An S-400 Triumf surface-to-air missile launcher during a military parade in Moscow. Yuri Smityuk | TASS | Getty Images

U.S. sanctions on NATO-ally Turkey might deter future arms deals with the likes of Moscow, but it could also play into Russian President Vladimir Putin's hands, analysts have told CNBC. Turkish dollar-denominated bonds and the lira have both fallen in recent days amid economic and geopolitical turmoil for Turkey, with investors concerned about its credibility and the potential for U.S. sanctions over a Russian weapons deal. President Recep Tayyip Erdogan sacked the country's central bank governor earlier this month, prompting fresh criticism regarding the institution's independence and leading ratings agency Fitch to downgrade Turkey's investment rating to "BB-." But looking ahead, market watchers are now worried about the American response to what continues to be a significant headache for NATO: Ankara has officially begun receiving parts for the Russian S-400 air defense missile system, the result of a weapons deal that Washington has long lobbied hard against.

This is surely a huge risk to the U.S. defense industry. Timothy Ash Senior emerging markets strategist, Bluebay Asset Management

Senators are now urging President Donald Trump to slap sanctions on Turkey. Erdogan "has chosen a perilous partnership with (Putin) at the expense of Turkey's security, economic prosperity and the integrity of the NATO alliance," four senators, including chairmen of the Senate Armed Services Committee and the Senate Foreign Relations Committee, said in a bipartisan statement last week. Trump, by contrast, has been far less confrontational on the issue.

Why sanction Turkey now?

U.S. officials see the deal as a threat to NATO, for which Turkey provides the second-largest military. And according to Pentagon officials, it's a security risk to the American-made F-35 stealth fighter jets — 116 of which have been sold to Turkey — as allowing the S-400 and F-35s to operate near one another could allow for Russian intelligence gathering on the American system. Sanctions, the senators hope, would send a clear message about NATO members buying weapons from non-NATO countries, particularly those considered adversaries of the 70-year-old alliance.

"Turkey's purchase of S-400s undermines efforts to coordinate arms production/procurement within NATO — and the risk now is that other countries follow Turkey's lead, buying major arms systems from non-NATO countries," Timothy Ash, emerging markets strategist at Bluebay Asset Management, said in an email. "Perhaps more importantly for the U.S. defense industry, the green light has been given for NATO members to buy kit from rival countries, Russia and China, in particular." "This is surely a huge risk to the U.S. defense industry." Proponents of sanctions also fear that not responding in this instance could weaken Washington's broader sanctions tools that are being used in other countries like Venezuela, Cuba, North Korea and Russia.

But could it backfire?

While attempting to deter future NATO member arms deals with the likes of Russia, U.S. sanctions on Turkey could ultimately benefit Putin, some analysts say. "Sanctions will just push Turkey further out of the Western orbit and further into the hands of the West's enemies, Russia, Iran, et al," Ash said. Fractures within NATO have long been a goal of the Russian president. Turkey could respond to sanctions by restricting U.S. access to its Incirlik air base, a strategically vital launchpad for American operations in the Middle East. It could also escalate attacks on U.S.-backed Kurdish militias in Syria, where the two have long been at loggerheads over the armed groups that each country supports.

Source: The White House

For Ali Bakeer, an Ankara-based political analyst, sanctions are the wrong move. "I think Russia outsmarted U.S. in the last few years when it comes to attracting Turkey toward it," Bakeer told CNBC. "It would be a big mistake to help Moscow achieve its goals of widening the gap between the U.S. and Turkey and create a rift within NATO by imposing sanctions on Ankara."

What would sanctions look like?