Turkish decision to buy Chinese missile system stirs controversy

Merrill Lynch has refused to underwrite Turkish arms manufacturer Aselan's proposed public offering, citing concerns about Turkey's decision to buy its missile defense system from a Chinese company.

al-monitor The Merrill Lynch logo is seen on a building, New York, May 7, 2012. Photo by REUTERS/Keith Bedford.

Topics covered

us-turkish relations, turkish military, turkish foreign policy, nato, missiles, chinese foreign policy, china

Dec 6, 2013

Western reactions to Turkey’s choice of a Chinese company [China Precision Machinery Export-Import Corp.] for its long-range missile system are mounting and are now tangibly affecting the financial sector. The latest such reaction was the refusal of international consultants Merrill Lynch to underwrite the second public offering of [Turkish arms manufacturer] Aselsan, pointing to its selection of the Chinese firm and the impossibility of underwriting such a project. Merrill Lynch, in a letter to Aselsan, explained why it could not perform the underwriting.

Merrill Lynch officials confirmed to us that they had rejected the proposal because of Chinese involvement, but refused to give details of the letter sent to Aselsan.

According to information reaching us, Merrill Lynch, which is one of the leading underwriters in the United States, pointed to that particular Chinese company's inclusion on the US blacklist for black money [money laundering] and financing terrorist operations. Aselsan is known to be involved in the long-range missile project, and its potential cooperation with the blacklisted Chinese company was one of the reasons for Merrill Lynch’s refusal.

Aselsan made an initial public offering some time ago, and 15% of its shares are traded on stock markets. Aselsan planned a second public offering, and without giving details, asked for bids from international underwriters. The timing and percentage to be offered to the public is to be decided jointly with selected underwriters. 

The conviction is that Merrill Lynch wrote its letter in accordance with the preferences of the US government. This is why it is not yet clear if Aselsan will be able to find an international underwriter, which are mostly from Western countries, and whether it will be able to go ahead with its second public offering.

One stark reality is that Turkey’s decision about the long-range missile project is becoming an impediment to the operations of Western companies in some sectors in Turkey. The reluctance among the financial sector is yet another indicator of how the selection of the missile manufacturer is becoming a factor increasing the vulnerability of an economy that is dependent on foreign resources.

In short, the troubles that followed the selection of the Chinese missile are growing.

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More from  Erdal Saglam