Airplane crisis raising questions about future of close economic trade ties between Russia and Turkey

(MENAFN- The Journal Of Turkish Weekly) Russian Prime MinisterDmitry Medvedevsaid Nov. 25 thatRussiamay consider cancelling some important joint projects with Turkey after the downing of theRussianjet by Turkish F-16s near the Syrian border on Nov. 24 raising questions about the future of the countries’ intimate economic and trade relations. Turkish companies could loseRussianmarket share due to the jet fighter incident Medvedev said in a statement published on the government website. He suggested it may lead to the barring of Turkish companies from theRussianmarket. “The direct consequences are likely to be the renunciation of a number of important joint projects and Turkish companies losing their position on theRussianmarket” Medvedev said. The joint projects that immediately come to mind are a number of existing and planned energy projects betweenRussiaand Turkey. Turkey commissioned Russia’s state-owned Rosatom in 2013 to build four 1200-megawatt reactors in a project worth $20 billion. Russia and Turkey are also working on the Turkish Stream pipeline project an alternative to Russia’s South Stream pipeline which was to transport gas toEuropewithout crossing Ukraine. The South Stream plan was dropped last year due to objections from the European Commission. The talks over the pipeline have been postponed due to Turkey’s election agenda and disagreements over a gas price discount as officials from the both countries had earlier mentioned. “It is quite difficult to start the talks again. If a reconciliatory step is not takenRussiawill most likely not continue this project. EvenRussiacould even scrap this project and start an alternative project like for example a Nord Stream 1 Gas Pipeline project” said a sector representative anonymously quoted by daily Hürriyet on Nov. 25. Energy trade matters
According to data from Turkey’s energy watchdog the Energy Market Regulatory Authority (EPDK) Turkey met some 54.76 percent of its natural gas demand fromRussiain 2014 some 26 billion cubic meters (bcm) of its 50 bcm of total gas imports. Besides Turkey is the second largest customer ofRussiangas after Germany. Around half of Turkey’s electricity production is made of natural gas. In this vein Russia’s top energy companies became one of the worst performers on Russia’s main stock exchange on Nov. 24. Gazprom’s stocks were down 4.2 percent in Moscow and Roseneft’s stocks down at least 2.9 percent according to Bloomberg data. Russia largest market for Turkish construction companies
Regarding the countries’ economic ties the Turkish construction sector may become one of the worst hit as a number of leading Turkish contractors have undertaken huge projects in theRussianmarket. According to data from the Contractors Association of Turkey (TMB) Turkish companies have completed around 2000 construction projects worth over $62 billion inRussiasince 1988. TheRussianFederation has been the largest market for Turkish contractors with around 20 percent of share. Turkish companies undertook a total of 47 projects worth around $4 billion inRussialast year. Turkish food exports so far have not been affected by Moscow’s ban on most Western food imports launched in 2014; these exports have constituted the largest export item for Turkey to Russia. Turkey made over $1 billion worth of food exports to the country in 2014. In 2014 some 4 percent of Turkey’s exports mainly textiles and food that were worth $6 billion went to Russia Renaissance Capital said in a note on Nov. 24 as quoted by Reuters.Russiahas been the seventh largest export market for Turkey. The head of theAntalyaFresh Fruit and Vegetable Exporters’ Association Mustafa Satc told daily Hürriyet thatRussiahas been the largest market for their sector. He added sector representatives do not want to think about any dark scenario regarding the future of trade ties between the two countries. “Russia is our largest export market followed by Germany. We don’t even think about a darker scenario in regards to the future of our trade ties with Russia” he said. Turkey does not only sell food to Russia it also imports a major grain: wheat. Turkey together with Egypt is also the largest buyer ofRussianwheat. It bought 4.1 million tons ofRussianwheat in the previous marketing year which ended on June 30 according to data compiled by Reuters. Textile automotive industries seeking revival
TheRussianmarket has also been of great importance for Turkey’s textiles and automotive exports. The textile manufacturers have long waited for a revival in theRussianmarket to increase their exports again. The same trend is the case for the country’s automotive exports. Turkey exported around $680 million worth cars to theRussianmarket last year. Sector representatives have long expected to see a revival in the market which has shrunk by around 40 percent due to Western sanctions on Russia. Turkish retailers have over 700 stores in Russia. In additionRussiancitizens have constituted the third largest purchasers of properties in Turkey this year buying approximately 1750 units so far.