Political conflicts steering Turkey’s defense business relationships

Burak BEKDİL ANKARA - Hürriyet Daily News

DAILY NEWS photo, Emrah GÜREL

Inconsistencies in domestic and foreign politics are increasingly coming to define the activities of Turkish defense companies.

A summer of conflict in domestic politics and Turkey’s regional policy may mean new business for some firms and lost contracts for others.

“The wise company or foreign country with defense business interests in Turkey should avoid any potential conflict with the Turkish government’s political ambitions. This has become the new norm in the trade,” said one senior country representative for a Western manufacturer. “We are worried.”

A top defense procurement official declined to comment, but added: “It is most natural that governmental decisions [such as on procurement] are not totally independent of political deliberations.”

According to a London-based Turkey specialist, politics have always been a part of the Turkish decision-making mechanism, but there is something new about it. “In the past, the Turks boycotted/blacklisted contenders from this or that country based on their foreign policy considerations. What’s new today is that they are doing this much more aggressively and they can now discriminate against or in favor of local companies too.”

Recently, Turkey’s procurement authorities, under orders from Prime Minister Recep Tayyip Erdoğan, decided to revise a $2.5 billion contract for the production of six corvettes. The Turkish government in January signed the contract, dubbed “national ship or Milgem in its Turkish acronym,” with the Istanbul-based shipyard RMK Marine, owned by Turkey’s biggest industrial conglomerate, Koç Holding. The contract may now go to a luckier shipyard.

In one incident during the month-long Gezi demonstrations in June, protesters tried to escape police tear gas and pepper spray, taking refuge in a posh Istanbul hotel, the Divan, which is owned by Koç. Hotel management admitted the protesters into its lobby which quickly turned into a makeshift first aid room. The police fired more teargas and pepper spray into the hotel lobby although it is illegal to fire such chemicals into indoor spaces. It was reported that Ali Koç, a board member and third-generation family member, had ordered the hotel to help the protesters.

On June 16 an angry Erdoğan said in a public rally: “We know which hotel owners helped terrorists [protesters]. It is a crime to abet terrorists. And those crimes will not remain unpunished.”

Egyptian deals ceased

On an international scale, Turkish companies vying to sell equipment and systems to Egypt have been the victims of a major diplomatic row between the largest Arab country and Turkey. Erdoğan has been a fierce supporter of Egypt’s first-ever elected president, the Islamist Mohamed Morsi, and relations between Ankara and Cairo have been frozen ever since Morsi’s July 3 ousting by the Egyptian army.

Only six weeks before the coup d’état in Egypt, Turkey granted Egypt a $250 million loan to finance Turkish-Egyptian joint defense projects. The loan, the first of its kind, intended to boost defense cooperation and Turkish exports of defense equipment.

Earlier, Egypt expressed an interest in buying the new ANKA Medium Altitude Long Endurance (MALE) unmanned aerial vehicles built by Turkish Aerospace Industries (TAI). The potential sale of six to 10 ANKA systems to Egypt was discussed during Erdoğan’s visit to Cairo last November. The ANKA is currently undergoing flight tests.

Before that, Ankara had approved the sale to Egypt of six multi-role tactical platform, MRTP-20 “fast-intervention crafts,” produced by the privately owned shipyards of Yonca-Onuk. Under this deal, three boats would be constructed in Istanbul and the others in Egypt’s Alexandria shipyard under a Turkish license.

Latif Aral Alış, chairman of Turkey’s Defense and Aerospace Industry Exporters’ Association, said Aug. 23 that Turkish defense and aerospace exports to Egypt had ceased since the coup.

But there are luckier manufacturers too. Bloomberg quoted Turkish producer Katmerciler’s CEO, Mehmet Katmerci, as saying images broadcast worldwide of Turkish protesters fleeing the company’s anti-riot water cannon trucks, TOMAs, may help generate business for the İzmir-based company in nations from Brazil to Libya that face social unrest.

In May, the government ordered 30 TOMAs, and it plans another tender soon for 43 more. Katmerciler’s founder, İsmail Katmerci, is a former lawmaker in Erdogan’s ruling Justice and Development Party (AKP).

Industry sources say Katmerciler will sell 60 protest dispersion vehicles this year, up from 10 in 2012.

About 90 percent of the Katmerciler vehicles are exported to 41 countries, according to the company’s 2012 annual report. Key markets include Iraq, Azerbaijan and Nigeria. Syria, which accounted for about 20 percent of exports before the war, is no longer buying.