Tank Tech Transfer With Turkey Near Collapse

A deal to export the country’s next generation tank XK2 Black Panther, also known as the Heuk Pyo, to Turkey is on the brink of collapse.

Hyundai Rotem yesterday was confirmed to have signed a contract with Korea’s Agency for Defense Development that could potentially derail another technology transfer deal worth 400 million dollars with Auto Car, a Turkish defense company, signed in July last year.

The contract with the agency says the technology transferred belongs to Turkey, while the deal with Auto Car includes a provision on royalty payments and does not recognize Turkey’s ownership. The core technology owned by the agency will be handed over to Turkey via Hyundai, but the two contracts contradict each other.

In January last year, Hyundai signed the contract with Auto Car six months after getting approval from the Defense Acquisition Program Administration and the agency, which were fearful of technology leaks. The contract recognized Turkey’s ownership over all related technologies including core ones, and obliged Ankara to notify Seoul when it exports the technologies to a third country.

Five months later, however, the agency signed a technology transfer contract with Hyundai with a provision requiring written approval from the defense administration’s commissioner and a royalty of five percent if Turkey transfers tank technology to a third country.

The eleventh clause of the contract’s special conditions stipulates, “When Turkey transfers or exports (the agency’s) core technology or products embodying core technology to a third country, Hyundai Rotem should gain written approval of the (defense administration’s) commissioner in advance, and receipt of all royalties for technology use in a third country should follow relevant guidelines.”

The agency or Turkey could annul the contract due to the contradictions, and this could halt technology exports. The agency, however, has not raised issue since the problematic clause assumes an event that might or might not occur “if Turkey develops a tank and sells relevant technology to a third country.”

It is unclear if the Turkish government is aware of the contract details between Hyundai and the agency. Thus, one of the two contracts should be revised to ensure smooth technology exports to Turkey.

The change in the agency’s position has led to speculation. Though the agency stressed the importance of technology exports while recognizing Turkey’s ownership in a meeting in January last year, it signed a contract contradictory to the one with Turkey in just five months. Some say the agency has prepared defensive measures against claims over technology leaks.

mhpark@donga.com