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A Strategic Intelligence Briefing | Aerospace, Defence & Sanctions Practice
The conflict that erupted on 28 February 2026, when the United States and Israel launched coordinated strikes across Iran, did not merely alter the balance of power in the Middle East. It fundamentally reshaped the strategic environment in which Türkiye operates — economically, militarily, and legally. For global investors, defense primes, and multinationals with exposure to the region, understanding Türkiye’s position in this new order is no longer optional. It is a prerequisite for sound decision-making.
This briefing examines the dual reality facing Ankara: a moment of profound strategic risk, and an equally profound moment of industrial and commercial opportunity. It also addresses the legal and compliance landscape that any serious international player must navigate when engaging with Türkiye’s defense and aerospace sector.
The Strategic Context: A War Türkiye Did Not Want — But Cannot Ignore
Türkiye shares a 560-kilometre land border with Iran. It is NATO’s only member state in the immediate orbit of the conflict. From the outset, Ankara has pursued a posture of calibrated neutrality — condemning neither Tehran nor Washington directly, while protecting its own territorial integrity and economic interests with increasing assertiveness.
That assertiveness was tested almost immediately. On 4 March 2026, NATO air and missile defense systems intercepted an Iranian ballistic missile in Turkish airspace, reportedly aimed at the Incirlik air base in the country’s south. A second missile was downed over Gaziantep on 9 March, followed by a third interception near Incirlik on 13 March, and a fourth on 30 March. Each incident prompted a formal diplomatic protest from Ankara and a firm public warning from President Erdoğan that Türkiye would “decisively and without hesitation” respond to any threat against its territory.
These are not isolated incidents. They reflect a structural tension that has existed between Ankara and Tehran for decades — competition for regional influence across the Arab world, the Kurdish question, energy transit rights, and the balance of power in post-Assad Syria — now compressed into an acute crisis. The Kürecik Radar Base in Malatya, which houses a NATO AN/TPY-2 early-warning radar widely regarded as the first link in the Western alliance’s missile detection chain, has been identified by analysts as a particularly sensitive potential target, given Iran’s strategy of disabling the region’s radar architecture.
Ankara’s response has been instructive. Rather than retaliating or fully aligning with its Western partners, Türkiye has deployed fighter jets to Northern Cyprus, reinforced its southeastern air defenses with NATO Patriot batteries, and established new emergency defense planning directorates across all cabinet ministries. Diplomatically, Türkiye continues to present itself as an indispensable intermediary — a NATO member that maintains open channels with Tehran and that could, in theory, play a mediating role as the conflict evolves.
The Economic Ledger: Risks That Cannot Be Discounted
Before turning to opportunity, intellectual honesty requires confronting the risks this conflict poses to Türkiye’s broader economy.
Türkiye imports approximately two-thirds of its energy needs. Iran has historically supplied around 13% of Türkiye’s natural gas imports. The disruption of that supply, combined with the near-total halt of tanker traffic through the Strait of Hormuz, has sent energy prices surging across the region — compounding inflationary pressures in an economy where annual inflation was already running at approximately 32% as of February 2026. The Turkish Central Bank had been guiding the market toward a target of 13–19% inflation by the end of 2026. That path has become considerably more difficult.
Tourism is another casualty. The Eastern Mediterranean’s designation as an unstable zone by international holidaymakers has sharply curtailed summer bookings, with visitors redirecting to other destinations. For a country where tourism contributes meaningfully to foreign exchange reserves, the timing is damaging.
There is also the refugee risk. Türkiye already hosts one of the world’s largest refugee populations. A collapse or severe fragmentation of the Iranian state could trigger a new wave of displacement across Türkiye’s eastern border — a prospect that strains social infrastructure and carries domestic political consequences.
Finally, Ankara’s long-standing fear of Kurdish resurgence cannot be discounted. With the Kurdish underground having announced its disbandment in May 2025, and with Syrian Kurdish groups having lost ground following the al-Sharaa regime’s gains in January 2026, Iran’s internal destabilization risks reinvigorating PJAK — the Iranian branch of the PKK — and reversing gains that Ankara considers among its most significant recent strategic achievements.
The Defense Industrial Opportunity: Türkiye’s Ascent Accelerates
Set against these risks is a defense industrial story of remarkable momentum — and one that the current conflict is accelerating rather than interrupting.
Türkiye’s defense and aerospace exports reached $10.54 billion in 2025, a 48% increase year-on-year, and the sector signed new export contracts worth $17.9 billion — an increase of 79% compared to the previous year. The Defense Industries Presidency (SSB) characterized 2025 as a “golden age,” with landmark deals including a €2.6 billion contract for 30 HÜRJET aircraft with Spain, the export of 48 KAAN fifth-generation fighters to Indonesia, and naval export agreements with Portugal. Five Turkish companies — ASELSAN, TUSAŞ, Baykar, Roketsan and MKE — now rank in the SIPRI global top 100 arms-producing firms.
These numbers reflect a decade-long policy of indigenization. What was an industry dependent on foreign components for roughly 80% of its inputs in the early 2000s has reduced that dependency to approximately 20% today, with domestic value capture now reaching 80% across major platforms. ASELSAN leads the domestic market with revenues of $2.17 billion in radar, electronic warfare, and electro-optics. TUSAŞ operates a 4-million-square-metre campus in Kahramankazan simultaneously producing the KAAN fighter, the GÖKBEY helicopter, and the ANKA-3 UAV. Baykar — whose Bayraktar TB2 drone has achieved battlefield validation in Ukraine, Libya, and Nagorno-Karabakh — now generates 90% of its revenues from export sales, with deliveries spanning 34 countries.
The Iran conflict, paradoxically, is amplifying this trajectory. Regional crises historically elevate the visibility and strategic importance of Türkiye’s defense sector, both domestically and among partner nations. The proven performance of NATO-interoperable Turkish air defense systems during the missile interceptions of March 2026 has demonstrated the real-world capability of Turkish platforms in high-intensity threat environments. The SSB has publicly identified the war as a catalyst for accelerated investment in air defense, cyber capabilities, missile development, and electronic warfare — capability gaps that the conflict has highlighted. A $6.5 billion contract for the “Steel Dome” integrated air defense architecture, signed in 2025, is now being executed with renewed urgency.
For global defense primes, tier-one suppliers, technology investors, and sovereign wealth funds looking to diversify away from saturated Western defense markets, Türkiye’s ecosystem offers something increasingly rare: scale, combat-proven platforms, rapid development cycles, and a government with both the political will and the financial architecture to sustain long-term investment.
The Legal Landscape: Where Opportunity Demands Expert Navigation
The opportunities described above do not exist in a legal vacuum. They sit at the intersection of some of the most complex and rapidly evolving areas of international law — sanctions, export controls, dual-use regulation, and technology transfer. For any international player entering or expanding in this market, the legal dimension is not a compliance footnote. It is a strategic necessity.
Sanctions Exposure and Secondary Risk
The Iran conflict has sharply intensified OFAC enforcement activity touching Türkiye. On 25 February 2026 — just three days before the war began — the US Treasury sanctioned more than 30 individuals, entities, and vessels, including Turkish companies alleged to have facilitated Iran’s UAV and ballistic missile procurement networks. The Bureau of Industry and Security (BIS) has simultaneously added Turkish entities to its Entity List for alleged transshipment of controlled components to Iran’s aerospace complex.
Critically, these actions carry implications well beyond the designated entities themselves. Turkish banks, insurers, logistics providers, and export partners of sanctioned companies face heightened secondary sanctions risk — the prospect of losing access to the US financial system through association rather than direct violation. In response to sustained US pressure, Ankara signed Presidential Decree No. 11068 on 16 March 2026, establishing a new legal framework governing the movement of controlled military and dual-use goods across Turkish customs territory. The regulatory architecture now exists; its consistent enforcement remains, for the moment, an open question.
For international investors and counterparties, the lesson is clear: engaging with Türkiye’s defense and aerospace sector without rigorous sanctions screening, counterparty due diligence, and export control analysis is not merely imprudent — it is potentially catastrophic. The CAATSA designations that affected Türkiye’s SSB in 2020, following the acquisition of the Russian S-400 system, remain a live precedent. Secondary sanctions exposure under US law applies to any entity, anywhere in the world, that conducts significant transactions with designated parties.
Technology Transfer and Export Control
Approximately 35% of Türkiye’s defense exports historically depend on American-origin components. The experience of the T129 helicopter program — where Honeywell could not obtain a US export license for its engines, derailing a 30-aircraft contract — illustrates the strategic vulnerability this creates. Any joint venture, technology sharing arrangement, or supply chain partnership involving Turkish defense primes must be structured with US Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) compliance at the center of the transaction architecture, not as an afterthought.
The same discipline applies to European partners. The EU’s dual-use regulation and national export licensing regimes in France, Germany, the United Kingdom, and Spain each carry their own requirements, and the current geopolitical environment has prompted several European governments to review their posture on technology transfers to non-EU NATO members in conflict-proximate environments.
Investment Structuring and Joint Venture Frameworks
Türkiye’s defense industry operates within a highly specific regulatory ecosystem. The SSB governs procurement, licensing, and technology transfer under a framework that requires careful legal architecture for any foreign participation. Joint ventures involving Turkish Aerospace Industries, Baykar, ASELSAN, or Roketsan are subject to SSB approval processes, offset obligations, and domestic content requirements. Understanding these requirements — and structuring transactions to meet them efficiently — requires local expertise combined with international regulatory knowledge.
Conclusion: The Case for Informed Engagement
Türkiye is, simultaneously, a country absorbing the shocks of a war on its border and an industrial ecosystem experiencing one of the most accelerated defense capability buildouts in its history. For global players — defense primes, institutional investors, technology companies, logistics providers, and financial institutions — this duality presents genuine and significant opportunity.
But the legal and regulatory environment surrounding that opportunity is as complex as the geopolitics that created it. Sanctions exposure, export control obligations, secondary risk, and transactional structuring challenges are not obstacles that experienced legal counsel can eliminate. They are risks that, properly understood and managed, become competitive advantages for those who navigate them with precision.
Türkiye has always been a country that rewards those who understand it deeply. In the current environment, that reward is larger — and the cost of misunderstanding larger still.
