Turkey asks U.S. to extend pricing on Raytheon missile bid: sources

WASHINGTON (Reuters) - Turkey has asked the United States to extend the pricing on Raytheon Co’s Patriot missile defense system proposal, two sources familiar with the discussions told Reuters on Monday, a sign that Ankara is keeping its options open in case its talks with the preferred Chinese supplier fall through.

Turkish Prime Minister Tayyip Erdogan last week said Ankara would be open to new offers if its talks about co-producing a long-range air and missile defense system with China Precision Machinery Import and Export Corp (CPMIEC) fail.

Turkey’s decision to choose a $3.4 billion Chinese offer over rival bids from Russian, U.S. and European firms has raised concern among Turkey’s Western allies.

The sources familiar with the U.S. proposal to supply a Raytheon-built Patriot missile defense system said Turkish officials had requested an extension of the pricing included in the bid while their talks continued with China.

“It’s clear that they are trying to hedge their bets,” said one of the sources, who was not authorized to speak publicly. It was not immediately clear how long of an extension was requested.

Turkey announced in September it had chosen China’s FD-2000 missile defense system over rival systems from Franco/Italian Eurosam SAMP/T and Raytheon. It said CPMIEC offered the most competitive terms and would allow co-production in Turkey.

The U.S. ambassador to Turkey said on Thursday that Washington was concerned that the deal with the Chinese firm could undermine allied air defenses and had begun “expert” talks with Ankara to assess the potential impact.

CPMIEC is under U.S. sanctions for violations of the Iran, North Korea and Syria Nonproliferation Act.

NATO is also worried about Turkey buying a system not compatible with those of other member states, potentially undermining a core principle of the 28-nation alliance.

The sources said Turkey’s missile defense deal could also affect its plans to buy radar-evading F-35 fighter jets built by Lockheed Martin Corp, which also builds the PAC-3 missiles used by the Patriot missile defense system.

“Do you really want a Chinese radar painting the F-35s every time they fly in or out of a Turkish base?” said one of the sources.

Turkey’s Defense Industry Executive Committee had been expected to approve an initial order of two jets in December or January, the first of 100 F-35s it plans to buy in coming years to replace its aging fleet of F-4 Phantoms and early F-16s, according to a third source familiar with the F-35 program.

But that order could now be delayed until concerns about the missile defense system procurement had been addressed, said one of the sources familiar with the U.S.-Turkish discussions.

Officials at Raytheon and Lockheed declined comment.

No comment was immediately available from the U.S. Defense Security Cooperation Agency, which oversees major foreign arms sales.

Turkish officials said only that discussions with the Chinese firm were continuing.

“As the final decision has not been taken, the other firms on the list always have the possibility to improve their bids,” a senior Turkish official told Reuters.

“But rather than pricing, joint production in Turkey is more important,” the source said, adding it would depend on the outcome of negotiations with the Chinese before Turkey decided whether or not to go back to other bidders.

Raytheon last week said it was still ready to sell its Patriot system to Turkey if Ankara changed its mind. {ID:nL1N0IE0WL]

Sources familiar with the U.S. proposal said it also included terms that would allow co-production in Turkey.

Raytheon already has supplier agreements with several Turkish firms including Aselsan, which makes antenna equipment for the Patriot system, and Roketsan, which builds missile components.

Reporting by Andrea Shalal-Esa in Washington and Nick Tattersall in Istanbul; Editing by Tim Dobbyn