The government is holding talks with the Turkish conglomerate Cengiz Holdings about stepping in to buy British Steel in the event that a planned sale to the Chinese industrial firm Jingye falls through.
But the Guardian understands that the Department for Business, Energy and Industrial Strategy (BEIS) has also been examining a back-up plan involving Istanbul-based Cengiz, which enjoys close ties to the Turkish regime.
A spokesperson for BEIS declined to comment on whether discussions had taken place.
Jingye’s preferred bidder status affords it the sole right to negotiate a deal with the official receiver, the government employee managing the sale alongside the accountancy firm EY.
But BEIS is not bound by the exclusivity arrangement and is keen to limit the amount of time it continues to own a business that collapsed into insolvency eight months ago and is losing about £1m a day.
A sale to Jingye still faces several obstacles, including fraught negotiations with suppliers to British Steel and concern among trade unions at the prospect of cuts to jobs and employment benefits.
The French government’s approval is also required for the sale of British Steel’s Hayange plant near the border with Luxembourg.
While BEIS officials are confident that these hurdles can be overcome, they are still exploring alternative options, mindful of the fact that one potential buyer has already walked away.
Jingye, led by the former Communist party official Li Ganpo, only became the preferred bidder after a deal with Ataer Holdings, a unit of the Turkish military pension fund Oyak, disintegrated.
While Oyak has links to the Turkish government and military, the regime is understood to favour a deal involving Cengiz, which also has connections to the state.
Its founder-owner, Mehmet Cengiz, is a close ally of President Recep Tayyip Erdoğan and his companies have won a host of major infrastructure projects.
The company is overseeing the Black Sea coastal highway, Istanbul’s new airport, a high-speed rail project, as well as work on dams and power generation.
Any further discussions involving Cengiz could benefit from friendly relations between the UK’s steel minister, Nadhim Zahawi, and the Turkish government.
The register of MPs’ interests reveals that Erdoğan’s AK party paid for Zahawi to visit its party conference in Ankara in 2012, funding £338.85 in hotel costs and transport. Zahawi’s flights, worth £625, were underwritten by a “non-registrable source”.
The Conservative MP also enjoys strong ties to Turkey’s allies in the Kurdistan regional government that runs the semi-autonomous region of northern Iraq.
The Ankara-backed Kurdish regime sends most of its lucrative oil through pipelines across the border between the two countries.
Zahawi, whose family are Iraqi Kurds, earned about £850,000 in less than three years as “chief strategy officer” for the Kurdistan-based oil firm Gulf Keystone Petroleum, a position he gave up in 2017 to focus on Brexit negotiations.
A BEIS spokesperson said: “The government remains completely committed to getting a good solution for British Steel’s valued employees at Scunthorpe, Skinningrove and on Teesside.
“In November the official receiver accepted a bid from Jingye for British Steel, which is an important step towards securing the future of the steelworks and its employees in the UK.
“The sales process is ongoing and we will continue to work with the official receiver as he seeks to finalise a sale.”
The Guardian has approached Cengiz Holdings for comment.
One other potential buyer, Liberty Steel, is also keeping close tabs on the situation and is waiting in the wings in case Jingye’s bid falls away.
The group, owned by the UK-based steel magnate Sanjeev Gupta, wants to convert part of the Scunthorpe steelworks from a blast furnace operation producing steel from scratch into an electric arc furnace plant that uses scrap steel.