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Monthly Defense News Recap – July 2023

Türkiye used its biennial arms exhibition, the 2023 International Defence Industry Fair (IDEF), to reveal and showcase its growing solutions catalog and, in turn, drive buyer interest from all over the world. Be it new warship concepts, armoured vehicles, advanced munitions, and marquee projects (such as the KAAN next-generation fighter and F-16 ÖZGÜR upgrade), Türkiye’s state-owned and private sector vendors have both committed to bringing their projects to fruition for domestic and overseas needs alike.

Ankara is not a stranger to being a defence exporter. In fact, in 2018, Türkiye closed several big-ticket deals with Pakistan in the form of the T129 attack helicopter and MILGEM corvette programs. While the MILGEM is progressing smoothly (with the fourth Babur-class corvette launching in August), the T129 was derailed due to the U.S’ refusal to release export licenses for the platform’s engines. Eliminating those supplier-side blocks became one of Türkiye key goals with its indigenization efforts, hence resulting in numerous engine programs for drones, helicopters, and fighter jets.

Following Strides with Leaps

Türkiye’s programs to-date show that it’s making strides in designing original solutions for a wide range of applications, be it small loitering munitions to large naval combatants to stealth fighter and drone aircraft.

However, the development processes involved to bring most of these programs to fruition up to this point required critical inputs from overseas, mainly the West. For example, the KAAN fighter prototypes rely on GE F110 turbofan engines, while the Hürjet trainer uses the GE F404.

To unlock the full export potential of its marquee solutions, Türkiye must own every critical input, including – if not most importantly – the powerplant. Being a new entrant to designing and producing aircraft, the effort to join the more exclusive powerplant club speaks to a higher ambition.

Likewise, Türkiye is also looking to pivot to original, homegrown upgrade paths for its existing systems, like the F-16. The Turkish Presidency of defense Industries (SSB) announced that the air force’s F-16C/D Block-30, Block-40, and Block-50 aircraft will undergo the domestic ÖZGÜR upgrade. Not only would this result in the Turkish Air Force’s vast F-16 fleet using locally built active electronically scanned array (AESA) radars, avionics, and electronic warfare and electronic countermeasures (EW/ECM) subsystems, but also leverage a growing inventory of locally developed air-to-air and air-to-surface munitions.

Finding Viable Partners and Customers

Türkiye’s shift to sourcing locally for both near and long-term requirements signals that Ankara is serious about the goals it set for the country’s defence industry. Undoubtedly, Türkiye’s national defence interests are a vital driver for the industry’s growth, but at the same time, Ankara likely senses the potential opening (increasingly left by Russia’s decline as an arms exporter) to push big-ticket arms sales to key markets.

Azerbaijan’s decision to join the Turkish Aerospace Industries (TAI) KAAN program is a notable example of this shift. Until recently, Azerbaijan was mainly customers of Russian military hardware, especially in terms of combat aircraft. However, Baku’s decision to partner with Ankara on the KAAN signals its desire to not only pivot away from Russian aircraft (at least in the long-term), but potentially build its own industry by collaborating with the Turks, not just in terms of aircraft, but other defence applications too.

Kazakhstan is also being pegged as another potential partner in the KAAN. To Türkiye’s benefit, these new potential partners not only bring help with driving economies-of-scale (via more production orders), but also strong fiscal support via their natural resource exports. This dual benefit can help secure funding for the KAAN and its critical subsystems (e.g., engine) while also help distribute the R&D costs across a larger number of units, thereby resulting in a more competitive price-point for the fighter. One can expect Türkiye to target former key Russian markets – e.g., Azerbaijan, Kazakhstan, Algeria, Iraq, etc – in the near future.

Türkiye will also target countries that would prefer Western equipment, but without the political, financial, or regulatory strings typically associated with U.S. and European solutions. Arguably, this could be among Türkiye’s biggest viable markets in aggregate. Countries like Pakistan, Bangladesh, Malaysia, Qatar, United Arab Emirates, Iraq, Argentina, South Africa, Nigeria, Ukraine, and many others fall into this group.

For Türkiye, the ideal scenario would be to draw the resource-rich former Russian markets like Azerbaijan and others to make its programs fiscally resilient so that they reach fruition. In turn, Türkiye could market the products to a wider group of countries and, subsequently, drive economies-of-scale. In fact, in certain cases, like Pakistan, the customer could also potentially contribute to the supply chain by manufacturing parts, carrying out assembly, or providing maintenance, repair and overhaul (MRO) services. These inputs can help reduce costs further while also enabling Türkiye to further expand its market reach.

The Turkish Deputy Minister of Defence, Celal Sami Tüfekci, recently announced that Turkish and Pakistani officials will meet by the end of August to potentially conclude an agreement that will see Pakistan officially partnered in the KAAN fighter program. Speaking to Quwa, TAI officials had previously noted their interest in investing in Pakistan as a potential zone of parts production and MRO services for helicopters (possibly as part of an offset agreement in the stalled T129 ATAK contract).

Though a potential pathway is forming for Türkiye, major challenges remain.

First, the flagship projects – especially KAAN – must succeed and come to fruition. Though the Turks may succeed in securing funding support and a strong cadre of initial customers, the technical challenges involved with fighter development and manufacturing remain. Not only is Türkiye a new entrant in aerospace, but it is pursuing these projects as a smaller economic power compared to the superpowers, the U.S. and China. Thus, the only viable path (which the Turks are pursuing) is to form partnerships and consortiums so as to pool resources and drive economies-of-scale to make these projects feasible.

Second, while the technical and economic merits are worthy of consideration, the Turks will also face more underlying obstacles in their target markets. For example, the likes of America and China will also pursue their interests in many of those countries, and their respective motivations are driven by geo-political and economic interests that cut beyond defence, but cover energy, capital flows, investment, and others. If the Turks were to compete with either superpower (but especially America) for a defence contract, it will not just be competing on a technical basis, but on a more comprehensive arena.

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