Turkish trade patterns shift with political dynamics

Economic bonds are affected by fraying relations in some cases, but are more resilient than might be expected in others.

By Erol Ertemer for SES Türkiye in Istanbul -- 06/03/12

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The shifting geopolitical dynamics of the Middle East -- most recently centred on Syria -- are redefining Turkish economic relations. Events in Syria are aligning Turkey's economic and political policies with the oil and gas rich Gulf states, while Iraq and its autonomous Kurdish region have moved to the forefront of Turkey's economic policy in the Middle East.

  • A driver stands next to the trucks lined on the Turkish-Syrian border in southeastern city of Kilis, Turkey. Declining trade with Syria is being offset by increases elsewhere. [Reuters]

    A driver stands next to the trucks lined on the Turkish-Syrian border in southeastern city of Kilis, Turkey. Declining trade with Syria is being offset by increases elsewhere. [Reuters]

The conflict in neighbouring Syria has put a near halt to Turkey's cross-border trade after years of steady growth. Before the uprising, Turkey viewed Syria as the gateway to its economic expansion in the Middle East, going so far as to envision forming a customs union among Lebanon, Jordan, Turkey and Syria, the so-called "Shamgen" or the Levant Quartet.

"Turkey's trade might have slowed down with Syria, but still Iraq could well compensate for the loss," said Tarik Bozbey, head of the Mediterranean Exporters Union. Last year, Turkey's bilateral trade volume with Iraq reached 9 billion euros (21.2 billion lira). Turkey's total exports to Iraq rose to 6.4 billion euros (14.1 billion lira) by the end of last year, ranking Iraq as Turkey's second biggest export destination after Germany.

Nearly 80% of the exports to Iraq went to the region administered by the Kurdistan Regional Government (KRG). Occasional sharp rhetoric and cross-border strikes on PKK bases in northern Iraq have not stopped Turkey from becoming the biggest foreign investor in the KRG, tying the vital region to Turkey.

One of the clearest signs of the melting ice between Turkey and the KRG was the January visit by Turkish Economy Minister Zafer Caglayan, accompanied by a large business delegation. The minister spoke Kurdish while addressing a group of Kurdish businessmen, saying "Arbil mala mine ji" which means "Arbil is also my home."

"Turkish businessmen are supported by both KRG authorities and Turkish officials to do business with Iraq," Bozbey said.

According to him, the Turkish government, which opened the way to trade with Middle Eastern states, could also create new alternative markets for Turkish exporters, despite the Syrian turmoil. "The Turkish government will find a way to do business with some alternative countries; we are not dependent on Syria," said Bozbey.

Even Turkey's business relations with Israel have not been affected by the sharp deterioration of political relations. Turkey's bilateral trade volume with Israel broke an all-time record of 3.38 billion euros (8.5 billion lira) last year, compared with 2.59 billion euros in 2010 (6 billion lira) and 1.95 billion euros (4.5 billion lira) in 2009, according to official data.

Businessmen agree that while the Arab spring might have hit Turkey in places like Syria and Libya, in the long run Turkey stands to economically benefit from its support of the protest movements.

According to the ministry of economy, comparing the first 11 months of 2010 with 2011, Turkey's exports to the Middle East increased 19.6%.

"Turkey's move, in line with the Western world, to support protestors demanding freedom was a right move; it will bring more benefit to Turkey [in the long run]," Ersin Takla, chairperson of the Turkish-Libyan Business Council at the Foreign Economic Relations Board of Turkey, told SES Türkiye.

The biggest shift may be in the increasing wave of political and economic contacts between Turkey and the Gulf states -- especially the United Arab Emirates, Qatar and Saudi Arabia -- that see eye-to-eye with Turkey on Syria, are concerned over Iran, and are strategically aligned with the West.

Iranian support for Syria, differing views over the future of Iraq, rising tensions between Iran and the West, as well as the bitter rivalry between the Gulf States and Iran throughout the Middle East are contributing to a recalibration of Turkey's policies.

Saudi Arabia and Turkey have become closer than ever, as the Gulf country remains the only country which could increase production capacity and feed Turkey's need for oil, especially if it is ever to reduce reliance on Iranian energy, which accounted for nearly a third of Turkey's crude oil imports last year.

According to Necdet Pamir, a former board member at the World Energy Council Turkish National Committee, Turkey may be unable to resist pressure from the West to eventually cut economic ties with Iran.

"In such case, Saudi Arabia remains as the only alternative for Turkey," he said, noting that Turkey and Saudi Arabia are both strategic partners of the United States.

Moreover, Turkey's close ties with Saudi Arabia can also be seen in the defence industry. According to the Union of Turkish Defence Exporters, Saudi Arabia topped the list of Turkish defence exports with 302m euros (708m lira) last year.


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