Turkey reels as Putin imposes Stiff Economic Sanctions

By Juan Cole | (Informed Comment) | – –

The Russian sanctions announced by President Vladimir Putin on Saturday could have a severe impact on the Turkish economy. It is not clear whether President Tayyip Erdogan and Prime Minister Ahmet Davutoglu did not expect this severe a reaction to the shoot-down of a Russian fighter jet, or whether they believe that Turks will rally around the flag and gladly suffer the economic consequences.

In retrospect is seems clear that Erdogan was extremely vulnerable to a Russian economic boycott, which has now begun. Turkish growth in gross domestic product was expected to accelerate from 3% per year now to 4% per year in 2017, an expectation that may now have been foiled.

Putin had some 90,000 Turkish workers in Russia fired, and more or less forbade Russian tourism in Turkey beginning Jan. 1.

Here are some significant economic facts:

* Russian – Turkish trade is worth over $30 bn a year

*Turkey got 54.76 % of its natural gas from Russia in 2014

*Turkey is the fourth-largest importer of Russian oil and oil products

* 3.3 million Russian tourists visited Turkey last year, dropping about $3 bn. on the country; they were 10% of all tourists. That money just evaporated.

* Turkey needed the tourism income to offset its poor balance of trade. That is, the disappearance of the Russian tourists will put powerful downward pressure on the Turkish lira, hurting Turkish consumers and businesses that import goods from abroad.

* Another million Russians came to Turkey last year for other reasons, including business, and likely they won’t be coming back.

* These Russian visits to Turkey were facilitated by visa-free travel, which Russia just abrogated (likely Turkey will reciprocate).

* Russia was set to build Turkey’s first nuclear reactor, a project that has probably just been mothballed.

* Turkey had sent 5% of all its exports to Russia in 2013, valued at $7 bn., and Turkey imported over $26 bn. worth of goods from Russia last year.

Turkey has lots of trade and investment partners and won’t collapse under the weight of Putin’s sanctions or anything. But that they could shave a point or two off growth in coming years is plausible, and that will mean a lower standard of living for many Turks. Will they blame Erdogan? Stay tuned.

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18 Responses

  1. After Russia, Iran is a major supplier of gas to Turkey and also has growing trade links. Turkey’s problems would be compounded if Iran also joins in the ban on the sale of gas to Turkey and limits her trade. It would really put the squeeze on Turkey during the winter months, but it would be an unwise decision. The problems in Syria cannot be resolved without some sort of agreement and joint action by Iran, Turkey and Saudi Arabia, as well as the United States and Russia. Iran could play a more constructive role by trying to bring Russia and Turkey back together and form an effective coalition against ISIS.

    • The Erdogists and Saudi Arabia want a Sunni Jihadi supremacist state ruling Syria. Iran and Russia want to prevent that from happening. What possible agreement could there possibly be among two sets of countries with such conflicting goals?

      The only possible prospect for peace in Syria is if the R +6 can get every trace of rebellion crushed and exterminated from every corner of Syria so that the legitimate government of the Syrian Arab Republic can re-impose order and control over all parts of Syria. And they have to get the rebellion crushed before the Axis of Jihad ( US, EUrope, Qatar, Saudi Arabia, Turkey, etc.) can still support and resupply their various pet rebels to keep fighting before the R + 6 can get the fighting stopped by crushing the rebels into abject submission or physical extinction.

      The difference between ISIS and the Saudi-Qatari jihadis is a distinction not even worth making from the viewpoint of the Christians, Shias, Alawites, secular Sunnis, etc. who would be persecuted or ethnicleansed or exterminated under any possible rebel government.

      • No. You have a completely incompetent analysis…
        — Russia wants a Russian puppet in power.
        — Erdogan wants to wipe out the Kurds.
        — Non-Erdogan Turkish interests want stability and trade.
        — Iran wants a Shiite government.
        — Saudi Arabia leadership wants a Saudi puppet.
        — Saudi Arabia sub-leadership (the guys who funded 9/11) wants ISIS or Al Qaeda in power.

        Those are a lot of different goals. The only ones which are totally incompatible are the Saudi goals; neither can be achieved while satisfying anyone else. Erdogan’s goal is also impractical since any military victory seems to depend on the Kurds. A Russian puppet would be practical, but the puppet shouldn’t be Assad, who lost all legitimacy when he started carpet-bombing civilians.

        If Putin were not an *idiot*, he would be arranging to replace Assad with a smarter and more compliant Russian puppet government led by a Shiite. But Putin is an idiot.

  2. Erdogan appears to be having serious regrets. Apparently he called twice but Putin wouldn’t take his calls. He’s now manoeuvring for a meeting in Paris on the side lines of the climate change conference, a meeting he may well not get either. He has treated the body of the downed Russian pilot with impressive reverence, and he has uttered a formulaic apology saying he wishes the event had not occurred. However, he still insists the plane was in Turkey’s airspace, albeit only for seconds, and until he revises that claim I imagine Putin will continue to rub his nose in it. Meanwhile, few Europeans would consider it an acceptable response to shoot down an aircraft actively engaged in combating ISIL even if it did stray over the Turkish border, and that taken with Obama’s knee jerk support of Turkey’s ‘right to defend its airspace’, so like his support for Israel’s carnage in Gaza, will only increase European respect for Putin and sympathy for Russia. Furthermore, the whole thing is unlikely to help Cameron when he tries to coax the UK Parliament to authorise bombing in Syria, and if Cameron fails at that, as he did once before, Obama’s tenuous ‘strategy’ will suffer a further blow.

    They seek one here,
    They seek one there,
    His courtiers seek one everywhere.
    Where will they find one,
    Nobody knows
    Of a good dry cleaner for Emperor’s clothes.

    • Putin’s a moron. We all know the plane was in Turkish airspace; all the evidence supports it. It would have been wise of him to back down on that while saying that it was an honest mistake and that there must be something wrong with their radios that they didn’t hear the warnings.

      Russia has no essential interest in its bombing of the Turkmens. Why are they even doing it? We know they aren’t fighting ISIS; the Russians are carefully leaving ISIS alone.

  3. I’m not sure this is at all so clear-cut. For the last year, Turkey has steered a quite independent course from Europe, forgoing sanctions and providing an alternative to the South Stream project. And 30 billion dollars of trade is nothing to sniff at, but…. if you look beyond the dollar totals, you will see that this trade is overwhelmingly unidirectional. Turkey imports Russian goods, mainly gas and oil, but in turn exports very little to back to Russia. Yes, you could phrase this as a balance of trade issue, but that’s seems too clever by half. Is Russia going to cut off its second largest natural gas customer or it’s 4th largest oil customer? And long-term what does this rift mean for the energy-dependent Russian economy? Europe is weaning itself off of unreliable Russian energy. South Stream is kaput. The Chinese have mothballed an already extremely favorable energy deal.

    No doubt, even before the current rift, the Turkish economy was slowing from around 9 percent growth to around 3.8% (why did you round down?). That’s still pretty healthy. Inflation is around 6 or so percent, not great, but pretty low by Turkish standards.

    I do think the loss of tourist dollars will hurt, as will the loss of jobs for Turkish workers and businesses. But again, dig a little deeper, and you have to ask yourself, with the Russian economy in recession, wouldn’t a lot of these tourist dollars dry up anyway? And as for the businesses and workers, many (likely most) of them are focused in the building and construction sector. Since the late 1980s, Turkey has built a lot of mid-range apartment and office buildings in Russia. Well, what do you think happens to this sector in a recession?

    And let me add, I am no fan of the current government in Turkey, or the downing of the Russian jet, but as a scholar of Russia, I find your analysis of the economics here troubling and one-sided. I am quite wary of your source, Russian-insider.com, which is run by a frequent contributor to RT News, and is aimed specifically to counter the reporting from the Economist, the NYT, etc. While I have all kinds of long-running problems with western reporting on Russia, I think it has actually improved pretty significantly over the past some years (and is in any case much more reliable than RT News). Maybe it’s just that you now operating on my turf, so I can see more clearly, but I don’t think this piece is up to your usual standards.

    • Maybe the Russian response is about something more important than the arithmetic. It does seem shocking that Turkey would shoot down a Russian bomber, given the apparently extensive economic ties between the two countries. Maybe Putin is outraged enough by the stab in the back that he doesn’t care how the numbers fall out, as long as Turkey gets hurt. Or maybe he just wants to test the West’s commitment to Turkey now that containment is a policy of the past. If I were Obama, I’d be looking at the clause in NATO’s charter that covers expelling a reckless member.

      • Maybe Turkey was getting sick of Russian violating their airspace repeatedly? Putin does have a record of airspace violations (see Ukraine).

        • Russia was not violating Turkey airspace and even if it was, Turkey should know that shooting down a Russian aircraft would land them in a pile of crap.

          I think, like the leader of Georgia,, turkey has an over-inflated ego and Turkey will pay a big price for its stupidity.

    • All Erdogan needs do to get this off the table before the sanctions bite either way is climb down a little further. The nub is in Dr Cole’s last question, Will the Turks blame Erdogan? Will he risk that? More likely he’ll find an acceptable accomodation, the lesson, however, will have been learned.

    • Russia can buy favor from Europe and isolate Turkey by selling gas and oil to Europe this harsh winter at a slight discount. Sure they will make slightly less profit, but the political payback will be worth it.

  4. Carl Nyberg

    NATO countries should refrain from hostilities with Russia unless sanctioned by a vote of all NATO countries.

  5. Is Turkey that POed over Russia’s support for Assad? The war against ISIS is not as big in the East as it is in the West.

  6. GAAAH! A drop in the lira is what Erdogan wanted, economically speaking. The drop in tourism is bad for business, but the drop in the lira is good for business.

    A cheap lira is good for EXPORTING businesses, and that’s Erdogan’s voting base.

    Meanwhile, Putin is going to tick off the Russians. They can’t vacation in the Crimea, they can’t vacation in Turkey, where are they gonna vacation? He’s been making it harder and harder for Russians to take a vacation, while sending Russian conscripts into foreign wars which they have no interest in.

    Russia shouldn’t have violated Turkish airspace. Putin is a complete idiot, geopolitically. His actions are self-sabotaging and are probably going to *benefit* Erdogan.

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