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International Acquisition Management
F-35, S-400 and Turkey – Irresistible Force vs. Immovable Object?
Written by: Frank Kenlon (Prof of Int'l Acq, DAU/DSMC-Int'l)
April 14, 2019
Various defense media sources have recently published several articles on the Turkish Government’s plan to acquire the Russian-built S-400 air defense system and the U.S. Government’s response suspending F-35 aircraft deliveries. This is not the first time the U.S. has blocked a major arms export to exert political-military leverage in a dispute with another nation. In 1990, the Pressler Amendment blocked deliveries of approximately 30 F-16s that Pakistan had already purchased via U.S. Foreign Military Sales (FMS) arrangements due to that country’s undeclared nuclear weapons program.
So why is this situation different? Turkey is one of the nine International Cooperative Program (ICP) partner nations in the Joint Strike Fighter (F-35) Production, Support, and Follow-On Development Memorandum of Understanding – known as the JSF PSFD MOU – which entered into effect on December 31. 2006. This blog will explore the potential impacts on the JSF ICP in the context of the ongoing political-military dispute.
Let's begin with a brief overview of the dispute itself. Several recent media articles have noted that the U.S. is blocking F-35 deliveries as leverage to ‘persuade’ the Turkish Government to reverse its decision to purchase the S-400 air defense system from Russia. It’s apparent to most observers that Turkey’s acquisition of the S-400 system could adversely affect future F-35 combat effectiveness through continuous observation of F-35 operations in the region which -- through some kind of compromise of sensitive information -- could find its way to the Russians. Moreover, it’s not just the U.S. that would be harmed. Six other NATO member nations – Canada, Denmark, Italy, Netherlands, Norway, and the U.K. – are JSF PSFD MOU partners. Two other NATO nations (Belgium and Germany) are considering acquisition of F-35 through FMS arrangements. It’s clear that these nations, as well as the entire NATO alliance, would be adversely affected by Turkey’s S-400 procurement plans.
What is less clear is why F-35 deliveries are being used as the sole leverage point in this dispute so far. Why not block all U.S. deliveries of defense articles and services via FMS and Direct Commercial Sales? Shouldn’t all NATO member nations consider suspending arms exports to Turkey until they change their S-400 acquisition plans? Perhaps the North Atlantic Council (NATO’s governing body) should take actions to suspend Turkey’s participation in some -- or even all -- of NATO foreign policy and military activities until this situation is resolved? It will be interesting to see whether a broader spectrum of political-military measures are actually implemented if Turkey goes ahead with its S-400 purchase, or if just the JSF ICP will be used as leverage.
JSF Acquisition Program Aspects
A few media articles have focused on the potential adverse impacts on the F-35 program if Turkey decides not to honor its JSF PSFD MOU commitments due to U.S. suspension of F-35 deliveries. Some observers in government and industry have expressed concerns about the adverse acquisition impacts on the JSF domestic, partner nation, and FMS aspects of the program. Is this a truly a cause for concern? Not really …
It is true that, in the near term, there would be some adverse impacts due to:
U.S., partner, and FMS customer government economies of scale savings reductions due to suspension of future Turkish JSF aircraft and sustainment procurement orders (i.e., buy a bit less, pay a bit more from a contract unit cost perspective).
U.S. industry loss of anticipated revenues from near-term sale of JSF defense articles and services to Turkey.
However, U.S. domestic programs have to deal with changes in plans that reduce anticipated procurement quantities – either due to Congressional actions or potential ICP or FMS sales that fall through – so there is nothing really new here. Moreover, it’s apparent that the JSF program is in a better position to reconfigure its supplier base (as required) to mitigate the potential loss of Turkish industry sources than most comparable U.S. domestic and FMS programs. Doesn’t seem like that big a problem, but sometimes the devil is in the details, so let’s dig a bit deeper and see what we find.
JSF PSFD MOU Provisions
Does the JSF PSFD MOU say anything about situations like this? Well yes it does, and it’s a public domain document so anyone can access and read it.
Spoiler alert -- while the current situation with Turkey is unusual, it’s not unprecedented. The JSF PSFD MOU – like all ICP international agreements – contains provisions that govern disputes among the MOU partners as well as the “rules” for withdrawal if a partner decides to leave the program. Here are the MOU’s provisions in these areas.
Settlement of Disputes
(Section XVII) is straightforward:
“Disputes among the Participants arising under or relating to this MOU will be resolved only by consultation among the Participants and will not be referred to an individual, to a national court, to an international tribunal, or to any other person or entity for settlement.”
How does this work in practice? Successively higher levels in each government attempt to resolve a dispute until it finally reaches the partner nation Heads of Government. If they cannot resolve the matter, it remains unresolved until one or more of the partner nations withdraws as a result of the dispute. If no partner withdraws, program implementation continues based on the MOU’s provisions and all previous decisions arrived at on a consensus basis by the partner nations’ MOU governance board (in the case of the JSF PSFD MOU, this is called the “Joint Executive Steering Board (JESB).”
(one part of Section XIX) is more complicated, but the basic “rule” is:
“Any Participant [partner nation] may withdraw from this MOU upon 90 days written notification of its intent to withdraw to the other Participants. Such notice will be the subject of immediate consultation by the JESB to decide upon the appropriate course of action. In the event of such withdrawal, the following rules apply:”
This paragraph is followed by several additional sub-paragraphs and paragraphs that spell out all the details. How does MOU dispute settlement work in practice? Often with great difficulty, since there are high level national interests and a lot of money involved.
What Might Happen in Formal JSF PSFD MOU Dispute?
It’s pretty obvious that the best outcome would be political-military resolution of the current suspension of F-35 deliveries versus S-400 acquisition impasse. However, what would happen if the irresistible force and the immovable object collide in this case ending up in a formal JSF PSFD MOU dispute?
Before starting, here’s a caveat – I am a DAU professor expressing my thoughts in a blog. I won’t be involved in any DoD decision making regarding a potential JSF PSFD MOU dispute caused by this situation. That said, “back in the day” I was the U.S. DoD chief negotiator for all of the JSF MOUs from the program’s inception. Moreover, I was responsible for oversight and management of all Navy ICP activities – and later on, all DoD ICP matters – for over 20 years. As a result I was involved in MOU disputes at various levels a couple times a year on average. Some of them got pretty ugly. While each denouement (as the French would say) had its own challenges, in general they all ended up about the same.
Put another way, while the location and characters were different, I saw the same movie based on the same plot about 50 times. It didn’t take very long before I had a really good idea of what would happen in the end after the first couple of scenes. However, as the investment advertisements say, “past performance is no guarantee of future returns.” Accordingly, I ask that you consider my observations in this blog – however well-informed they might be regarding what might happen -- in the context of this adage. Caveats duly noted, here are my thoughts …
I always found that most U.S. and partner nation representatives involved in MOU disputes tended to think their particular dispute was metaphysically complex and hard to fathom, like a game of Star Trek three-level chess. Not surprising really – not only was it their first time “seeing the movie” many of them were “in the movie,” which colors your perspective quite a bit.
However, as an experienced (and hopefully more objective) observer, I found MOU disputes relatively straightforward, like checkers or tic-tac-toe. Why? Because the primary factors in each dispute were always the same. Moreover, in most situations the U.S. was the partner nation with the most leverage in a dispute due to its larger investment -- and resulting greater amount of control – over the ICP MOU program. A “first among equals” partner, if you will. The JSF PFSD MOU is based on these principles. Accordingly, here’s a brief analysis of each key factor to help predict what will happen if the current situation being reported in the media becomes a formal MOU dispute:
: Who has control of (or has already benefited from) all of the JSF partner nations’ funding already provided “pre-dispute” under the MOU?
: The U.S. and the other partner nations.
: Who has control of the JSF defense articles and services developed and produced “pre-dispute” under the MOU?
: The U.S.
: Who has government control of the JSF acquisition program being carried out under the MOU (minus the partner who is disputing what is happening under the MOU)?
: The U.S. and the other partner nations.
: Who has control of the JSF program industrial efforts being carried out under the MOU (minus the partner who is disputing what is happening under the MOU)?
: The U.S. and partner nations through U.S. prime contracts with Lockheed Martin and Pratt & Whitney.
: If a partner unilaterally withdraws from the JSF PSFD MOU, what happens?
: Per MOU paragraph 19.4.3. the withdrawing partner is obligated to pay any ‘marginal’ contract cost increases ‘caused’ by their withdrawal to the remaining partners.
What is Turkey’s potential leverage in a future JSF PSFD MOU dispute? They can stop sending their funding contributions – which at this point are mostly for Turkish recurring procurement actions -- and prevent their industry from honoring JSF program subcontracts, which are all second source items. Not much leverage here …
Worst Case Scenarios
Accordingly, the Worst Case Scenario for the U.S. and other partner nations’ would involve: a) higher marginal short term costs for JSF production and sustainment; and, b) reordering JSF industrial work, which might entail some short term supplier shortages. However, it’s very likely that in the mid-to-long term, the U.S. and its partners would replace Turkish JSF buys with future F-35 FMS sales, and cut Turkish industry out of the pattern entirely, sharing current and future JSF program industrial work among themselves.
By comparison, the Worst Case Scenario for Turkey would involve $300M of lost non-recurring investment, no F-35 deliveries, no future JSF industrial work, the potential for similar U.S. sanctions on Turkish purchase of other U.S. defense articles and services, and potential sanctions from NATO in the acquisition area.
Note that there would almost certainly be Worst Case Scenario political-military impacts on the U.S., JSF partner nations, NATO, and Turkey, but they’re beyond the scope of my comprehension (and this blog).
I remain hopeful that the U.S., Turkey, and their NATO allies will find a way to resolve this situation in the near future. However, it also makes sense for the U.S., JSF partner nations, and the entire NATO alliance to consider what might happen -- and prepare to take appropriate measures within the JSF international cooperative acquisition program -- to minimize disruptions and exert maximum leverage to achieve their desired political-military objectives.
Until next time,
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