- UK wants to develop its trading relationship with Ankara
- Turkish officials demand that Rolls-Royce shares sensitive technology
- High-level ministerial discussions attempt to resolve issue
Turkish and UK ministers are battling to save a flagship partnership to develop a fifth generation fighter jet.
Rolls-Royce, the British aero-engine group, has been working with Turkish industrial giant Kale to bid for the engine development contract on the TF-X jet, an ambitious project to produce Turkey’s first indigenous combat aircraft.
A dispute has emerged over the role of a company with close ties to Qatar and Turkey’s President Recep Tayyip Erdogan.
The programme is a priority for President Erdogan, who wants to build a national defence industry to drum up nationalist support and reduce Turkey’s reliance on outsiders amid growing strains with many Nato allies.
It is also crucial for the UK, which wants to develop its trading relationship with Turkey and sees the partnership as key to preserving Britain’s ability to develop military aircraft given the dearth of UK fighter programmes once production of the Typhoon combat jet comes to an end in the mid 2020s.
Technology sharing raises concerns
On a visit to Turkey in January 2017, Theresa May said the fighter jet partnership marked “the start of a new and deeper trading relationship with Turkey and will potentially secure British and Turkish jobs and prosperity for decades to come”.
However, the project has run into problems after Turkish defence officials demanded that Rolls-Royce share sensitive technology with TR Motor, a company that is 55 per cent controlled by a subsidiary of BMC, a defence manufacturer whose major shareholders include the Qatari ministry of defence, and a businessman known for his links the Turkish president.
“The UK government does not want to fully lift export controls. They say: ‘what if in 10 years’ time there is a huge row with another country and we want to stop selling this to them?’,” said a Turkish official.
Rolls-Royce executives and British ministers have told Turkey that they cannot accept an arrangement that would see TR Motor own and manage the intellectual property of the programme.
“There are strict parameters around the TF-X programme,” said a person familiar with the situation. “Rolls-Royce doesn’t want a potential competitor to take the IP away and use it outside this programme for their own benefit.”
Calls between Turkish and UK ministers were planned this week to discuss the issue. Gavin Williamson, Britain’s defence minister, also discussed it with his Turkish counterpart, Nurettin Canikli, on the fringes of a Nato meeting last week.
IP issue threatens Rolls-Royce deal
Should the two sides fail to reach an agreement, Rolls-Royce could be forced to pull out of the programme. This could call into question the role of BAE Systems, which last year signed a £100m contract with Turkish Aerospace Industries to help design the jet. About 200 BAE engineers are working with TAI in the UK and Turkey.
The UK Ministry of Defence said: “The fact this issue was discussed between the two ministers tells you how seriously this is being taken. Both sides remain committed to finding a resolution.”
Other people close to the subject insisted that progress was being made, and that both sides were determined to overcome the obstacles.
“This is all part of the normal process of development programmes at this stage. We have had productive commercial discussion and are maintaining an active dialogue,” Rolls-Royce said. A team from the company will travel to Ankara for further talks after the presidential and parliamentary elections on June 24.
During President Erdogan’s trip to London last month, the two sides appeared to have resolved the IP issue. An initial agreement was signed and a deadline was set for July 31 to finalise terms, including the sharing of technology and export conditions. However, Turkish officials later renewed their demand that TR Motor supervise the propulsion programme.
Turkey wants to retain full ownership
BMC produces vans, buses and military vehicles. It recently won the tender to produce the first fully Turkish-made battle tank.
The company is 49.9 per cent owned by the Qatari armed forces, Yasin Ozturk, a member of the board of directors, told Turkish defence magazine MSI in December. He said that a further 25 per cent was owned by Ethem Sancak, a Turkish business tycoon who once said in a newspaper he owned that after getting to know Mr Erdogan, he learnt that “divine love is possible between two men.”
Osman Dur, general manager of BMC Power, the BMC subsidiary that is working on the TF-X programme, insisted that the project “will benefit the country”.
“All the IP and similar intellectual property rights gained within the scope of this project will remain in Turkey and belong to the SMM [the Turkish government’s under-secretariat for defence industries], which is providing the funding for the project,” he said.
A Turkish official with knowledge of the negotiations said that BMC had offered financial support for the TF-X programme, which Turkey estimates will cost $30bn in total. He said that Qatar’s involvement could also lead to future sales of the jet to the small Gulf state.
The official added: “For us, the whole point is that we want to own it. We are trying to become an independent defence producer. We don’t want restrictions imposed by outsiders.”