Turkey walks economic tightrope between Iran and sanctions
Even as Turkey reduces its oil imports from Iran under pressure from the US and EU, the country is maintaining economic ties with its neighbour.
By Anna Wood for SES Türkiye in Istanbul -- 18/06/12
Just weeks before another set of US and EU-imposed economic sanctions on Iran's oil industry is to go into effect, Turkey sold record levels of gold to its nervous neighbour.
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![A customer buys Iranian gold coins at a currency exchange office in Tehran. [Reuters]](/shared/images/2012/06/18/ANNAphoto-310_213.jpg)
A customer buys Iranian gold coins at a currency exchange office in Tehran. [Reuters]
![A customer buys Iranian gold coins at a currency exchange office in Tehran. [Reuters]](/shared/images/2012/06/18/ANNAphoto-800_550.jpg)
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The Turkish Statistical Institute reported that in April Iran was Turkey's largest export market at $1.47 billion, $1.2 billion of which was gold. This represents an increase of more than four times the amount of gold sold by Turkey to Iran in the same period last year.
Economists see rising gold purchases over the past few months as an attempt by Iran to deflect some of the negative effects of sanctions that will become worse as conducting international trade becomes more difficult.
A ratcheting up of sanctions has forced Iran to move away from the dollar while the euro continues to be volatile. Economists believe that gold is seen as a dependable alternative as high inflation in Iran erodes savings and the Iranian currency loses value.
"Because of inevitable developments in Iran, the public's inclination towards precautionary savings and their simultaneous desire to have these savings in gold may have increased," Seyfettin Gursel, a professor of economics at Bahcesehir University, told SES Türkiye.
"From an economic perspective, this is a rational explanation," Gursel added. "We know that households in Turkey also hold great amounts of gold. There must be a large stock among jewelers, as well."
Djavad Salehi-Isfahani, an Iranian professor of economics at Virginia Tech and a non-resident senior fellow at the Brookings Institution, sees Iran's economic engagement with Turkey as a result of "unprecedented sanctions."
Iran "has been denied access to the global financial arrangements that have taken the world decades to construct, such as SWIFT," Salehi-Isfahani told SES Türkiye, referring to the Society for Worldwide Interbank Financial Telecommunication, the organisation that enables global financial institutions to make transactions in a secure, standardised environment.
"Iran now has to find creative ways to do without some of these facilities," Salehi-Isfahani explained. "So far, it has been turning to gold and local currencies of its trading partners as means of payments. Gold is also now its main instrument for keeping its international reserves."
What complicates these transactions from a political perspective is Turkey's desire to be exempt from Iran sanctions, engage in trade that will help Iran evade the effects of those sanctions, and all the while maintain important economic, military and political alliances with the United States and the EU.
Currently, Turkey seems to be managing this balancing act.
Last week, less than two weeks after the huge gold sales were reported, Turkey's demand for exemptions from the US-backed sanctions was finally met. The US granted Turkey a 180-day exemption from Iran oil sanctions as a result of a nearly 20% cut Turkey made in Iranian oil imports in April.
Sanctions would have affected not only Turkey's energy stability, but also numerous other Turkish industries linked to international markets.
Turkey's trade with Iran has been growing dramatically in recent years. According to data from the Turkish Exporters Assembly and the Turkish Statistical Institute, the total value of goods and services traded between the two countries in the first eight months of 2011 was $10.6 billion, and the Iranian ambassador to Turkey predicted that the value in 2012 could easily reach $15 billion.
Given this profit incentive, as well as Turkey's ongoing -- and increasingly unrealistic -- desire to maintain a "zero problems with neighbours" foreign policy strategy, Turkey is loath to participate in economic sanctions.
Salehi-Isfahani predicts that Turkey's economic ties with Iran could easily grow in the near future. Ultimately, he explained "Turkey remains one of Iran's best options for staying connected to the rest of the world."
What do you think of this article? (Total Votes )
11 Like(s)
6 Dislike(s)
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I’m a soldier in Istanbul. My Dear Minister, this period for military service is too long. We’re having difficulties psychologically as well. It’ll be very good if this period could be shortened. Best regards.
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Turkey is a honourable nation. Everybody should do their own part, the result will be fine then.
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Military service is a different thing. You’ll get used to it.
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I’ve done my military service in 1972/4 Period and I’ve done it for 19 months by never going to my home and by not taking any leave. I’m proud of being a member of Turkish Armed Forces which takes its power from the history and unique to Turkey, virtuous, noble, solid and sincere. If I’m given another task, I would do it again with pleasure.
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Babies, your web site is full of crap.
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Turkey is and will remain a whole. However, I think it would not be good if we come into conflict with a Muslim country. The Muslim world share the same qibla (the direction of Mecca) and holy book. They are trying to set Muslims against each other. We should not fall into their trap. May god help all Muslims.
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I wonder when Syria will down another aircraft of ours? They put a sack on our head, killed our people on international waters and most recently downed our aircraft. What a pity! Iran betrayed us. Turkey stood by Iran, but Iran turned against us. Iran is making secret talks with Israel, but acts as if it is an enemy of theirs. The only thing Iran can hit is Iran itself.
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Iran is a backstabber which has got nothing to do with Islam. Pro-Israel Iranian people are fake Muslims. They are both coward and ignoble.
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I have two sons and under today’s conditions I would not send them to war. Because only the sons of the poor die for this country. Those rich bastards enjoy themselves at night clubs while the poor sons fight with traitors at the mountains. The sons of the prime minister and the president establish holdings and enjoy the very best opportunities in this country. I would not send my sons to the military for those bastards.
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How happy is the one who says I’m Turk.
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Tayyip Erdogan, while he is so powerful and while the army is so furious and while this nation is behind him, I don’t understand why he does not demonstrate our power. Who is Iran, who is Syria, who is USA, who is Russia. Turkey will demolish all of them solely.
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The ones who can not see the favors done in the past, cannot live in this country. The ones who did not derive lessons from mistakes of the past, amuse themselves by saying “One minute” like now. The ones who does not like their real identity, will disappear one day. The real Muslim leaders sustain the good work done in the past by increasing them and do not repeat the mistakes of the past. They take the material damage back from the living politicians, the rich ones and the authorities who give harm to the country and in case of intangible damage, they punish them.
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Write, it’s OK but only you read what you’ve written. Because no one can read your writings except you. They will say “You elected me.”. I have not. I read or not, it’s upto me, isn’t it? Iran, Syria, USA, Russia; come off them. The important thing is to be patient. There is a lot of thing in patience. Forget the rich ones, laugh away them. You should look at yourself. I have a son too. I would send him. For Turkey, country, honour and for our Muslim book The Quran.
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Turkey is and will remain secular. I liked it.
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I am calling out to the so-called Muslims! Iran is supporting Assad who does not care about the holy months and eids [and continues killing people], so they should not be talking about Islam. They do not fear God. They would even change their religion for their interests. I am calling out to that dirty Khomeini! Does the Quran tell you to support such a butcher? They are shamelessly talking about piety. You failed to know your friends. Turkey was supporting you when there was nobody else was. Now Assad would come to save you if the US swoops down on you! You are factious. You are more dangerous than Jews. God is always with the oppressed people. Dirty Khomeini!
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