[OPINION] Russia keeps Erdoğan’s Turkey at arm’s length in trade, business

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Abdullah Bozkurt

Abdullah Bozkurt

The restrictions on Turkish trade and commerce imposed by Russia in the aftermath of the shooting down of a Russian fighter jet on the Turkish-Syrian border on Nov. 24, 2015 by a Turkish F-16 still remain intact, which suggests that seemingly cordial ties at the political level between Moscow and Ankara have failed to translate into a real partnership in business. Turkey is struggling to sell products to Russia, with only $2.7 billion in exports in 2017 in contrast to $7 billion in 2013 telling the real story of Turkish-Russian ties.

Behind Russian reluctance to allow Turkish businesses to enter its own market lies Moscow’s desire to keep the government of President Recep Tayyip Erdoğan at arm’s length because of mistrust of his interventionist Islamist policies that pose a threat to the social fabric of Russia as well as other communities in its neighborhood. Russian policymakers want to maintain tight control over Turkish business and trade initiatives and limit operations by Erdoğan’s associates and cronies from gaining a firm foothold in the Russian market. Moscow appears to have made permanent changes in its policy toward the Erdoğan government using the plane incident as a pretext and is intent on sticking with this realignment.

Russian President Vladimir Putin laid bare a threat emanating from the Turkish president a day after the downing of the Russian plane when he said: “We see — and not only us, I assure you the entire world sees it — that the current leadership of Turkey has been for a number of years pursuing a purposeful policy of support for the Islamization of the country. … We ourselves support Islam and will continue to do so, but the point at issue is the support of a more radical branch. And that in itself creates a very unfavorable environment, an atmosphere that one cannot see at first glance.”

The fact that Putin’s Russia is working with Turkey at a tactical level to provide an exit strategy from the Syrian theatre and force Ankara to cut back on its support for jihadist groups there while trying to undermine the NATO alliance by wooing bad boy Erdoğan does not change this underlying theme in Turkish-Russian ties at all. At the strategic level, Russian policymakers long ago came to the conclusion that Erdoğan can be a threat to their own interests if he is not kept in check. “We know who it is who profits in Turkey by letting terrorists sell oil there [Syria]. Terrorists use that money to plan attacks against us, France, Mali and others. It was in Turkey that terrorists from the north Caucasus used to find refuge, and some of them are still there,” Putin said in his annual state of the nation address at the Kremlin on Dec. 3, 2015.

That is why, for example, Russia is not willing to restore visa-free travel for Turkish citizens, a policy that was suspended in 2015 in reaction to the jet incident. Moscow’s security risk assessment of Turkey keeps the visa policy intact as of today, reflecting the general concerns about the Erdoğan government’s policies that aid and abet all sorts of jihadist groups and facilitate their travel in and out of Turkey. The Turkish side offered a deal to facilitate visas for business travellers, but even that proposal received a cold welcome from the Russians. Another proposal by Turkey is to provide temporary residence permits for Turkish workers hired by companies in Russia. That offer, turned into a draft agreement that was under negotiation before 2015, was not taken up by the Russian side despite lobbying efforts from Turkey to resume talks.

Erdoğan has pushed Putin to recognize the Islamist Maarif Foundation, a government-funded education outfit that is run by jihadist-linked administrators for a campaign of proselytization abroad, and facilitate its work in Russia. That approach was also met with a cold reception from Moscow, which already harbors a deep mistrust of the Islamist ideology of the Erdoğan government. On tourism, Russia is slow in promoting Turkey, which witnessed a record drop in the number of Russian visitors in the wake of the jet incident, as a holiday destination. The numbers bounced back in 2017, reaching 4.7 million Russian visitors after normalization, but joint mechanisms to encourage further cooperation have not yet been made fully functional. For example, the renewal of a 1995 tourism agreement was not settled, and plans are underway to conclude negotiations for a new deal by the end of 2018. Various working groups such as one on tourist safety has not resumed their work although the the issue came up during bilateral talks.

On transportation, which is critical for Turkey to move products to Russian and nearby markets, Russia has not addressed the Turkish grievances for truck drivers who haul loads to and through Russia. Moscow refers to an outdated 1988 intergovernmental deal regulating land transportation for addressing these problems and is unwilling to review a newly drafted deal on land transportation despite both sides saying they have agreed in principle to negotiate. The lingering problems in transportation impact a wide range of Turkish industrial and agricultural product exports, raising logistical costs and weakening the competitiveness of Turkish businesses. On Turkey’s construction industry, which has been quite a success in the Russian market since the 1990s, Russia has not entertained a new proposal by Turkey to organize new delegations to Russian regions to make sales pitches for new contracts. Despite protracted talks, trade in services and investment negotiations have not been finalized between the two countries, either.

On the other hand, realizing that Erdoğan, largely isolated internationally and regionally, is negotiating from a weak position, Russian negotiators are pushing to gain an advantage for their own national organizations and companies in the Turkish market. Russian navigation satellite system GLONASS Union was pitched to the Turkish side as successful a entity that could share its experiences with Turkey during joint economic meetings. Turkey has agreed to work with Russia on priority application areas of navigation technologies such as traffic, the movement of police and special forces, insurance and commercial vehicles. Another example would be the Russian proposal to manufacture satellites for Turkey and send them into space by means of the Russian Roscosmos State Corporation for Space Activities. Russia also offered to sell heavy equipment, buses and tractors and establish a service and parts network to support the maintenance of these products in Turkey.

Russia’s Magnitogorsk Iron & Steel Works’ (MMK) MMK Metalurji unit in Turkey was also raised at bilateral talks during which the Russian side expressed an interest in renewing the license for MMK’s port facilities where coal was unloaded and posed environmental hazards. The sale of Russia’s Sukhoi Superjet 100 (SSJ100) short haul aircraft to Turkey was also proposed to the Turkish side, while cooperation on acquiring more Russian-made helicopters for state-owned entities and commercial enterprises in Turkey was agreed by both sides.

The picture in oil and gas products, which comprise the bulk of Russian exports to Turkey, valued at $20 billion in 2017, is the same as well. Russian giant Gazprom continues to expand its operations in Turkey, its second largest export market, where it had supplied 51.93 percent of overall Turkish gas imports as of year-end 2017. The Erdoğan government is rushing to meet all of Russia’s demands by cutting the red tape, making hastily arranged legislative and regulatory changes and even fixing environmental impact assessment reports for a Russian project called TurkStream, a twin pipeline stretching across the Black Sea from Russia to Turkey and further to Turkey’s border with neighboring countries. In its latest move, Russia has also offered to expand a long-term service maintenance contract for a gas network in Turkey and sell power equipment such as gas turbines and pumps. The same can be said for the Russian oil industry, which supplied 19 percent of Turkey’s crude and diesel needs in 2017. Moscow offered to expand oil trade to include petrochemical products and industrial oil.

On projects to which Turkey attaches more value, Russia appears to be taking its time to complete agreed deals. For example, the construction of a nuclear power plant in the district of Akkuyu in Turkey’s southern province of Mersin as part of a 2010 deal has been hit with further delays despite the fact that the Erdoğan government has been bending over backwards to facilitate the required licenses and authorizations in record time. A Turkish order for long-range S-400 missiles, an irritant to NATO allies, has not yet been finalized, either, despite efforts by the Turkish side to portray it as a done deal. The signatures were inked and a deposit was made up front by the Turkish side, but the Russians are not in a hurry to deliver them to Turkey. Moscow remembers what happened to China when Turkey negotiated and agreed to a purchase of similar missiles, only to drop it when China’s president Xi Jinping arrived in Turkey for a G-20 summit in 2015 held in the Turkish resort city of Antalya. Putin does not want to experience the same humiliation, and Russian policymakers have doubts that NATO ally Turkey will be able to go through with the deal in the end.

Turkey has very limited room to maneuver in terms of taking retaliatory actions against Russia. The measures taken so far clearly show this weak position of the Erdoğan government. For example, the Turkish government’s restrictions on imported Russian agricultural products such as wheat, corn, rice and sunflower oil are still in place. Russia asked for elimination of the need to secure permission for such imports, but the Turkish side claimed the system was designed to keep records of imported goods and not a restriction per se. Turkey’s anti-dumping probes into Russian paper products and additional tariffs on potential export items from Russia such as tires and drilling equipment are a source of complaint by Moscow. The Turkish Ministry of Economy has yet to respond to Russian diplomatic notes dated September 5, 2017 regarding concerns over these obstacles.  Russian energy company Inter Rao, which acquired Trakya Elektrik in Turkey in 2012, wants to renew a concession agreement with the Turkish Energy Ministry beyond June 5, 2019. The agreement, framed as a build-operate-transfer project, was hit with problems that remain unaddressed by Turkey.

Overall, the trade and business ties between Turkey and Russia do not match the rhetoric and have been hit by substantial problems. Russian misgivings about Erdoğan’s intentions are strong, and at the end of the day the Turkish economy is more dependent on Europe than any other trading partner. Yet Erdoğan’s political problems with the US and European allies have started to undermine those precious ties as well, leaving Erdoğan stuck between a rock and a hard place. Wherever he turns, Erdoğan’s Islamist project is hitting the wall, threatening his rule over Turkey by cutting the economic underpinnings of Turkey’s authoritarian regime.

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