Russia, which began imposing unilateral sanctions following the jet downing crisis, is now unable to adjust to rising prices and the 2018 World Cup, with Moscow easing sanctions imposed on Turkish firms in various fields
The Russian government has launched draft legislation concerning the exemption of some Turkish firms from sanctions previously imposed on Turkish imports following the downing of a Russian jet by Turkey for violating its airspace. According to the draft legislation on the Russian government's website, some rules will be determined with a view to foster trade with Turkish firms and narrow the scope of sanctions imposed on Turkish imports. This decision is thought be in response to the reality that the bans imposed on Turkish goods have put upward pressure on the Russian inflation, which had already been following an increasing trend.
The decision aims to exempt some Turkish goods and Turkey-based producing firms from the sanctions imposed as a result of the crisis experienced between Turkey and Russia. If the draft legislation is put into effect, when the goods imported from Turkey cannot be substituted with other domestically -produced goods, the embargo will be eased in those cases. Moreover, the Russian Ministry of Development noted that Sberbank, which also owns Turkey's Denizbank, should remove the restrictions on the transactions between Turkish and Russian firms.
According to the news in Russian Kommersant daily, in order not to risk the construction work planned to be completed for the 2018 World Cup, Russia plans to provide some flexibility for Turkish construction companies. According to information retrieved from a unnamed Russian official, those Turkish companies for which the sanctions will be eased, can operate in Russia only if they form partnerships with Russian companies and operate under the condition that they possess at most 25 percent ownership in these companies.
On the other hand, two Turkish airline companies, Pegasus Airlines and Onur Air, decided to suspend their flights to Russia about two weeks ago, after Russian officials had demanded flight crews obtain Russian visas - an act considered a violation of international civil aviation rules. In a response on Friday, Pegasus Airlines through a press release announced that they have decided to continue flights to Russia after their flight crews overcame the issue of visa.
Following Turkey's shooting down of a Russian military jet over the Turkey-Syria border last month, Russia imposed a range of unilateral sanctions on Turkey, including a ban on food imports, an end to visa-free travel and calls for tourists not to visit Turkey. In December, economic sanctions imposed on Turkey caused an increase in prices in Russian shops, Prime Minister Dmitry Medvedev said. Revealing that the government was trying to come up with a compensation formula, Medvedev also told Russian TV that tourism ties to Turkey and Egypt could be rebuilt.
Moreover, analysts from Russia and Turkey have warned the Russian government repeatedly that Russia risks economic pain by freezing economic relations. The Russian economy cannot replace what Turkey exports, commented Stanislav Tkachenko, professor in the International Relations Department of St. Petersburg State University (Russia) in a note published on Russia Direct on Nov. 26. "The structure of bilateral trade clearly benefits Russia more than Turkey," Tkachenko wrote. "In 2014, Turkey ranked fifth among Russia's partners in terms of exports ($25 billion of mainly natural gas, metals and agricultural products). 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." 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, Tkachenko said. "The fragile shoots of economic growth in Russia, after nearly a year of recession, would be torn out of the ground," he added.
Imports from Turkey are much-needed in Russia, but replacing them will involve an operational restructuring of logistics and supplies, according to a spokeswoman for a Russian retail chain, Maria Kursonov, who spoke to Komsomolskaya Pravda on Nov. 29. Inozemtsev warned that the banning of tourists flights to Turkey will drastically affect many tour operators in Russia. This may also lead to a rise in expenses on travel, holidays, accommodation, boarding and lodging. With tourist flights facing a ban, Russian foreign trade turnover with Turkey and Egypt will be considerably affected. He advised that instead of getting preoccupied with retaliatory measures, Russia should act in a cool and calculated manner to prevent any possible risks.
Russia has been going through hard times due the decline in oil prices, Western sanctions and the slump in capital inflow into the country. This being the case, Turkey is a major trade partner for Russia, whose exports to the country amount to more than $25 billion annually. The foreign trade volume between Turkey and Russia soared from $26.2 billion in 2010 to $31.2 billion by the end of 2014 - a 17.3 percent upsurge. In 2014, Turkish companies invested more than $10 billion in Russia, with the tourism, construction, food, home appliances and banking sectors taking the lead. Turkey functions as a major market that enables Russia to access global markets. Russian Sberbank, which entered the Turkish market by purchasing DenizBank in 2012, currently operates in the banking sector.