mazlat - Elbit Systems - January 15 2009
Unmanned spy plane. Photo by Elbit Systems
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Elbit Systems is demanding the government compensate it after ruling Thursday that the defense exporter had to cancel its relationship with a Turkish company due to "political considerations."

Elbit had been hoping to renew its export license to go through with a $90 million deal to supply aerial surveillance systems (IMINT) to Turkey's air force. It had received the license several years ago.

Capital market sources surmised that the Defense Ministry had told Elbit to halt the project in light of the deteriorating relations with Turkey.

On Friday, Elbit, chaired by Michael Federmann, said it had demanded the Defense Ministry compensate it for the damage this decision would cause. The sides reportedly have begun negoting.

"At the present time, there is not an estimate of the amount of the damages that may result from the non-renewal of the export authorizations. Such damages may have a material impact on the company's financial results," the company said in a statement.

In 2008, Elbit Systems and Israel Aerospace Industries signed the IMINT contract with the Turkish company Arselan, which was supposed to be the project's main contractor. Elbit was slated to receive $87 million from the project, while IAI was supposed to get $54 million. Elbit was supposed to fulfill its end of the deal over the course of four years.

"The Defense Ministry does not elaborate on all the considerations behind its decisions regarding defense exports," it stated in response.

However, a defense official was quoted as saying that the decision related to the specific system, not the country in question.