Latest data on Turkey’s trade with Russia sure to irk West

Latest data on Turkey’s trade with Russia sure to irk West
Erdogan and Putin are no strangers to deals of convenience. /, cc-by-sa 3.0.
By bne IntelIiNews August 16, 2022

Discomfort is mounting in the West at the perception that Turkey is capitalising on attempts to isolate the Kremlin with sanctions by stepping into Russian markets that European, US and other companies have been forced to leave.

That perception will have been reinforced by the release of official trade data by Turkey that shows Turkish exports to Russia grew 46% y/y by value over May to July. The export value increased by $642bn to $2.04bn, data compiled by the Turkish trade ministry and Turkish Statistical Institute (TUIK, or TurkStat) showed. Turkey’s exports to Russia in July were up 75% y/y to $730mn, with the vehicle trade expanding rapidly and the Turkish transport minister openly boasting about it.

Russia’s share of Turkey’s total exports in July reached 3.9% from 2.6% in July 2021. Thus the export value remains relatively small—and is dwarfed by the energy bill Turkey pays Russia for oil and gas—but a growing number of Western officials seem irked by the deepening economic co-operation between Ankara and Moscow, especially since a secretive four-hour summit between Turkish Presidents Recep Tayyip Erdogan and Russian counterpart Vladimir Putin in Russia earlier this month ended with a joint pledge to expand energy and trade collaboration. The fear is that Turkey will help Putin with schemes that enable major sanctions evasion.

Some Western capitals, according to a Financial Times report on August 16, have requested information from Ankara on its relationship with the Kremlin. “It’s on our radar,” an EU official was quoted as saying by the daily. “It’s not nice and is not being perceived well by the EU. It’s an irritant.”

Nevertheless, the consensus among Turkey’s Nato allies appears to be that Turkey—with its unique geo-strategic position at the crossroads of Europe, Russia and the Middle East—is a special case. Given the influence this gift of fate provides Turkey, Erdogan knows full well he can afford to play both sides in crises such as the Ukraine war.

Turkey’s case for maintaining good relations with both Moscow and Ukraine—with the former relationship sometimes described as a “competitive cooperation” as both Erdogan and Putin attempt to secure certain advantages at the expense of some discomforts, such as, in Russia’s case, tolerating Turkey’s provision of combat drones to Ukraine—is that it can preserve itself as a trusted interlocutor that can be called upon to mediate talks when the Russians and Ukrainians are ready to talk peace.

But there is another crucial aspect to Turkey and Erdogan’s growing cooperation with Russia despite the war. Turkey, it should not be forgotten, is facing what could turn out to be its worst economic crisis in living memory. And many Turks, with one eye fixed on the elections that they pray will see Erdogan turfed out of office within a year, blame the “Erdoganomics” of Turkey’s leader of two decades for it. With dollarisation in Turkey running at record levels and the Turkish lira on its knees, Erdogan needs all the economic help he can get right now (including that provided by the millions of Russian holidaymakers heading for Turkey this summer with Russian-Turkish relations in such great shape), beggars can’t be choosers.

The point was perhaps amply made by Moody’s Investors Service on August 12. Despite last week ending with some “feelgood” reports across the media on some improvement in Turkey’s economic fortunes, the rating agency cut the country’s sovereign rating further into junk, taking it to six notches below investment grade.