NATO member Turkey has chosen a Chinese defense firm that has been hit by U.S. sanctions to co-produce a $4 billion long-range air and missile defense system, rejecting rival bids from Russian, U.S. and European firms.

The Turkish Defense Minister announced the decision to award the contract to China Precision Machinery Import and Export Corp (CPMIEC) on Thursday.

In February, the United States announced sanctions on CPMIEC for violations of the Iran, North Korea and Syria Nonproliferation Act.

It did not say precisely what CPMIEC had done, but Washington has penalized the company before. In 2003, Washington said it was extending sanctions on the firm for arms sales to Iran. It was unclear when those measures were first imposed.

Turkey, which has the second-largest deployable military force in the NATO alliance, has no long-range missile defense system of its own, but NATO has deployed the U.S.-built Patriot air and missile defense system there since 2012.

The winning Chinese FD-2000 system (photo) beat the Patriot, the Russian S-400 and the French-Italian Eurosam Samp-T.

Raytheon Co, which builds the Patriot missile system, said it had been informed about the Turkish decision and hoped to get a briefing soon. It said there were 200 Patriot units deployed in 12 countries, including Turkey.

“NATO has long supported the system, deploying Patriots in five aligned countries and, in 2012, providing a requested Patriot deployment to Turkey. Given this strong performance, we hope to have an opportunity to debrief and learn more about this decision,” Raytheon spokesman Mike Doble said.

CPMIEC does not make missiles itself. The two main manufacturers are China Aerospace Science and Technology Corp (CASC) and China Aerospace Science and Industry Corp (CASIC). CASC makes intercontinental ballistic missiles, while CASIC focuses on short- and intermediate-range rockets.

After decades of steep military spending increases and cash injections into local contractors, experts say some Chinese-made equipment is now comparable to Russian or Western weaponry. Last year, China became the world's fifth-biggest arms supplier with 5 percent of the market, according to the Stockholm International Peace Research Institute. Pakistan was its biggest buyer.

Turkish Defense Minister Ismet Yilmaz's statement also said a contract to produce corvette ships by Koc Holding , Turkey's biggest conglomerate, had been cancelled. A contract to build two ships would be awarded to the Turkish naval shipyard. The construction of four remaining ships will be put out to tender later, Yilmaz said.