Italy has approved a drone manufacturing venture between state-controlled defense group Leonardo and Turkish manufacturer Baykar but imposed national security conditions limiting its sales and overseas expansion to countries politically aligned with Europe and NATO.
The Italian cabinet approved the 50-50 joint venture, named LBA Systems, at a meeting Tuesday by exercising powers that allow the government to regulate or block transactions involving strategic industries.
A spokesperson for Italian Prime Minister Giorgia Meloni’s office confirmed the approval to BBC Turkish. Reuters also reported the decision Wednesday, citing a source familiar with the matter.
Under the conditions, aircraft produced by the venture may be sold only to countries that Italy considers politically aligned with Europe and NATO. Any expansion of LBA Systems into other international markets will face the same restriction.
The reported wording refers to political alignment rather than formal membership in the European Union or NATO, giving the Italian government discretion over proposed customers.
Technology used in the aircraft will also be classified under national security rules. Italian intelligence authorities sought safeguards to protect classified information, technical data and systems required by the venture, according to Italian media reports.
The government has not released the clearance decree or a full list of its conditions.
Italy reviewed the transaction under its Golden Power system, established by a 2012 law to protect national interests in defense, security, energy, transportation, communications and other strategic sectors.
The rules allow the government to impose operational conditions, veto corporate decisions or block acquisitions when it finds a threat to national interests.
Leonardo is subject to those controls because of its role in Italy’s defense industry. The Italian Ministry of Economy and Finance owns about 30.2 percent of the company and has enough influence to appoint two-thirds of its directors under Leonardo’s bylaws.
LBA Systems will have its legal and operational headquarters in Italy. Leonardo and Baykar announced the venture at the Paris Air Show in June 2025 after signing a memorandum of understanding in Rome three months earlier.
Leonardo’s May 2026 securities prospectus described LBA Systems as a company that was still awaiting establishment, indicating that Italian regulatory approval remained necessary before it could begin formal operations.
The venture will design, develop, manufacture and maintain new-generation unmanned aircraft systems. An unmanned aircraft system includes not only the aircraft but also its control station, communications links, sensors and mission equipment.
Baykar will lead the design and development of the aircraft platforms. Its product line includes propeller-driven surveillance and strike drones as well as the jet-powered Kızılelma uncrewed combat aircraft.
Leonardo will supply electronic systems and mission payloads, including sensors and other equipment carried by the aircraft. It will also oversee qualification and certification work.
The Italian company will develop crewed-uncrewed teaming capabilities, which allow pilots and drones to share sensor data and conduct coordinated missions. It will also contribute swarming technology, which allows multiple uncrewed aircraft to coordinate their movements and tasks.
Leonardo has identified four Italian sites for the program. Ronchi dei Legionari will handle work involving uncrewed aircraft; Turin will conduct engineering and certification; Rome’s Tiburtina facility will develop systems that connect operations across air, land, sea, space and cyber domains; and Grottaglie will produce composite structures.
Production is also planned in Turkey.
The partners have described their portfolios as complementary. Baykar supplies aircraft that have entered service with armed forces in several countries, while Leonardo provides sensors, electronics, mission systems and certification expertise needed for access to European defense markets.
The partnership gives Baykar a manufacturing and certification base inside the European Union. It also gives Leonardo access to Baykar aircraft without requiring the Italian company to develop each platform from the beginning.
Baykar Chairman and Chief Technology Officer Selçuk Bayraktar, a son-in-law of Turkish President Recep Tayyip Erdoğan, signed the agreement with Leonardo Chief Executive Roberto Cingolani.
Baykar expanded its presence in Italy in June 2025 by completing its acquisition of Piaggio Aerospace, an aircraft and engine manufacturer that had been under government-supervised administration. Italy also approved that acquisition under the Golden Power system.
Leonardo and Baykar estimate that the European market for uncrewed combat aircraft, armed surveillance drones and long-range strike drones will reach $100 billion over 10 years.
The new restrictions mean that access to that market will come with Italian oversight of buyers, foreign partnerships and the handling of military technology.