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China plans a new Silk Road, but trading partners are wary

Power lines near an industrial park in Eskisehir, Turkey, Nov. 27, 2015. In the summer, a Chinese company abruptly backed out of a deal to buy a stake in the electrical grid for Eskisehir and nearby provinces.
Power lines near an industrial park in Eskisehir, Turkey, Nov. 27, 2015. In the summer, a Chinese company abruptly backed out of a deal to buy a stake in the electrical grid for Eskisehir and nearby provinces.Byron Smith/The New York Times

ANKARA, Turkey — As tensions in the Mideast and Ukraine rose in recent years, Turkey moved to jointly manufacture a sophisticated missile defense system. The $3.4 billion plan would have given Turkey's military more firepower and laid the foundation to start exporting missiles.

But Turkey abruptly abandoned the plan just weeks ago in the face of strong opposition from its allies in NATO.

Their main objection: Turkey's partner, a state-backed Chinese company. Western countries feared a loss of military secrets if Chinese technology were incorporated into Turkey's air defenses.

As one of its highest economic and foreign policy goals, China has laid out an extensive vision for close relations with Turkey and dozens of countries that were loosely connected along the Silk Road more than 1,000 years ago by land and seaborne trade.

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But Beijing's effort to revive ancient trade routes, a plan known as the Belt and Road Initiative, is causing geopolitical strains, with countries increasingly worried about becoming too dependent on China.

Kazakhstan has limited Chinese investment and immigration for fear of being overwhelmed. Kyrgyzstan has pursued warmer relations with Moscow as a balance to Beijing.

With the missile deal, Turkey was turning toward China partly to reduce its reliance on NATO. "Our national interest and NATO's may not be the same for some actions," said Ismail Demir, Turkey's undersecretary for national defense.

But the deal immediately raised red flags in the West.

Besides the technology issues, the Chinese supplier, the China National Precision Machinery Import and Export Corporation, was the target of Western sanctions for providing ballistic missile technology to Iran, North Korea, Pakistan and Syria. So Turkish exports based on a partnership with China National Precision could have also been subject to sanctions.

Complicating matters, China and Russia are close allies on many issues. Russia is especially distrusted in Turkey because of its military intervention in Syria and its annexation of Crimea from Ukraine. And Turkey had been a close U.S. ally ever since it sent a large contingent of troops to fight North Korea and China during the Korean War.

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The Chinese missile project "was one of the things that really made people say 'Turkey is shifting, wow,'" said Mehmet Soylemez, an Asian studies specialist at the Institute for Social and Political Researches, an independent research group in Ankara. "China wants to remake the global financial and economic structure."

With its wealth and markets, China is a tantalizing partner.

Companies are increasingly turning to China for cost reasons, buying components or importing fully assembled products. Arzum, one of Turkey's best-known appliance manufacturers, did the engineering and marketing for its popular new Okka single-cup Turkish coffee brewers locally. But the brewers are manufactured in southeastern China.

"Ten years ago, Turkey didn't exactly see the threat of China for manufacturing," said T. Murat Kolbasi, Arzum's chairman. "The threat has to be changed to the opportunity."

Chinese companies can quickly sever ties as well.

The state-controlled China Machinery Engineering Corporation abruptly backed out of a $384.6 million deal to buy a 75 percent stake in the electricity grid of Eskisehir and nearby provinces in Turkey. It happened days after national elections in Turkey last June cast uncertainty on the future of the industry's regulations.

China Machinery provided no official reason to Turkish Electricity for canceling the deal. The Chinese company declined to comment.

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The Turkish Electricity Distribution Co., a nationwide grid company, is suing the Chinese company in an effort to collect a breakup fee. Mukremin Cepni, chief executive of Turkish Electricity, said that he had worked 18 months on the Eskisehir deal and was unenthusiastic about any more tie-ups with China.

"I won't think well of them, because personally I struggled a lot, and their going away without giving any reason exhausted us," said Cepni.

Ethnic issues have further complicated China's relations. Many countries in the region are Muslim, and versions of Turkish are spoken in more than a dozen countries, partly a legacy of the Ottoman Empire.

That history has fanned regional tensions over Beijing's stringent policies toward the Uighurs, Muslims in China's Xinjiang province who speak a Turkic language. Beijing has blamed Uighurs for a series of attacks on Han Chinese from eastern China.

When China suppressed Uighur protests in 2009, Recep Tayyip Erdogan, the Turkish prime minister at the time, condemned the actions as "a kind of genocide." Last July, Turks and Uighurs held two rounds of protests in Istanbul and Ankara.

Now the president of Turkey, Erdogan is prioritizing ties with China. He calmed the anti-Chinese protests last summer by urging his countrymen to be wary of rumors on social media about China's treatment of the Uighurs.

Nationalistic Turkish groups like Anatolia Youth, previously outspoken about the Uighurs, have responded by softening their stance toward China. Mahmut Temelli, the chairman of Anatolia Youth's foreign relations council, said that he believed that on missiles, "the bid should have remained with China."

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The missiles became an international issue two years ago, when Turkey's defense ministry announced it favored a Chinese bid. It beat out a U.S. offer to sell fully built Patriot missiles, as well as similar deals with Western Europe and Russia.

Turkish military analysts compared a long list of variables, like missile range and the willingness to share technology and manufacturing. The analysis was approved by a committee including the defense minister, generals and Erdogan, Demir said.

But nobody consulted the foreign ministry on how Turkey's allies would react, partly because NATO had already tolerated Greece's acquisition of Russian air defense missiles from Cyprus. "They were informed after the process was completed," Demir said. "It was not treated as a special project that will have a lot of political results."

Within days of the announcement about China's leading bid, NATO member countries organized a campaign to overturn the decision. President Barack Obama, Western European heads of state and top NATO commanders contacted Turkish leaders.

NATO officials have been cautious, saying any country has a right to choose its own equipment. But they have publicly expressed concern that Chinese missiles might not be compatible with NATO equipment — and privately that they were loath to share technical details to make compatibility possible.

Last month, Turkey opted to go ahead on its own. It will probably subcontract some components to foreign manufacturers, possibly China National Precision.

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An engraved metal plate from China National Precision in a polished rosewood box still sat on a shelf outside Demir's office the morning the Russian warplane was shot down. Hours of negotiating with Chinese arms makers has forged a relationship that will make future military cooperation easier, Demir said.

"There is a value," he said, "in the time we have spent with these companies."