Purpose relationship sorely needed: Why Erdogan gets involved with Putin

Purpose relationship sorely needed: Why Erdogan gets involved with Putin
Purpose relationship sorely needed: Why Erdogan gets involved with Putin

Economically, Russia and Turkey are moving closer together than ever. For Moscow, this comes at just the right time: Turkish exports are filling the gaps left by the West. For Ankara, however, the new purpose relationship is just as important.

As the western world turns its back on Russia, a country comes closer than ever: Turkey. Not only that Ankara is the only NATO member that refuses to sanction Russia for the war of aggression against Ukraine. Both countries also want to significantly expand their relations “despite the current global challenges” – especially in trade. Turkey’s membership of the Shanghai alliance, recently announced by President Recep Tayyip Erdogan, would reinforce this. True, Russia and Turkey have not been friends in the past. Even now, Erdogan has repeatedly spoken out openly against Russia’s war in Ukraine. Nevertheless, both presidents know that they desperately need their relationship of convenience.

For Russian President Vladimir Putin, the economic benefits are obvious. On the one hand, Russia has a secure customer for its gas in Turkey, which it urgently needs because of the dwindling customer base from the West. On the other hand, Turkish exports provide Russia with urgently needed international goods such as chemicals, food and cars. Because while Western companies such as VW, BASF and Nestlé are closing their trade channels to Russia one after the other, Turkey is expanding theirs at breakneck speed.

According to the Financial Times, Turkish exports to Russia have increased by 46 percent compared to the previous year. The trade in vehicles alone increased by almost 60 percent, as the Turkish Minister of Transport Adil Karaismailoglu announced in mid-August. According to the Russian news agency “Tass”, none of the approximately 3,000 Turkish companies that are active in Russia have announced their withdrawal since the beginning of the war. On the contrary: Some of these companies have even set up their own export departments for exports to Russia, as reported by the “Handelsblatt”.

Turkey plugs Russia’s trade gaps

No sanctions also means no flight restrictions. So Russians can easily spend their summer vacation on Turkish beaches, because Turkey is one of the last European countries to offer direct flights to and from Russia. For Russian tourists or emigrants, the Black Sea neighbor offers two advantages, says economist Gerhard Toews ntv.de. First, they can pay with their Russian credit cards because many Turkish banks have introduced the Russian payment system “Mir” (English: Peace). “Secondly, a lot of people are worried about their money because of the political and economic situation in Russia,” continues the lecturer at the New Economic School in Moscow. “And they are now putting that into real estate somewhere in south-west Turkey.” From an investment sum of 400,000 US dollars, Turkish citizenship is free.

Turkey is plugging many of Russia’s trade gaps left by the West. However, she does not do this out of charity to Moscow. In fact, she urgently needs the Russian cash injection. The inflation rate was over 80 percent in August, the highest in 24 years. Grocery prices rose by more than 90 percent compared to the previous year and the Turkish lira also lost 44 percent in value last year. “People really have massive problems coping with their everyday lives,” says Erdal Yalcin, who is a professor of international economic relations in Constance and also an expert at the Kiel Institute for the World Economy, ntv.de. Erdogan is putting the economic situation in a quandary because “he has an election to win.” Next year in June there will be presidential and national assembly elections. The Turkish President is currently doing poorly in polls.

Erdogan is not relying on austerity measures, but on interest rate cuts by the formally independent central bank, despite the high inflation. On the one hand, he serves conservative voters, because interest “is ‘haram’ for many Turks, that is, a sin.” On the other hand, the already heavily indebted population would hardly be able to afford higher interest rates. Erdogan has no choice but to focus on rapid economic growth. The problem: This requires investments from abroad, according to Yalcin. “And because of the political framework and the bad financial situation, they are hard to come by.” This is where Russia comes in.

Russian cash injection urgently needed

Russian tourists and Russian investments are bringing much-needed money into the country. The Russian nuclear company Rosatom is building a $20 billion nuclear power plant in southern Turkey. “I wouldn’t be surprised if every sector in Turkey affected by the sanctions isn’t booming right now,” says Toews. The economist, who spent a long time in Turkey himself, gives two examples: A house in Bodrum, Turkey, which cost 20,000 euros 20 years ago, now costs half a million euros. Where I used to pay 250 euros for a flight from Moscow to Berlin, I now have to fly via Istanbul and therefore pay 2000 euros on some days.”

The growing export market in Russia provides foreign exchange, which Erdogan needs to cover Turkey’s trade deficit and buy Turkish lira on the financial markets. In this way, he can support the currency without raising interest rates. However, the expert Yalcin still does not believe that trade with Russia will pull Turkey out of the crisis in the short term. The total volume of the Russian market for Turkey is not big enough for that.

In addition, the inevitable male friendship between Putin and Erdogan is on shaky ground. Neither of the two autocratic heads of state wants to be left out, as was recently made clear at a summit in Uzbekistan: Erdogan demanded a discount on Russian gas from Putin. The Russian head of state refused – despite the close ties to Moscow, Turkey must continue to pay the world market price. “The topic is certainly not off the table yet,” says ntv correspondent Rainer Munz. Because Turkey is well aware of its strong basis for negotiations with Moscow.

The article is in German

Tags: Purpose relationship sorely needed Erdogan involved Putin

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