry day and encouraged Turkish and US defense industries to work together, saying that most successful cooperative development relationships START with industry-to-industry partnerships. At the DIC, progress was made in identifying joint research opportunities. During an industry day visit to the Turkish equivalent of the National Science Foundation, US Army, Navy and Air Force research specialists identified several potential opportunities for further exploration. END SUMMARY. ¶2. (SBU) Ministry of National Defense (MND) Deputy Undersecretary for Economic and Technical Affairs MG Omer Inak opened the 18th DIC meeting ON May 23 by reminding the participants that the genesis of the DIC meetings is the 1980 Defense Economic Cooperation Agreement (DECA),the US "SOFA" agreement with Turkey, which requires the US to assist Turkey to develop its industrial base to the best of the US' ability. He claimed that Turkey has spent over $20B in defense R&D since the 1970's (Turkish defense R&D was $300M in 2005) to increase its defense industrial capabilities. As a result of Turkey's increased industrial base, the government's procurement priorities have shifted. He stated that the greatest value of the DIC is in providing a regular forum for discussion, whether or not we agree ON any particular subject. TAPPING JOINT RESEARCH OPPORTUNITIES -------------- ¶3. (SBU) Following up ON discussions held at the 2005 DIC meeting, both sides reiterated their interest in joint R&D projects. Mr. Bruce noted USG interest in concluding a Research, Development, Test and Evaluation (RDT&E) umbrella 
MOU with Turkey but underscored that the USG requires concrete project opportunities that have the support of one of the military services or another DOD agency before entering into an MOU. He asked for MG Inak's assistance to identify specific projects. MG Inak stated that, while Turkey would prefer to sign the MOU first and then identify project opportunities, he is aware of several potential projects, including a Turkish Navy project and a Center Of Excellence for the Defense Against Terrorism (COE-DAT)-sponsored counter-IED (improvised explosive device) development program which Turkish Land Forces will lead, with MND coordination. Dendis added that the US Army is interest in cooperation ON a tactical missile MOU. MG Inak agreed to consider this idea. Both sides agreed that any project must benefit both countries. ¶4. (SBU) Representatives of the Office of Naval Research-Global and the US Army International Technology Center-Atlantic (USAIT-Atlantic) outlined opportunities for scientist exchanges and joint research and listed specific research areas of interest. USAIT-Atlantic also outlined the mission of the US Air Force's European Office of Aerospace Research and Development (EOARD) and noted the possibility of basic research opportunities with that organization. MG Inak responded that Turkey is doing a lot in the NATO arena, investing in EU projects and evaluating several projects with Asian countries. He offered to forward the USG science and technical opportunities to Turkish universities and research centers and requested the establishment of a working group to identify additional areas of cooperation. BG Birol Erdem, MND Technical Services Department Chief inquired about possible research into dual use items. Mr. Bruce offered to provide MND with a contact at the US Defense Threat Reduction Agency, which handles this issue. ¶5. (SBU) The Turkish side suggested two additional areas for cooperation -- the certification of military aircraft and the certification of all Turkish-manufactured weapons systems. According to MND, Turkey plans to establish military aviation and defense system certification authorities and would like US consultation assistance. Col Dendis requested additional specifics in order to identify the appropriate DOD office for these tasks. Regarding the certification of military aircraft, he also recommended MND contact or visit the US Federal Aviation Administration for information ON commercial aviation air-worthiness certifications, as well as applicable US military facilities. Regarding NATO certification for ammunition, Mr. Bruce recommended that MND work with NAMSA and NATO HQ ON specific procedures for Turkish ammunition manufacturing companies. DEFENSE COOPERATION -PROBLEM OR OPPORTUNITY? -------------- ¶6. (SBU) MG Inak said Turkey's primary goal is 100% Turkish production of armaments. Absent Turkey's ability to indigenously produce an item, it will opt for co-production with a foreign firm. Only as a last resort will Turkey buy a foreign defense item outright. A Turkish company will be the prime contractor but will be "free" to choose its sub-contractors, according to Inak, who added that he would like US/Turkish defense industry cooperation to be a model for Turkey's cooperation with other countries. Mr. Bruce responded that the most successful cooperation begins with industry and moves to government -- not the other way around -- and highlighted the importance of the May 24 Defense Industry Day for US and Turkish firms to connect with each other. ¶7. (SBU) Undersecretariat for Defense Industries (SSM) Aviation Department Head Sedat Guldogan led a discussion entitled "Problems and Restrictions in Turkish Industrial Cooperation," which he said reflected the US view of the situation, noting that Turkey views defense cooperation as an "opportunity." Guldogan enumerated Turkey's defense industry priorities, reflected in SSM's new standard contract, as follows: 1) up front foreign government commitment to the project, 2) use of Turkish industry to realize the project, 3) sustainment of workshare, 4) Turkey's sovereign right to use of the finished armaments "as required." ¶8. (SBU) Guldogan denied that Turkey requires "unlimited usage rights for transferred technical data." When asked for his definition of "technology transfer", Guldogan differentiated between design source codes, which he considered "technology," and the technical data packages required for the installation of TU-origin equipment onto a US platform, which he suggested were less sensitive and did not constitute "technology transfer." Regarding Turkey's requirement for approval to modify a foreign-origin platform, Guldogan said that any restriction ON modifications for Turkey's use of an item after purchase "is unacceptable." Addressing contractor liability for force majeure actions, Guldogan insisted that a foreign contractor should bear the responsibility for its government's decisions and should resolve with its government any damages resulting from that government's actions. According to Guldogan, Turkey is bearing the liability for problems which occur up until actual production begins. Therefore it is fair to ask the contractor to bear any subsequent liability. US EXPORT CONTROLS AN UNACCEPTABLE SECURITY RISK -------------- --- ¶9. (SBU) According to Guldogan, absent an easing of USG restrictions ON foreign manufacturing, using and improving US-origin equipment, Turkey will consider doing business with the US "an unacceptable security risk." He complained of difficulty identifying "the right address" in the US government to discuss the export licensing process and said that the USG and US firms each lay blame for export license restrictions (provisos) ON each other, leaving Turkey unsure where to turn. Noting that Turkey is working ON an indigenous UAV and will look for international partners and that SSM will issue in June a tender for a surveillance satellite, Guldogan suggested that these programs will be closed to American firms unless the export license issue is "resolved." Mr. Bruce offered to connect SSM with export licensing experts to discuss the USG process. He also requested detail ON specific restrictions placed ON recently approved licenses in order to determine if the restrictions are USG-origin or industry-specific. ¶10. (SBU) Guldogan also expressed frustration over US contractors' differing definitions of a show stopper term or condition (T&C),saying that a show stopper for one company is not a problem for another company. Inak added that Turkey is willing to review those T&Cs that don't meet USG regulations but, in his view, most of the US company concerns are based ON business decision. DECLARATION OF PRINCIPLES -------------- ¶11. (SBU) To clear the way ahead for industrial cooperation, Guldogan suggested drafting a bilateral "Declaration of Principles" to pledge the efforts of both governments to expedite the export licensing process; avoid "irrational" restrictions; define and increase areas of collaboration; and increase the level of inter-operability. Mr. Bruce responded that any such document would be, at most, an expression of our governments' goodwill for cooperation -- not a legally-binding document. A "Declaration of Principles" is unnecessary, he emphasized. WORKSHARE DRIVING TURKISH JSF PARTICIPATION -------------- ¶12. (SBU) The Joint Strike Fighter (JSF) project will be a priority for Turkey over the next decade, according to Guldogan. He stated that, at the JSF meeting in Norway, the US had suggested it would consider a relaxation of technology transfer restrictions for this project, which he hopes is true. Turkey has pledged $175M in JSF investments and has high expectations for its participation in the project, including $5-$6B in workshare in "technically-intensive" areas such as the mission control systems (Note: Guldogan said TurkQreceived positive signals about work in this area),weapons integration and the air vehicle. The PM, MND and Chief of the General Staff will meet ON June 27 to determine whether Turkey will commit to JSF. Their decision will be based in great part ON Turkey's quality and level of workshare, according to Guldogan. He claimed disappointment with the $2.4B in workshare opportunities offered to-date by Lockheed Martin (LM) and its partners. (Note: We understad that LM has outlined a potential $5.4B in workshare, which could rise with the sale of additional aircraft.) ¶13. (SBU) Guldogan acknowledged that Turkey does not have financing lined up to buy 100 aircraft and is looking for international credit or another source of funding. He said Turkey is in discussions with Italy and the Netherlands for the joint establishment of a European logistics center and requested US support for this project. ¶14. (SBU) Mr. Bruce stated that JSF has been a "best value" program from its inception. All partners were aware of and agreed to those terms. He noted AT&L receipt of Turkey's letter requesting high-tech JSF workshare and said the issue is being studied and may be discussed in upcoming final JSF negotiations. He urged Turkish industry to continue its contacts with LM ON the workshare issue. DEFENSE SPACE COOPERATION STYMIED -------------- ¶15. (SBU) SAF/IA International Program Analyst Aris Yortzidis outlined project opportunities in those areas where Turkey is seeking cooperation under the umbrella space cooperation MOU (Note: signed ON November 9, 2005 ON the margins of the High Level Defense Group meeting). He emphasized that the US is ready to initiate a cooperative relationship with Turkey in the space area but is waiting for a White Paper from the Turkish Air Force that was promised in January 2006 but has not been delivered. He underscored that no cooperation can begin until the US Air Force receives this non-paper defining the areas Turkey would like to explore, as well as the technologies and capabilities Turkey can contribute to cooperation projects. When pressed, Turkish Air Force representatives suggested it might be ready in June, 2006 but provided no detail ON its content. COMPETITION KEY TO PARTICIPATION IN US DEFENSE PROJECTS -------------- -------------- ¶16. (SBU) In response to an MND request for information ON foreign involvement in US Military Depot Level Maintenance, Elizabeth Bieri, Staff Officer for the US Army Deputy Chief of Staff for Logistics explained the US Army Depot Level Maintenance process. She emphasized that US Title 10 restrictions limit the ability of foreign companies to participate and underscored that any foreign award will be made ON a "best value" basis. She and Mr. Bruce, who outlined the Performance-Based Logistics (PBL) system concept, emphasized the importance of competitive bids in US military programs and urged that Turkish companies actively pursue opportunities and demonstrate their price/value leadership in those areas where they believe they hold a competitive edge. Guldogan said the PBL concept is new to Turkey and will be a challenge. He expressed concern over the implementation of PBL ON the JSF program and requested DOD to provide any PBL-specific wording that Turkey should include in its JSF sub-contractor agreements. SECOND ANNUAL INDUSTRY DAY -------------- ¶17. (SBU) To ensure that Turkish companies received the same message presented to the Turkish MND regarding the need for Turkey to be aggressive and competitive and to demonstrate "best value" in any bid ON USG military projects, representatives of Turkish and US defense firms were invited to the second annual Defense Industry Day ON May 24 to receive briefings by Mr. Bruce, Ms. Biere and the DOD research specialists ON depot level maintenance, performance-based logistics and USG research opportunities. At every opportunity the US briefers stressed the need for Turkish companies to take the lead to identify US partners and to investigate USG program opportunities. ¶18. (SBU) Also ON May 24, USG personnel visited TUBITAK, Turkey's equivalent of the US National Science Foundation (NSF),and reviewed the programs of two of TUBITAK's 15 Istanbul and Ankara-based research institutes. TUBITAK VP Professor Dr. Omer Anlagan expressed an interest in working with the USG and noted that TUBITAK and the US NSF have conducted 40 joint projects under an exchange of letters. TUBITAK had participated in past bilateral projects under a US/Turkey research agreement that had expired in 2004. TUBITAK institutes work ON such projects as IED, remote sensing, cryptologic, small satellite, genetic engineering, fire arms identification and other sensitive technologies. US research representatives pledged to FOLLOW up with several of TUBITAK's Istanbul-based institutes to conduct a further review of missile development and other research projects. Visit Ankara's Classified Web Site at http://www.state.sgov.gov/p/eur/ankara/ WILSON