Advertising signs in Russian attract tourists to Bodrum Turkey, in ancient Halicarnassus, one of the area’s most popular tourist resorts. It’s no secret that many of the luxury yachts in the city’s harbor, sometimes referred to as Turkey’s Mykonos, are owned by Western-sanctioned Russian oligarchs. Turkey remains neutral in Russia’s war against Ukraine and does not participate in Western sanctions against Moscow.

For the Turkish economy, this tactic is profitable. During the year, Turkish exports to Russia, as well as imports from this country, doubled. According to the German-Turkish Chamber of Commerce and Industry, Turkey was Russia’s largest trading partner in 2022, the first so far owned by Germany. According to the financial website rbc.ru, Turkish exports of mechanical equipment to Russia have now exceeded the corresponding German exports.

Cheaper energy for Turkey

These developments bring numerous benefits to the Turkish economy. “Ever since the war started, Turkey has been importing cheaper energy than Russia,” said Erdal Yalchin, professor of international economic relations at the German University of Konstanz and a research fellow at the Institute for International Economics in Kiel. Even before the war, oil and natural gas from Russia covered most of Turkey’s energy needs. Since 2022, Russian oil imports have almost tripled, and this provides short-term relief to the Turkish economy in the face of a currency and inflationary crisis, and even in such a difficult and unstable pre-election period.

But Turkey is also strengthening its presence in the Russian market. Enterprises like Koton are now replacing Western chains like Marks & Spencer. Even EU High Representative for Foreign Policy Josep Borrell expresses “concern” but also suspicion that Turkey offers opportunities for legal or even formal circumvention of Western sanctions. Economist Erdal Yalchin also points to this. “Turkey imports crude oil from Russia and refines it in its own refineries to export it to Europe as a Turkish product,” he told the German News Agency (DPA). “This is a typical case of sanctions avoidance,” says Yalcin, but he believes that it is not only Turkey, which sells oil, but also the EU, which buys it, that is responsible.

Something similar, he argues, is observed in the semiconductor market. For 10 months now, the export of semiconductors from the EU to Russia has been steadily declining, but at the same time, exports from the EU to Turkey and, accordingly, from Turkey to Russia have been increasing. “As long as the company that buys the goods in the EU is Turkish, this transaction is considered legal,” explains Yalchin.

Turkey as “bridge»but also a place to relax

There are no more direct flights to and from Russia to the EU, Russians traveling to Europe usually fly via Turkey. Of course, many people prefer Turkey itself for recreation, which has become more popular among Russian tourists in recent months. Sales of country houses, as well as “golden passports” to Russians, are also growing rapidly. With a minimum investment of $500,000 in the real estate market, those who wish have the opportunity to obtain Turkish citizenship. In total, 14,000 properties were sold to Russians between January and November 2022, compared to 2,900 in 2019.

According to the Turkish Chamber of Commerce TOBB, in the first eleven months of 2022, 131 Russian “joint stock companies” and 1,077 “limited liability companies” were created in Turkey, and in 2019, the last year before the pandemic, new Russian companies did not exceed 17 percent and 95 respectively. There are also benefits that are not fixed but understood. In recent months, Turkey’s current account has shown significant “liquidity injections” that seem to have no logical explanation. Erdal Yalcin believes that “this is cash that came to Turkey in … suitcases.”

An alternative to Western markets?

Russia and Turkey aim to increase their total bilateral trade to $100 billion by 2030. In addition, Russia has declared “Europe’s largest energy hub” on Turkish soil and is currently building Turkey’s first $20 billion nuclear power plant. I’m planning two more.

However, Erdal Yalcin argues that “Turkey’s turn towards Russia may have benefits in the short term, but it is not sustainable in the long run” as “only trade with Europe guarantees more jobs in the long term.” A similar opinion is expressed by the head of the German-Turkish Chamber, Tilo Pal. “In the long term, Germany remains the most important export destination for Turkish companies,” the German manager assesses in an interview with DPA.

Source: Deutsche Welle.