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Turkey scraps $3.4 bln missile deal awarded to China

Turkey has cancelled a $3.44 billion deal with China to build its first anti-missile system that had alarmed Ankara's allies in NATO, a Turkish official said on Sunday.

"The deal was cancelled," the official from Prime Minister Ahmet Davutoglu's office told AFP, adding that the decision is based on the possibility that Turkey may construct its own national defense system.

The news came as Turkey hosted key Western allies including US President Barack Obama but also Chinese leader Xi Jinping for the summit of G20 top economies in the Mediterranean resort of Antalya.

NATO member Turkey in 2013 had chosen China Precision Machinery Import and Export Corp as the preferred candidate for the deal, sparking Western worries over inherent security risks from Chinese technology.

French-Italian consortium Eurosam and US-listed Raytheon Co had also submitted offers but the government had prioritized talks with the Chinese company due to its competitiveness and potential for co-production in Turkey.

However, NATO raised objections to Turkey's move, pointing out that missile systems used by members of the transatlantic military alliance must be compatible. NATO insisted that the Chinese technology is not compatible with the evolving ballistic missile shield being built in Europe.

An official from Turkey's Defense Industry Undersecretariat, which has run the technical negotiations with China, said in July that a major stumbling block has been China's reluctance to make a technology transfer which could give Turkey the knowledge to operate the system and eventually replicate it.

Turkey had given mixed messages on whether it was planning to integrate the system with NATO infrastructure or not and US and European allies has wanted Turkey to use a system that is compatible with NATO's air defense.

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