Turkey Begins Testing Missile Radars at Heart of Row With U.S.
Turkey Begins Testing S-400 Missiles’ Radar System in Ankara
(Bloomberg) -- Turkey will test a component of its newly acquired Russian air defense system, a step that risks escalating a dispute with the U.S. and touching off possible sanctions. The lira reversed gains.
Military aircraft will be used in the capital Ankara on Monday and Tuesday during the testing of the S-400 system’s radar-detection equipment, a Turkish defense official said, asking not to be identified in line with his department’s restrictions.
The decision comes after President Recep Tayyip Erdogan said that he told President Donald Trump during a meeting this month that Turkey wouldn’t give up on deployment of the systems, risking penalties championed in Congress.
“What does testing mean? It means they have turned on the thing,” said Cristian Maggio, the head of emerging-market research at TD Securities in London. “So sanctions become an even more concrete possibility. They have always been, but now they may seem possible and imminent.”
The two NATO allies have been sparring over the potential risks posed by the purchase to the Pentagon’s costliest weapons program, the F-35 fighter jet built by Lockheed Martin Corp.
Top Pentagon officials have repeatedly said Turkey will not be able to continue building components for the F-35 or buy the jet if it continues with its deployment of the S-400. The S-400 system was designed to shoot down U.S. and allied aircraft at greater ranges and altitudes than older missiles. U.S. officials are concerned that sensitive technology in its advanced F-35 fighter plane designed to evade such a system could be compromised and used to improve Russian technology if Turkey has both.
“Turkey’s insistence on moving forward with the S-400 is inconsistent with its commitments to NATO and will have impacts on Turkish interoperability with the alliance,” Lieutenant Colonel Carla Gleason, a Pentagon spokeswoman, said in a statement on Monday.
Trump said after his Nov. 13 meeting with Erdogan that Turkey’s deal with Moscow presents “some very serious challenges” for the U.S., and directed Secretary of State Michael Pompeo to try to resolve the impasse.
The U.S. response to the radar tests will be “crucial” to investor sentiment surrounding Turkish assets, according to Piotr Matys, a strategist at Rabobank in London.
“Any indication that Trump’s positive attitude toward Turkey is fading amid growing political pressure from Congress would provide USDTRY with a much stronger upside traction,” Matys said.
Read More: Turkey’s Assets Set for Rocky Ride as Country Tests Radar System
Fear of such a fallout was already apparent in the lira’s reaction to Monday’s news. The currency fell as much as 0.5% and was trading 0.4% lower at 5.7339 per dollar at 12:27 p.m. in Istanbul. The yield on Turkey’s two-year benchmark notes rose 7 basis points to 11.93% and Istanbul’s benchmark stock exchange swung to losses.
--With assistance from Tugce Ozsoy and Glen Carey.
To contact the reporter on this story: Firat Kozok in Ankara at fkozok@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, ;Onur Ant at oant@bloomberg.net, ;Riad Hamade at rhamade@bloomberg.net, Amy Teibel, Mark Williams
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