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The economic stakes of the standoff between Russia and Turkey

Russia looks to punish Turkey for downing warplane by cutting economic ties, investments


 
epaselect epa05039461 A still image made available on 24 November 2015 from video footage shown by the HaberTurk TV Channel shows a burning trail as a plane comes down after being shot down near the Turkish-Syrian border, over north Syria, 24 November 2015. A Russian fighter jet was shot down 24 November over the Turkish-Syrian border, the Defence Ministry in Moscow said, according to Interfax news agency. The Sukhoi Su-24 was reportedly downed by Turkish forces, Turkish state news agency Anadolu reported, citing sources in the presidency. The report said that the jet violated Turkish airspace and ignored warnings. It crashed in the north-western Syrian town of Bayirbucak, Turkish security sources were quoted as saying.  (HABERTURK TV CHANNEL/EPA/CP)

A still image from video shown by the HaberTurk TV shows a burning trail as a plane comes down. (HABERTURK TV CHANNEL/EPA/CP)

MOSCOW — Russia plans to retaliate against Turkey for the downing of a warplane by imposing sanctions, cutting economic ties and scrapping major investment projects.

Since the plane was shot down Tuesday on the Syria-Turkey border, Russia has already restricted tourism, left Turkish trucks stranded at the border and confiscated large quantities of Turkish food imports.

On Thursday, Russian Prime Minister Dmitry Medvedev ordered his government to also draft sanctions against Turkey within two days in response to what he described as an “act of aggression against our country.”

The sanctions will include “restrictions and bans on Turkish economic structures operating in Russian territory, restrictions and bans on deliveries of products, including foodstuffs,” as well as on labour and services.

The steps threaten billions of dollars of trade, as well as further complicating the Syrian conflict.

Russia is the largest destination for Turkey’s exports, and the two countries are bound by plans for a new gas pipeline and strong trade in food and tourism.

As recently as in September, Turkish President Recep Tayyip Erdogan met his Russian counterpart Vladimir Putin and predicted a tripling of bilateral trade to $100 billion in the next eight years.

Some regional authorities appeared to be taking matters into their own hands.

In the Crimean peninsula, Deputy Prime Minister Ruslan Balbek told the Tass news agency that 30 Turkish investment projects worth a total $500 million had been frozen. In the southern Krasnodar region, local TV reported that 39 Turkish delegates at an agricultural exhibition were to be deported for visa violations.

The growing clash could exacerbate both countries’ economic troubles. Russia’s economy is predicted to shrink about 3.8 per cent this year, while the Turkish currency has slumped in value in 2015.

Here’s a look at what’s at stake.

ENERGY

One of Russia’s flagship energy projects, the proposed Turkish Stream pipeline, would allow Russia to export gas to the European Union through Turkey and reduce its reliance on transit through Ukraine.

Turkish Stream, which has yet to begin construction, was proposed last year after Putin ended plans for another pipeline to Bulgaria, South Stream, which had run into opposition from EU countries.

Turkey obtains most of its energy from Russia, and while ending those supplies would cause economic pain for Russia, scrapping plans for Turkish Stream could be more expedient, says Ozgur Unluhisarcikli, director of the German Marshall Fund in Ankara.

“Russia would not be able to turn away from its commitments such as providing gas, but if there is no commitment, then it could stop everything,” he said.

Also, Russian state company Rosatom was contracted in 2010 to build and operate Turkey’s first nuclear power plant in a $20 billion project, though it is far from complete.

Both Turkish Stream and the nuclear plant could become part of a sanctions package, Russian Economic Development Minister Alexei Ulyukaev said Thursday.

TOURISM

The biggest immediate impact on Turkish business may be a plunge in the number of Russian tourists.

Turkey’s beach resorts are a big draw for Russians, but the Russian foreign ministry has warned against all travel there and leading Russian travel agencies have stopped selling tours to Turkey.

Restrictions on flights between Russia and Turkey are being considered, Ulyukaev said Thursday. In recent months, Russia has also ended flights to Ukraine and Egypt.

Nearly 4.5 million Russians visited Turkey last year, making them second only to German tourists among visitors to the country. Given that many Germans who travel to Turkey are ethnic Turks visiting relatives, Moscow-based analyst Tom Adshead of Macro Advisory said Russians may be the largest contributors to Turkish tourism.

An end to tour sales or restrictions on flights to Turkey could cost Turkey a couple billion dollars or more per year, Adshead estimates.

Turkey stands to lose out heavily if Russia ends visa-free travel between the countries, as that could redirect some Russian tourists to domestic destinations like Crimea.

FOOD

Since Tuesday, there has been a flurry of Russian restrictions on ostensibly unsafe Turkish food and calls to patriotic buyers to avoid Turkish produce.

The consumer safety agency said Thursday it had confiscated more than 800 kilograms of Turkish food this year for “non-compliance with quality and safety requirements.” Clothing, furniture and cleaning products are also unsatisfactory, the agency said.

Separately, six shipments of Turkish chicken meat totalling 162 tonnes (178 tons) have been held up at a border crossing near Kaliningrad due to problems with their documentation, local authorities said Wednesday. In the past, Russian food safety authorities have often been accused of selectively blocking imports from various countries for political reasons.

Buying Turkish food is unpatriotic, according to Gennady Onishchenko, a former food safety chief who now advises the prime minister. “Every Turkish tomato bought in (supermarket chain) Auchan or at the market is a contribution toward the next rocket to be fired at our guys,” Onishchenko was quoted saying by the RIA Novosti agency.

Turkish fruit and vegetables are commonplace in Russian stores, especially since Putin blocked all imports of EU produce last year in response to Western sanctions. Previous import restrictions have been followed by sharp rises in food prices in Russia.

BORDER RESTRICTIONS

Russian authorities have begun to turn away vehicles with Turkish license plates at a border crossing with the Caucasus nation of Georgia, the Georgian government said Thursday. Hundreds of Turkish trucks are reportedly stuck in the neutral zone between Russia and Georgia as a result.

The Verkhny Lars crossing is on a transit route for exports from eastern Turkey to Russia over land, with trucks carrying food and consumer goods.

Putin’s spokesman, Dmitry Peskov, insisted Thursday there is no ban on Turkish goods but said customs officials were inspecting them carefully “due to various reasons” including a possible terrorist.

“This is only natural in the light of Turkey’s unpredictable actions,” Peskov said.

Suzan Fraser in Ankara, Turkey, and Misha Dzhindzhikhashvili in Tbilisi, Georgia, contributed to this report.

 


 
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