ONGOING TRADE CRISIS DEMONSTRATES TURKEY’S LACK OF LEVERAGE AGAINST RUSSIA

On September 8, Kursad Tuzmen, the Turkish Minister of State for Foreign Trade, said that the delays being faced by Turkish exports trying to enter Russia had so far cost the country $500 million.

The crisis began in mid-August when trucks and ships carrying Turkish exports began experiencing long delays at Russian customs posts. The Russian authorities attributed the holdups to changes in procedures which required goods from Turkey to be subjected to more extensive customs checks. But the timing of the delays, coming so soon after the Russian-Georgian war over South Ossetia, raised suspicions in Turkey. Although the Justice and Development Party (AKP) government had been considerably more circumspect than many of Turkey’s NATO’s allies in their comments on Moscow’s de facto annexation of South Ossetia, Ankara had nevertheless infuriated Russia by allowing US ships carrying aid to Georgia to transit the Bosphorus (see EDM, September 3). Many suspected that the “new customs procedures” were a way of Russia flexing its muscles and reminding the AKP of the massive economic leverage it is able to bring to bear against Turkey.

Tuzmen reacted furiously, noting that Russia had not applied the same procedures to goods from China and India, which are Turkey’s main rivals in areas such as textiles, which account for a substantial proportion of the country’s exports to Russia. On August 26, Tuzmen threatened retaliation.

“It really disturbs us to see our trucks being held at customs for three weeks,” said Tuzmen. “If someone disturbs us, then we shall disturb them” (Dunya, August 27).

On August 29, Tuzmen announced that, starting from September 1, Turkey would begin to apply restrictions to imports from Russia.

“We shall apply the same conditions and practices to Russian goods coming into Turkey as are applied to Turkish goods entering Russia,” Tuzmen declared (Dunya, August 3).

But Tuzmen’s threat was an empty one. At a meeting of the Council of Ministers, Prime Minister Tayyip Erdogan bluntly rejected Tuzmen’s suggestion. On September 1, Government Spokesperson Cemil Cicek delivered a humiliating public rebuff to Tuzmen.

“Tuzmen’s proposal was not approved by the Council of Ministers,” Cicek told the NTV television news channel. “The normal procedures are continuing to be applied” (NTV, September 1).

On September 2, speaking after a meeting in Istanbul with his Turkish counterpart Ali Babacan, Russian Foreign Minister Sergey Lavrov dismissed suggestions that Russia was discriminating against Turkey (Milliyet, Hurriyet, Zaman, September 3). Few in Turkey believe him, but the AKP government does not appear to have much room for maneuver.

Russia is Turkey’s main trading partner. In 2007, annual bilateral trade stood at $28.2 billion and is expected to reach $38 billion by the end of 2008. In 2007, Russia was Turkey’s fourth-largest export market with an annual volume of $4.73 billion. Turkish companies are currently estimated to have between $3.2 billion and $6 billion invested in Russia. Over the last 20 years, Russia has proved a highly lucrative market for Turkish contractors, who are estimated to have completed more than $20 billion worth of construction projects. Russia is also Turkey’s second largest tourism market after Germany. In 2007, around 2.5 million Russians visited Turkey on vacation.

But the most critical aspect of Turkey’s economic reliance on Russia is energy. In 2007, Turkey imported 9.36 million tons of crude oil from Russia, nearly 40 percent of its total oil imports. Even more significantly, in 2007 Turkish imports of natural gas from Russia totaled 24 billion cubic meters (bcm), equivalent to around 65 percent of its total natural gas imports. Turkey is currently scheduled to increase its imports of Russian natural gas to 30 bcm by 2010.

In addition to its use in industry and natural gas burning power stations, Russian natural gas is also used for central heating in many Turkish cities, including Istanbul and Ankara. The AKP simply cannot afford to antagonize Russia and risk an interruption in the gas supply going into the winter, particularly given that nationwide local elections are due to be held in March 2009.

Despite Tuzmen’s threats of retaliation against Russia, Turkish exporters themselves are more realistic. Oguz Satici, the chair of the Turkish Exporters’ Assembly (TIM), the largest foreign trade organization in the country, warned against what he described as “the language of revenge”.

“The problem should be solved with reason. Russia is our biggest trade partner and trade relations between the two countries cannot be deferred,” said Satici, before ruefully noting: “Unfortunately, we are an energy importer” (Turkish Daily News, September 8).

But Tuzmen remains recalcitrant. On September 8, he brought the issue back onto the news by publicly and pointedly noting that the problem remained unresolved (Anadolu Ajansi, September 8). Such defiance has inevitably raised questions about Tuzmen’s political longevity. Erdogan is not renowned for tolerating either criticism or any challenge to his authority. He is unlikely to have been pleased by Tuzmen’s attempts to steamroller the AKP into taking retaliatory measures against imports from Russia. Tuzmen does not have a strong following within the AKP. A former bureaucrat, unlike most of the rest of the AKP leadership, he comes from an ultranationalist rather than a radical Islamist background. Not surprisingly, inside the AKP, Tuzmen’s name has now moved to the top of the list of those ministers who can expect to be replaced if Erdogan finally introduces his long-rumored Cabinet reshuffle.

Perhaps more importantly, such a clear demonstration of the stranglehold that Russia enjoys over Turkish energy imports is unlikely to have discouraged the AKP from pushing ahead with its ambitions to diversify its energy supplies – including importing more natural gas from Iran – and to initiate the country’s first nuclear power program this fall.