Ukraine crisis challenged Turkey-Russia relations in another dimension where the political and defense aspects, as in the case of the S-400 missiles, follow the economic aspect, which is more likely to have more profound effect on Turkish public. In this rough patch, natural gas, tourism, agriculture and contracting services came to a fore in terms of their effects on both households and Treasury of Turkey which has been going through an economic ordeal with rising inflation and currency crisis.
Turkey denounced Russian President Vladimir Putin’s recognition of Ukraine’s breakaway eastern regions Donetsk and Luhansk which were under the control of Russian-backed separatists groups as independent republics. In its reflection on Turkey’s domestic politics, as a rare occasion, President Tayyip Erdoğan and main opposition Republican People’s Party (CHP) leader Kemal Kılıçdaroğlu agreed on opposing Putin’s order to send “peacekeeping missions” to Ukrainian territories which amounts to de facto military invasion.
Erdogan’s decision to return to Ankara before completing his Africa trip after a phone call with Ukrainian President Volodymyr Zelensky on February 22 reflects the seriousness of the situation. The Turkish Armed Forces has increased its military measures within the framework of NATO resolutions.
Three stages of the Turkey-Russia test
Before we look at what shape Turkish-Russian relations will take in the Ukraine test and how it will affect the economy, we need to look at the three major tests it has passed in the last few years.
The first of these was on November 24, 2015, when Turkish F-16s downed the Russian Su-24 plane on the grounds that it violated the Syrian border, causing the death of its pilot. This was the first instance of a NATO member country shooting down a Russian warplane since the end of the Cold War and the Second World War. Putin stopped the tourist flow, Turkish agricultural products began to return from Russian customs. The crisis was resolved on June 29, 2016, two weeks before the July 15 coup attempt, with the initiative of the then Chief of Staff, now Minister of National Defense Hulusi Akar, businessperson Cavit Çağlar, and Kazakh leader Nursultan Nazarbayev.
July 15 attempt and S-400 tests
The second stage in the Turkish-Russian relations was the July 15, 2016 coup attempt. Erdogan received Putin’s support which did not come from the US President Barack Obama, who has been in his last months in the White House. Russia gave its covert support in the first Syrian operation (Jarablus), which started only 5 weeks after 15 July. Erdogan made his first visit after the coup attempt to Putin. In the same year, Turkey signed the Turkish Stream natural gas agreement with Russia. In November it was announced that negotiations for the S-400 air defense system, which is not compatible with NATO, had begun.
Karlov assassination and Syria
The third stage is the murder of Russia’s Ambassador to Ankara, Andrey Karlov, at an exhibition opening in Ankara on 19 December 2016. Karlov was killed by Turkish police officer Mevlüt Altıntaş, who disguised as the ambassador’s bodyguard, at the Çankaya Contemporary Arts Center, across from the US Embassy, while Foreign Minister Mevlüt Çavuşoğlu was on a flight to Moscow to meet with his Russian counterpart, Sergey Lavrov. This crisis was overcome when Erdogan immediately called Putin and allowed Russian experts to participate in the murder investigation.
On January 23, 2017, Syria talks started between Turkey, Russia and Iran in Astana, Kazakhstan.
As can be seen, the relations between the two countries have endured many ordeal including the S-400 crisis, which caused further strains between US and Turkey and led to the expulsion of Turkey from the F-35 program. In addition to this, pro-Turkey and pro-Russian forces fight on opposite sides in Libya, and the Turkish-made TB-2 SİHA (Unmanned Combat Aerial Vehicle) neutralized the Russian Pantsir air defense missiles at the Tripoli airport.
Is Turkey-Russia relations a “new model”?
When Putin launched the de facto invasion of the eastern regions of Ukraine, International Relations at Özyeğin University. Prof. Dr. Evren Balta was at the Middle East meetings of the Valdai Forum in Moscow. We had an interview with her to grasp the atmosphere in Moscow.
Balta stated in that interview that one of the most interesting assessments about Putin in the meeting was that of one of her colleagues who said that Putin “is now looking at himself from the future.”
In other words, in the future, Putin did not want to be known as the leader who allowed NATO to expand under Russia’s nose.
She also underlined that that Russian experts cited their relations with Turkey as an example of “the flexible diplomacy of the 21st century”. In other words, Russia and Turkey were on opposite sides from Syria to Libya, from Cyprus to Ukraine, but they also had common interests in many other areas. If the two could be continued together, it should have been an exemplary model.
Can it happen? Can it be sustained?
Now it’s time for the Ukraine exam
The TB-2 Bayraktar SİHAs (UCAVs) that Turkey exported to Ukraine had been receiving harsh criticism from Russia for a long time. Warships from NATO countries do not leave the Black Sea empty by complying with Montreux Agreement restrictions. Russia, on the other hand, is constantly reinforcing its Black Sea fleet over the Mediterranean. Turkey’s most important security concern right now is the possibility of hot conflict and, worse, war in the Black Sea where she shares cost with Russia and Ukraine.
However, the economic effects of the crisis is a cause for a concern for President Erdogan and the ruling Justice and Development Party (AKP) administration, which are already trying to get out of an economic crisis.
Natural gas and energy
The government raised the prices of natural gas and electricity at the beginning of the year which has caused an outcry in the public. Then the fuel oil was below 80 US Dollars a barrel. With the crisis, the price of a barrel approached 100 US Dollars. The natural gas price is calculated over the oil price. Turkey imported 61 billion cubic meters of natural gas from Russia in 2021; about 40 percent of its total intake. Half of this is used in electricity generation.
Therefore, the government, which is preparing to reduce the electricity prices with gradual measures due to the public backlash, may have to make a new increase, or it will have to compensate the loss from somewhere. The same goes for natural gas and fuel oil.
There are three possibilities, two of which will put Turkey in even more trouble. First is that Russia cut off gas because Turkey took a stance on Ukraine. Second, the US force Turkey to impose sanctions on Russian gas by promising “I’ll give it to you cheaper.”
The third and most likely possibility is that the US will not force Turkey into energy sanctions since Turkey has given full support to Ukraine together with NATO. Even in this case, the Erdogan government may be stuck in the dilemma of whether to reflect the rising prices to the public.
Agriculture: bread and sunflower prices
Turkey shares the first place with China in import of agricultural products from Russia. We buy the most wheat from Russia. Turkey used to be a country with wheat production records. (We also buy from Ukraine.) The bread prices are another subject of debate that causes public discontent. It is going up as the inflation goes up. Next comes the sunflower seeds; rising sunflower oil prices have also been in the headlines for a while. Then comes barley, bran and dried legumes; We pay more than 4 billion dollars a year.
There is also the export of Turkish agricultural products to Russia; it is around 1.5 billion dollars. Tomatoes, peppers, eggplants, lemons, citrus fruits… In every crisis, the Russian customs sends them back on the ground that there are flies, and it gets better when the crisis passes.
Tourism revenues are vital
Tourism revenues make up about 5 percent of the Turkish economy, and more importantly, it means cash.
Due to reasons such as Covid-19 pandemic and Turkey’s political outlook, the tourism has become dependent on Russian and Ukrainian tourists in recent years. Last year, Russian tourists were in the first place, German tourists in the second place and Ukrainian tourists in the third place. A total of 7 million tourists came from Russia and Ukraine.
The arrival of Russian tourists depends on Putin’s words, as we have seen before. Tourism professionals also hope that the Ukrainians will be in a state of going on a holiday. They are the ones that prays the most hat the crisis does not turn into a war and that it completely subsides in a month or two.
And contracting services
Turkish companies are in the first place with a share of nearly 20 percent in the contracting services that Russia receives from outside.
According to the agreement signed in 1984 during Turgut Özal’s Prime Ministry in Turkey, natural gas is traded with contracting to a certain extent. However, in the plane crisis, it was seen how Russia suddenly blocked the activities of Turkish companies. This could pose a serious threat to the economy.
On top of all these, the crisis has a further increasing effect on the exchange rate. This, also bares a risk for the government to have a burden on treasury because the new financial program that depends on currency-protected deposit accounts end in March.
On the other hand, the beginning of the US sanctions on Russian banks may cause some funds to be shifted from Russia to Turkey via Borsa Istanbul.
When we say Turkish-Russian relations are in the Ukraine test, we are not talking about an easy test.