Erdoğan and Putin at the Kremlin, 23 September 2015.
“Us three countries, Russia, China and Turkey can trade among ourselves with our national currencies; with the ruble, yuan, the Turkish lira and gold.” -Turkish President Erdoğan
The sanctions on Russia will cost the Turkish economy at least $30-35 billion, according to Turkish economists quoted in the pro-government newspaper Yenicag.com. There will be a significant hit to Turkey’s tourism industry, an increase in energy prices and agricultural products, as well as further decline in the Turkish lira. In an effort to mitigate this impact, Turkey appears to be trying to position itself as a safe haven from Russian sanctions.
As the accompanying passage from pro-government newspaper Hürriyet reports, in early March, Turkish President Erdoğan suggested to Putin, “Us three countries, Russia, China and Turkey can trade among ourselves with our national currencies; with the ruble, yuan, the Turkish lira and gold.” Pro-government outlets interpreted Erdoğan’s offer as a “historic hand [being extended] to Russia, whose ties with the international system are being cut and who is being isolated.” Others criticized this as ridiculous, claiming that the world would not accept Turkey’s effort to turn the Russian sanctions into an advantage while it endures the costs. Regardless of the reactions to the idea, business leaders said Turkey should actively work to develop a mechanism to facilitate trade with Russia in rubles, as the passage from pro-government Daily Sabah reports.
Economically, Russia is an important trading partner to Turkey, with over 3000 Turkish companies operating in Russia and a trading volume of over $32.5 billion annually. Russia provides 34% of Turkey’s natural gas, is building Turkey’s first nuclear power plant, and sends the greatest number of tourists to Turkey. Russia and its banks’ exclusion from the international payment system will create challenges in Russia making its payments to Turkish contractors in Russia and to Turkish travel agents that organize tours for Russian tourists to visit Turkey.
Politically, Turkey is a neighboring country to both Russia and Ukraine in the Black Sea and has good relations with both, including a developing partnership with Ukraine, whereby Turkey sells it armed drones. As such, Turkey has been trying to play a balancing act between Ukraine and Russia regarding Russia’s invasion. On the one hand, Turkey acted with its NATO allies and strongly condemned Russia’s actions in Ukraine, openly calls Russia’s invasion a “war,” and voted to condemn Russia in the United Nations. President Erdoğan said that Turkey would continue to sell armed drones to Ukraine. On the other hand, Turkey abstained from a vote to suspend Russia’s membership rights within the European Council, and announced it was not planning to impose sanctions on Russia.
“Atilla Yeşilada Türk ekonomisine düşen bombayı duyurdu (Atilla Yeşilada explains the bomb that is about to explode on the Turkish economy),” Yenicag.com.tr (pro-government newspaper), 25 February 2022. https://www.yenicaggazetesi.com.tr/atilla-yesilada-rusyaukrayna-savasi-sonrasi-turk-ekonomisine-dusen-bombayi-acikladi-514360h.htm
Turkish Industrialists’ and Businessmen’s Association Chief Economist Gizem Öztok Altınsaç says that the geopolitical tension can have an initial cost to Turkey of about $30-35 billion.
Source: Abdülkadir Selvi, “Erdoğan, Putin’e ne önerdi? (What did Erdoğan suggest to Putin?),” Hurriyet.com (pro-government newspaper), 8 March 2022. https://www.hurriyet.com.tr/yazarlar/abdulkadir-selvi/erdogan-putine-ne-onerdi-42017962
At the AK Party Central Executive Council, President Erdoğan made important statements about the meeting he had with Putin. He said he suggested to Putin, that “Us three countries, Russia, China and Turkey can trade among ourselves with our national currencies; with the ruble, yuan, the Turkish lira and gold.”
…With this suggestion, Erdoğan is extending a historic hand to Russia, whose ties with the international system are being cut and who is being isolated. At the same time, he is taking steps to turn the crisis into an opportunity for Turkey. Would Russia, who is being isolated in the world, consider the Turkey and China option? Why not?
Source: “Uslu: İnsanlar ayçiçek yağı ile güçlü lider arasında tercih yapabilir (Uslu: People can decide between sunflower oil and a strong leader),” Karar.com.tr (independent Turkish newspaper), 8 March 2022. https://www.karar.com/karar-tv/bikarar-ver-bugun-karar-tvde-12-1655020
Political communications expert İbrahim Uslu [said about Erdoğan’s offer to Putin]: “This is unbelievable, even if you convince Putin, once the world feels that you are intensely piercing their sanctions, they will sanction us… As the world imposes sanctions and endures significant economic costs, they will not look favorably upon Turkey’s attempt to turn this into an opportunity, attempt to feed the entire Russian market by itself and comfortably make money from this. Such suggestions can seem appealing trade-wise, but they should be reconsidered in light of political international relations and the alliances that Turkey belongs to.”
Source: “Turkish businesses expect progress on using rubles in trade with Russia,” Daily Sabah (pro-government newspaper), 11 March 2022. https://www.dailysabah.com/business/economy/turkish-businesses-expect-progress-on-using-rubles-in-trade-with-russia
Since the currency dispute with shipping companies is causing problems in the delivery of goods passing through customs, Turkey should actively work to develop a mechanism to facilitate trade with Russia in rubles, Istanbul Chamber of Commerce (ITO) head Şekib Avdagiç said Friday.
Avdagiç stated that the companies working with Russia see the withdrawal of Western countries from Moscow as a new opportunity and emphasized that it is important to enable the use of the national currency of Russia.
Image: Erdoğan and Putin at the Kremlin, 23 September 2015.
Source: Kremlin.ru, via Wikimedia Commons
Attribution: CC BY 4.0