Defense

Turkey has until next month to cancel a messy multibillion-dollar Russian arms deal or face harsh US penalties

Key Points
  • Turkey has a little more than two weeks to decide whether to complete a complex arms deal with the U.S. or risk severe penalties by going through with an agreement to buy a missile system from Russia, according to multiple people familiar with the matter.
  • By the end of the first week of June, Turkey must cancel the Russian deal and buy Raytheon's U.S.-made Patriot missile defense system or face removal from Lockheed Martin's F-35 program, forfeiture of 100 promised F-35 jets, imposition of U.S. sanctions and potential blowback from NATO.
  • The U.S. State Department's current offer is the final one, according to multiple sources.
Russia's S-400 surface-to-air missile system is seen during a military parade in Moscow's Red Square.
Sefa Karacan | Anadolu Agency | Getty Images

WASHINGTON — Turkey has a little more than two weeks to decide whether to complete a complex arms deal with the U.S. or risk severe penalties by going through with an agreement to buy a missile system from Russia, according to multiple people familiar with the matter.

By the end of the first week of June, Turkey must cancel a multibillion-dollar deal with Russia and instead buy Raytheon's U.S.-made Patriot missile defense system — or face removal from Lockheed Martin's F-35 program, forfeiture of 100 promised F-35 jets, imposition of U.S. sanctions and potential blowback from NATO.

As it stands now, the U.S. State Department's current offer is the final one, multiple sources who spoke on the condition of anonymity told CNBC when asked whether the deadline had room for more extensions.

Turkey, a NATO member, is slated to receive the Russian-made S-400, a mobile surface-to-air missile system, next month. The S-400 is said to pose a risk to the NATO alliance as well as the F-35, America's most expensive weapons platform.

"NATO countries need to procure military equipment that is interoperable with NATO systems. A Russian system would not meet that standard," said a U.S. State Department official who requested anonymity given the sensitivity of the matter.

"We underscore that Turkey will face very real and negative consequences if it completes its S-400 delivery," the official added.

In 2017, Ankara brokered a deal reportedly worth $2.5 billion with the Kremlin for the S-400 despite warnings from the U.S. that buying the system would come with political and economic consequences.

In multiple efforts to deter Turkey from buying the S-400, the State Department offered in 2013 and 2017 to sell the country Raytheon's Patriot missile system. Ankara passed on the Patriot both times because the U.S. declined to provide a transfer of the system's sensitive missile technology.

All the while, Turkey has become a financial and manufacturing partner for Lockheed Martin's F-35 jet, the world's most advanced fighter.

An F-35 fighter jet is seen as Turkey takes delivery of its first F-35 fighter jet with a ceremony in Forth Worth, Texas, USA on June 21, 2018. Two such planes destined for Turkey are yet to leave American soil.
Atilgan Ozdil | Anadolu Agency | Getty Images

Lockheed Martin and Raytheon were preparing to make massive adjustments to their intricate production schedules amid a contentious negotiation with Turkey.

If Turkey goes through with the Russian deal, Lockheed Martin would have to rework its supply chain on components for the F-35 fighter jet, while also making changes to its production schedule.

Yet if Turkey abandons its deal with Russia, Raytheon would reorganize the Patriot missile defense system production schedule to guarantee that Turkey could receive the missile system within a faster time frame.

Last year, Turkey was in the process of constructing a site for the S-400 system, according to a person with firsthand knowledge of an intelligence report.

The intelligence assessment included satellite imagery of a concrete launch facility as well as bunkers, according to the person, who spoke on the condition of anonymity. The new construction fits the pattern for Russia's S-400 system, the person indicated.

If Turkey does receive its S-400 from the Kremlin this summer, the system is expected to be ready for use by 2020.

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Multibillion-dollar weapons sale between U.S., Turkey and Russia gets far more complicated