US embassy cable - 04ANKARA6661

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. 
 
---------------------------- 
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. 
 
------------------ 
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. 
 
-------------------------- 
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." 
 
-------------------------------------- 
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. 
 
------------------------------------ 
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