Defense industry cos greet renewed Turkish ties

Defense industry source: All Israel's defense companies have been fantasizing about renewing strategic relations with Turkey.

Israel's defense manufacturers are certain that it will take some time to get back, if ever, to the close defense industry relations that there once were between Israel and Turkey. The reconciliation between the two countries on Friday reminded them of the yearning for better times in trade with Turkey and the open admiration of Turkey's generals for Israeli defense systems.

These ties have faded over the long months since the bloodshed on the Marmara nearly three years ago and the freeze in defense trade ties that followed the incident. But all this cannot be recovered by one phone call.

A senior source in a top Israeli defense company said, "It will take some time to get back to the close relations that we had. There is a difference between Israelis going on an all- inclusive vacation in Antalya and selling classified, sensitive weapon systems. Only a year ago the defense ministry prohibited the sale of very sensitive technological systems to the Turkish Air Force after expressing concern that the sensitive technology could fall into enemy hands. The new defense minister Moshe Yaalon will now need to decide if these sensitive systems could still fall into enemy hands. In other words he'll be required to reconsider the question of what has changed in Turkey over the past year. Meanwhile, it seems that as far as defense trade is concerned there is a long way to go in normalization with Turkey."

A short while after the Marmara incident in May 2010, it became clear to defense industry heads that they were in for a long and hard winter with their Turkish customers. For the decade before that Turkey was a main export market for Israeli defense industry companies. Israel Military Industries Ltd. (IMI) upgraded 170 M-60 A1 tanks for the Turkish army to a level approaching the Merkava Mark III in a deal worth $700 million. Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) sold the Turkish Air Force advanced UAV systems for Turkey's ongoing operations against the Kurds. Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) also got in on the act with a combat aircraft upgrade supplying land stations to operate UAVs and selling new systems for collecting data. And this is only a partial list.

A defense industry source told "Globes," "All Israel's defense companies have been fantasizing about renewing strategic relations with Turkey and all of us dream about returning to the era a decade ago when the Turkish Army was Israel's biggest customer and Israel's Air Force and Navy trained together with their Turkish peers. But we have to be realistic. These relations will have to be rebuilt anew over time."

Turkey is a wonderful market

It was a somewhat artificial dispute," Manufacturers Association president Zvi Oren "I don't think there is anybody in the business sector that hasn't profited from this landmine being neutralized. I certainly think that it is possible to renew the previous times and improve trade relations between the two countries. We have things to offer Turkey and they have things to offer us."

The Israel Export and International Cooperation Institute economics department says that trade with Turkey has actually grown over the past three years. In 2012 combined trade between the two countries reached $3.5 billion, 13% down from $4 billion in 2011. Turkey was Israel's seventh largest trading partner in 2012, and there has been an 8% rise in trade in the first two months of 2013 to $652 million.

Published by Globes [online], Israel business news - - on March 24, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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