Here’s why Russia should shy away from reckless political decisions after Turkey's controversial downing of a Russian jet.
Russian President Vladimir Putin, left, and his Turkish counterpart Recep Tayyip Erdogan speak during a joint news conference at the new Presidential Palace in Ankara in December in 2014. Photo: AP
For almost a quarter of a century Russia and Turkey have sought political and economic rapprochement. As of Nov. 24, 2015, when the relationship was dealt a tragic blow by Ankara’s downing of a Russian bomber and the death of one of the pilots, an impressive infrastructure had been put in place with a view to economic cooperation.
This is reflected in the total trade in goods between the two countries, which almost hit $40 billion in 2008, before dipping slightly on the back of the global economic crisis. For the past three years the figure has been steady at around $31-34 billion per year. Today, Turkey is one of Russia’s largest trade partners.
The two countries had even set the rather optimistic target of raising bilateral trade to $100 billion by 2023. Diplomats on both sides discussed the prospects for concluding an agreement on a free trade area for goods, services and investments. In other words, Russia and Turkey were on the verge of market integration.
The boon of bilateral trade for Russia
Today, the structure of bilateral trade clearly benefits Russia more than Turkey. In 2014 Turkey ranked fifth among Russia’s partners in terms of exports ($25 billion of mainly natural gas, metals and agricultural products). Russian imports of goods and services from Turkey were relatively low in 2014 (at around $7 billion). At the same time, Russia buys products from Turkey that it needs for its economy (machinery, equipment, textiles, building materials, food) that cannot be replaced overnight with Russian substitutes.
And then there is tourism. Last year 4.4 million Russians visited Turkish resorts, where high-quality infrastructure has been built especially for them. Clearly, a slump in Russian tourism will adversely affect the business of Turkish hotels and restaurants. But is that really the aim of Russian diplomacy today? Another question remains unanswered: Where will Russians go on vacation in 2016? For those seeking sea and sand, there is nowhere closer and cheaper than Turkey.
Russia is Turkey’s biggest partner in terms of imports, surpassing even Germany in 2014. But Russia did not feature in the list of Turkey’s largest partners for exports of products and services in 2015. If tomorrow Russia stopped supplying natural gas to Turkey (the most important export item), people in the country’s eastern regions would likely face problems similar to those in Crimea: blackouts, heating outages, higher utility bills, etc.
But again the question arises: Do we need this? Russia is right to believe that the decisions taken by Ukrainian Prime Minister Arseniy Yatsenyuk’s government to rupture Russian-Ukrainian economic ties in all possible areas are ill-advised and aimed solely at harming the Kremlin. Is it too much to hope that the Russian government will act more sensibly in the current crisis?
It should also be mentioned that more than 8,000 Russians own real estate in Turkey, and that Russian investments in Turkey amount to approximately $10 billion. Turkish investments in Russia are comparable (a little over $10 billion), and provide tens of thousands of jobs and hundreds of millions of rubles in taxes for the Russian Federation.
These facts and considerations should be kept in mind when analyzing Russian-Turkish relations today. Any attempt to inflict economic damage on Ankara will be repaid in kind.
Keeping the door open
It follows that an economic war with Turkey would be a shot in the foot for the Russian economy; it would damage both national business and consumers. Economic sanctions with no clear purpose are risky, both economically and in terms of maintaining a reputation.
We live in a world where politics and economics are bound together in a tight knot. That is why the various ministries of any government need to know how to maneuver within an overall team strategy.
Turkey’s controversial downing of the Russian jet requires a reasoned and transparent assessment on the part of Russian politicians. The Russian Defense Ministry needs to draw lessons from the incident, and ensure that post-Nov. 24 Turkey poses no more threat to Russian forces in Syria.
Russian diplomats should keep the door to communication with Turkey open, so that at any moment the Kremlin can convey its point of view to the Turkish side.
Meanwhile, Russian economic diplomacy, including business relations with Turkey, must do its duty and not discard 25 years of bilateral ties.
The cost of a misjudged response
If the Kremlin starts to view Turkish policy through a negative prism, and the Turkish-Syrian border turns into a line of armed confrontation between the two countries, economic considerations will lose all meaning, and trade and investment will become the inevitable victims of the confrontation.
The economic cost of severing ties with Turkey could exceed $30 billion, and for some sectors of the Russian economy (energy, metallurgy) it would be a heavy blow. The fragile shoots of economic growth in Russia, after nearly a year of recession, would be torn out of the ground.
The task of Russian economic diplomacy is to define the line beyond which punishing Turkey for its illegal actions against a Russian military aircraft starts to undermine Russia’s own economic well-being.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.