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56 Opinion bne August 2023
Turkey's balancing trade and geopolitics
in relations with Russia and Ukraine
Ben Aris in Berlin
Turkey finds itself in a delicate position, caught between its support for Ukraine's territorial integrity and its desire to maintain ties with Russia, writes Natalia Konarzewska, a political analyst for the Central Asia-Caucasus Institute in an analytical note.
While Turkey has supplied Kyiv with significant amounts of weapons, it has also increased its trade exchange with Russia, leading to accusations from the West that these economic ties support the Russian war effort. However, Turkey's trade co-operation with Russia is vital for its own economic stability, and it is unlikely to alter course.
According to the Turkish Statistical Institute (TUIK, or TurkStat), trade volumes between Turkey and Russia witnessed a significant surge in 2022. Russia became Turkey's top import partner, with imported goods valued at $58.85bn, double the amount from the previous year. Similarly, Turkey's exports to Russia also saw a substantial increase, reaching $9.34bn in 2022, compared with $5.8bn in 2021, according to the United Nations COMTRADE database on international trade.
These trade figures align with Turkey's efforts to strengthen its economy and improve household purchasing power. Facing challenges such as double-digit inflation, soaring living costs and a weakened currency, the Turkish government and financial institutions have been desperate to prop up the economy and boost economic growth.
“The overall value of Turkish exports in 2022 was at a record high and hit $254bn, which was publicly announced in early January 2023 by Turkey’s President Recep Tayyip Erdogan,” says Konarzewska.
“The Turkish government and financial institutions have been desperate to prop up the faltering Turkish economy, which grapples with double-digit inflation, soaring costs
of living and a weak currency, by improving household purchasing power and financial stability, as well as boosting economic growth. Economic concerns were the chief reasons why Ankara declined to join Western sanctions against Russia and decided to use the disruption of the trade flows created by them as a leverage to boost Turkey’s economic and trade opportunities. This approach is unlikely to change in the near term, especially since rebuilding the provinces that were devastated by February earthquakes requires spending astronomic sums,” Konarzewska adds.
The surge in trade volumes between Turkey and Russia has
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raised questions about Turkey's role as an intermediary for Russia to circumvent Western sanctions. Turkish authorities vehemently deny any exports or facilitation of trade involving sanctioned goods or items that could aid Russia's war efforts in Ukraine. In early June, Turkey's foreign minister, Mevlut Çavusoglu, attributed the spike in trade to an increase in the volume and cost of Turkey's energy imports, firmly denying any exports of goods like chemicals and microchips that could be used in Russia's military endeavours, contrary to the evidence indicating that is exactly what is going on.
The energy trade has been especially important. Turkey's increased imports of Russian oil, natural gas and coal in 2022 can be attributed to Russia's need to reroute energy exports away from the European Union due to sanctions. Ankara has seized this opportunity, taking advantage of discounted prices and the EU energy ban to double its oil exports from Russia compared to the previous year. Negotiations are also underway to secure a substantial discount on natural gas purchases
from Russia via a mooted “gas hub”, serving as a back door for Russian hydrocarbons to enter European markets. Volumes
up to 100bn cubic metres a year have been mentioned, which would take up Russia's entire stock of unsold gas following the destruction of the two Nord Stream 1&2 pipelines.
Turkey has emerged as one of the largest importers of Russian hydrocarbons and coal since the onset of Russia's invasion of Ukraine. The Centre for Research on Energy and Clean Air (CREA) estimates that Turkey is now the third-largest consumer of Russian fossil fuels, following China and Germany. Since February 2022 Turkey has purchased approximately $14.8bn worth of Russian crude oil, $7.5bn worth of natural gas and $3.6bn worth of coal, according to CREA.
“Energy Intelligence also reports that Turkey has been buying unusually large volumes of cheap Russian diesel, which it uses for domestic needs and exports its own production to the EU, which banned Russia-produced refined products starting from February 5, 2023. Such a mechanism is called an “origin swap’’ and is not explicitly banned, because Russian diesel does not reach the European Union market. However, such operations, which can be very profitable for the refiner, nonetheless demonstrate how Turkey benefits from being
the intermediary between sanctioned Russia and the West,” Konarzewska reports.
Reports also indicate that Turkish companies have supplied essential items, such as plastics and rubber, used in the production of military armaments to Russian firms sanctioned