Turkey Russia economic relations after the plane downing

(MENAFN- The Journal Of Turkish Weekly) On November 24th 2015 Turkey shot down a Russian Su-24 bomber on the Turkish-Syrian border. It is the first time that a NATO member has shot down a Russian plane since 1952.

Turkish officials expressed that the Russian plane had violated Turkish airspace adding that the plane had been warned at least 10 times over a period of five minutes before being shot down by two Turkish F-16 fighter jets.

Economic relations between Turkey and Russia have been negatively affected since the downing. In response to the incident Russia imposed economic sanctions against Turkey including an import ban on Turkish products such as poultry tomatoes cucumbers onions oranges grapes apples and peaches as well as a prohibition on charter flights between the two countries. Russia is also planning to suspend bilateral economic cooperation programs and commissions. While Russia and Turkey mutually abolished visa requirements in 2010 Russian Foreign Minister Sergey Lavrov has announced that Russia will suspend visa-free travel for Turkish citizens visiting Russia starting on January 1st 2016. Also Russia’s tourist board has suspended all tours to Turkey a move that is estimated to cost the Turkish economy $10bn seeing that Russian tourists are important for Turkey’s tourism sector. Additionally Lavrov also announced “we do not recommend that our citizens travel to Turkey for tourism or any other reason” based on security reasons. On the other hand Turkey has not announced a change in its visa regime applying to Russian citizens.

Economic ties

Indeed Turkey and Russia are important economic partners in the energy trade and tourism sectors to name a few. Russia is one of the countries with which Turkey has significant trade relations. In 2014 Turkey’s total trade volume with Russia amounted to $31bn while its exports to Russia amounted to $5.94bn. Russia is the 7th largest export market for Turkey. Turkey’s major export items to Russia include foodstuffs textiles vehicles and machinery. However Turkey’s exports to Russia decreased by 14.7 percent in 2014 compared to the previous year and Russia’s share of Turkey’s overall exports went down to 3.8 percent from 4.6 percent. Seeing that sanctions against Russia after the Ukraine crisis and the depreciation of ruble led to a substantial decrease in Russian imports overall the amount of Turkey’s exports to the country fell significantly.

In 2014 Turkey’s imports from Russia amounted to $25.3bn with an increase of 0.9 percent compared to 2013. The export-import ratio of Turkey’s trade with Russia is unfortunately 24 percent which is low. The main reason for this is energy as 55 percent of Turkey’s natural gas comes from Russia. In addition Russia is also one of the largest providers of foreign direct investment in Turkey.

In the construction industry Turkish contractors have engaged in large-scale operations in Russia since the 1990s. According to the Turkish Contractors Association Turkmenistan (21.5%) Russia (16.9%) and Iraq (10.8%) occupy the top three countries in which Turkish contracting companies operate. Last year Turkey was involved in 47 projects worth a total of $3.85 billion in Russia.

As noted Turkey shares strong ties with the Russian market in the tourism sector. In 2014 about 4.5 million Russian tourists arrived in Turkey and it is expected that they injected $3 billion dollars into the country.

These strong economic ties between the two countries clearly indicate that the political fallout after Turkey’s downing of the plane will exert unfavorable impacts on both of the countries’ economies. Seeing that Turkey is in a disadvantageous position in its trade relationship with Russia particularly due to its energy imports the Turkish economy might be disproportionately affected by these tensions.

However the Russian economy more than half of which is based on oil and gas revenues has recently been experiencing hard times itself due to the global fall in oil prices which are currently below $40 per barrel. Also the Russian economy has been negatively affected by the enactment of EU and U.S. sanctions last year.

In the end the loss of market shares in different sectors will work to the detriment of both Turkey and Russia.