Turkish defence giant struck by economic fallout from Syria incursion

Turkey’s defence corporation Aselsan could be one of the first economic casualties of the ongoing Turkish military operation in northern Syria, after it was forced to cancel its planned secondary public offering to foreign investors.

Aselsan is the world’s 58th largest defence company, with exports accounting for a large portion of its annual revenue of $1.7 billion. It is also a main provider of equipment and electronic defence systems for the Turkish military.

The proposed secondary public offering fell through due to the lack of a suitable offer, a company representative said in a statement to the Istanbul Stock Market. Aselsan had sent proposals to 18 companies, nine of them foreign, according to media reports. All nine of the foreign firms were banks, including Morgan Stanley, JP Morgan and Citigroup.

Knowledgeable sources have said that the numerous, vague statements on the matter by Aselsan signal that the company has undergone a significant crisis in its attempts to sell the shares.

This type of sale is usually conducted by a brokerage house, which pays the company regardless of whether the shares sell. However, events indicate that no brokerage house was willing to undertake the risk, a source from the Capital Markets Board of Turkey (CMBT) told Ahval.

The secondary public offering was announced on Dec. 27 last year. Its failure can be explained by “momentary changes” to the market, in Turkey’s case caused by the Afrin operation coming to the agenda, according to the same source.

Turkey began its assault on Afrin on Jan. 20, aiming to clear the region of the mostly-Kurdish People’s Protection Units (YPG) holding it. Turkey regards the YPG as a terrorist organisation linked to the separatist Kurdistan Workers’ Party.

The incident has sparked serious tensions between Turkey and its NATO ally the United States, which has been providing weaponry and support to the YPG, which it considers an indispensable ally in the fight against the extremist jihadist Islamic State.

Turkey’s agreement to buy S-400 surface-to-air missile defence systems from Russia may also have had some influence on the breakdown of the sales, said the CMBT source.

The purchase of the missiles from one of NATO’s rivals “worried the West because the system cannot be integrated into NATO’s defense architecture,” Reuters reported on Dec. 29 last year.

This incident recalls a similar episode involving Aselsan in August 2013, when Turkey agreed to buy long-range missiles from a Chinese company. Merrill Lynch had won a public offering by Aselsan that year, but the deal fell through in December when the United States blacklisted the Chinese firm under the scope of operations against money laundering and terrorism.