Turkish Foreign Minister Mevlut Cavusoglu urges Canada to review the policy over the export ban that affects 29 permits and applies to a wide variety of military goods and technologies.
Canada has cancelled arms permits to Turkey that were suspended last year.
Global Affairs Canada and Department of National Defense have conducted a thorough review of all suspended and valid export permits for all military goods and technology destined to Turkey, Canada's Foreign Minister Marc Garneau announced said in a statement on Monday.
Turkey, which like Canada is a member of NATO, is a key ally of Azerbaijan, whose forces gained territory in the enclave after six weeks of fighting with Armenia.
"Following this review, which found credible evidence that Canadian technology exported to Turkey was used in Nagorno-Karabakh, today I am announcing the cancellation of permits that were suspended in the fall of 2020," Garneau said.
Ottawa suspended the permits last October so it could review allegations that Azerbaijani drones used in the conflict had been equipped with imaging and targeting systems made by L3Harris Wescam, the Canada-based unit of L3Harris Technologies Inc.
Turkish Minister for Industry and Technology Mustafa Varank later tweeted that Turkey does not use any product manufactured in Canada for its drones and that which used to be produced in Canada will be now produced by ASELSAN.
Garneau noted that he has spoken with Turkish Foreign Minister Mevlut Cavusoglu earlier in the morning amid Canada's concern and greater bilateral cooperation on export permits.
"Turkey is an important NATO ally and applications related to NATO cooperation programs will be assessed on a case-by-case basis," he said.
Earlier on Monday, Cavusoglu asked Canada to review the restrictions, urging it to review the policy, while Turkey voiced its "discomfort" over the embargo, according to Turkish diplomatic sources.
The export ban affects 29 permits, and applies to a wide variety of military goods and technologies including components for the production of aircraft, software and technical data for flight simulators, satellite equipment and firearm components.
The value of Canadian exports of weaponry to Turkey was last pegged in 2019 at more than Can$150 million (US$120 million).
In a statement, the Turkish Embassy in Ottawa said, "We expect our NATO allies to avoid unconstructive steps that will negatively affect our bilateral relations and undermine alliance solidarity."
Export licenses were suspended in 2019 during Turkish military activities in Syria against PKK/YPG terrorists. Restrictions were then eased but reimposed during the Nagorno-Karabakh conflict.
Turkey has backed its longtime ally Baku in the fighting over Karabakh, a territory that is internally recognised as Azerbaijani but was illegally occupied by ethnic Armenian militias supported by Yerevan after a bitterly fought war in the 1990s.
Turkey has in the past supplied drones to Azerbaijan and its military exports to Azerbaijan jumped sixfold last year. Sales of drones and other military equipment rose to $77 million in September alone before fighting broke out in the Nagorno-Karabakh region.