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What is the Cost of the Conflict between Russia and Turkey?

What is the Cost of the Conflict between Russia and Turkey?

Loss of Russian bombers on the Syrian-Turkish border poses a threat to the extensive trade and economic relations between Russia and Turkey. RBC wanted to understand what is at stake.

Destruction of a Russian bomber by the Turkish Air Force on Tuesday that Putin called “stab in the back of the accomplices of terrorism” can put an end not only to plans to expand bilateral trade between Russia and Turkey, but threatens to rupture economic ties.

It is already clear that the tourism industry is at risk – Foreign Ministry and Rosturizm Tuesday recommended Russians to refrain from trips to Turkey. Will there be other measures, it is hard to say – now it is “a presidential theme,” say two sources in RBC’s financial and economic bloc and  in the government. The government, according to them, is waiting for signals from the Kremlin, and has  not started to discuss possible trade and economic measures against Turkey.

At stake  is  the mutual trade worth over $ 30 billion a year and more than $ 2 billion of mutual accumulated investments. Turkey  is the fifth-largest trading partner of Russia with a share of 4.6% of the total Russia’s trade with the outside world. According to this index, Turkey is second only after  China, Germany, the Netherlands and Italy, but  is ahead of Belarus, Kazakhstan and Ukraine.

Trade turnover between Russia and Turkey amounted to $ 31 billion in 2014,  in the first nine months of 2015 – $ 18.1 billion, of which $ 15 billion  is the Russian exports to Turkey (Turkish imports of goods amounted to just over $ 3 billion). And taking into account trade in services of the Russian-Turkish figures are even higher: for example, in 2014 the turnover of goods and services amounted to almost $ 44 billion.

Two months ago, when Turkish President Recep Tayyip Erdogan arrived in Moscow, he told the Russian President Vladimir Putin that the trade turnover between Russia and Turkey was expected to reach $ 100 billion by  2023. These ambitions were not fantastic: on the background of discord between Russia and the West, Turkey which did not join sanctions has positioned itself as a particularly promising economic partner. “The tension between the West and Russia over the Ukrainian crisis could open a new era and set new parameters in the Turkish-Russian relations” – Turkish edition of Journal of Turkish Weekly  noted with the hope in August.

But in September, Russia has started to bomb the Syrian rebels. This provoked protests from Turkey, for which Syria has always been a sphere of immediate interest.

Dreams of free trade

“Russia and Turkey had good trade relations, and there  were  not reasons for the deterioration,” – regrets Researcher at the Central Institute of Economics and Mathematics (CEMI) Natalya Volchkova.

Since 2009, Russia and Turkey have been  successfully implementing the project “Simplified customs corridor.

Russia mainly exports natural resources to Turkey, but it is also a good market in terms of product sales in the manufacturing sector, says Volchkova. Import from Turkey is  a fairly diversified basket of consumer goods, says the expert. Many representatives of the Russian construction industry are  tied to Turkish goods, and relationship  rebuilding, finding new suppliers will be for them a significant loss.

According to customs statistics, almost half of Russia’s exports to Turkey accounted for products under the secret code. Turkey, in turn, delivers to Russia products of plant origin ($ 779.3 million for the first nine months of 2015), textiles (about $ 514 million) and equipment ($ 496 million).

Energy dominates

Russia and Turkey traditionally have energy interests. Turkey  is  the second (after Germany) market for “Gazprom”. In 2014, Russia delivered to the country 27.3 billion cubic meters  or about 60% of its needs. LUKOIL  is also a major player in the Turkish fuel market. In 2008, the company  acquired a network of local gas stations  for  $ 555 million, now it has more than 600 gas stations in Turkey.

Irreparable loss

Recommendations of the Russian authorities to limit the travel of Russians to Turkey can be expensive for  it. In the first nine months of this year, Turkey, according to its Ministry of Tourism, was visited  by 3.3 million Russians – this is 20% less compared to the same period in 2014.

From Sberbank to Deripaska
Turkey is  an important market not only for “Gazprom” and tour operators. It is strategic for Sberbank, which in 2012 bought almost 100% of the Turkish DenizBank for $ 3.5 billion. The deal was the “biggest acquisition for the 172-year history of the bank.

DenizBank is now one of the ten largest banks in Turkey and a leader in retail – the bank serves 5.4 million customers, has 599 branches in Turkey and 75 abroad. Its assets as of January 1, 2015 make  $ 40 billion, capital – $ 3 billion.

“Alfa Group» – Alfa Telecom Turkey Ltd is also present  in the telecom market in Turkey.  It owns 13.22% in the largest Turkish operator Turkcell and planned to increase its share by half.

Since 2011, “Yandex”  has been operating in Turkey, it is the first country outside the CIS. The main search engine in Turkey  is Google, the share of “Yandex” in the local market for a long time did not exceed 4-5%.

Military-technical cooperation

A representative of the General Staff on Tuesday night said that “contacts with Turkey on military lines will be discontinued.” Prior to the escalation of the conflict, Russia has supplied to Turkey anti-tank missile complexes “Kornet-E”, the Mi-17 helicopters, armored personnel carriers.