The Turkish Defense Industries Undersecretariat (SSM) has a plan for Israel to meet some of the costs of modernizing Turkey's American M60-A1 tanks by purchasing water from the Manavgat river in southern Turkey.
An initial deal for Israel to modernize 170 M60-A1 tanks came close to being signed, the issue being discussed during the visit of Israel's controversial Prime Minister, Ariel Sharon, in Ankara on August 8. Anti-Israeli demonstrations took place in Turkey during the visit, while Turks and Israelis once again discussed the modernization of the tanks by Israel's IMI. SSM Undersecretary, Professor Dursun Ali Ercan, told the Turkish Daily News: "We should still work on bringing down the price." He added that plans for Israel to meet some of its offset pledges by purchasing water from Turkey had been temporarily abandoned, since the Foreign Ministry had cited several political and technical reasons why the sale of water to Israel should not be linked to the deal.
The water sale negotiations became deadlocked when the Israeli side sought to reduce the price of the water and Turkish transporters insisted on carrying the water to Israel. A defense industry source said that the Foreign Ministry raised concerns that a connection between the two deals would send wrong signals to Turkey's Arab neighbors. However, the same source said that SSM would write a letter to the Foreign Ministry attempting to remove their concerns.
"The amount that Israel will pay for the water purchase is estimated at about $75 million over the coming ten years, while the tank project is scheduled to be completed in about six years. Israel has to make an offset commitment of which the water sale is only a small portion. Thus there should be no need for concern," said this source.
Meanwhile, despite persistent pressures exerted upon Turkey by companies like General Dynamics to allow them to compete in the tank-upgrading project, SSM has accelerated talks with Israel for the earlier modernization of 170 M60-A1 tanks. Ercan did not rule out that the upgrading of the remaining tanks in Turkey's inventory will be contracted to Israel in the future.
The competition between the maker of Turkey's M60-A1 tanks, General Dynamics and IMI is expected to become fiercer as Turkey has speeded up its negotiations with Israel. General Dynamics is worried that if Israel finally signs the M60-A1 modernization contract, its chance to get Turkey's $7 billion main battle tank project will increase, as SSM seeks to install on the MBTs technologies similar to those to be installed on the M60s.
There are still question marks over whether Turkey will go ahead with the planned co-production of 1,000 third generation MBTs due to the economic crisis and to doubts raised whether Turkey requires so many tanks. Turkey's controversial decision in early June 2000, for IMI to produce a prototype of an M60 exclusively, prompted criticisms from local industry sources too. Apart from General Dynamics, FNSS, a Turkish-US consortium, offered earlier to produce tank prototypes with the aim of competing for the project. But the SSM disregarded both offers. The French Giat Co. also made an offer to the SSM last year to modernize M60 tanks.
The initial project involves the modernization of 170 M60-A1 tanks during the coming six years to meet an urgent operational requirement. It is valued at between $300 million and $350 million. However, there is still a gap between what Turkey is ready to pay for the modernization of the tanks and what the Israelis want. According to defense industry sources, Israel requests something like $1 billion, but is ready to make a slight reduction.
In view of Turkey's deep economic crisis (the Turkish Lira has lost about 90% of its value against the dollar,) Turkey is seeking various means of financing the project. But most of the money is expected to come from SSM funds.
