Western sanctions imposed on Russia following the Kremlin’s invasion of Ukraine, including banks’ being cut from the SWIFT system as well as the subsequent depreciation of the ruble, are continuing to affect the purchasing power of Russians and the companies conducting business with the country. This includes Turkey’s readymade clothing sector which is already suffering in Ukrainian markets as businesses come to a standstill.
While 267 stores and 180 selling points of a total of 24 Turkish readymade clothing brands in Ukraine already shut down and dealt a heavy blow to the sector, some 32 brands operating in Russia are monitoring the developments regarding their 655 stores and 2,556 selling points.
Sector representatives told Turkish economics daily Dünya that due to the cancellations and postponements of the shipment their loss has already reached $150 million to $200 million (TL 2 billion to TL 2.7 billion) only in Ukraine.
According to the official data, the sector made exports worth $173 million and $287 million to Russia and Ukraine, respectively, last year. However, a large number of exports to these countries were also carried out in "shuttle trade," which allowed the export figure in question to reach $750 million in Ukraine, and exceed $1 billion in Russia.
The sector, which participated in the fairs held in both countries last month and made great business connections – before Russia invaded Ukraine – had the goal of increasing official exports to Russia from $287 million to $1 billion.
The most affected businesses in Turkey will be those in Laleli and Osmanbey districts, both are major garment and clothing hubs and carry out the majority of foreign sales to both countries.
Şeref Fayat, head of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) Readymade Clothing and Apparel Sector Assembly, said that cancellations and postponements in exports to Ukraine amounted to $150 million-$200 million.
"The shipment to Ukraine has stopped, there is an uneasy wait in Russia, too. Since most of the trade is carried out via shuttle trade, those are not subjected to swift transactions," he also said.
Mustafa Gültepe, head of the Istanbul Apparel Exporters’ Association (IHKIB), however, stated that they will have problems with Russia’s being cut from the SWIFT system and that local currencies can be used by taking all kinds of risks in the trade that will continue.
Gürkan Tekin, the chairperson of the Mediterranean Ready-to-Wear and Apparel Exporters' Association (AKIB), stated that the trucks are currently waiting at related countries’ borders.
"The first sector to be affected from the slightest problem is ready-made clothing. Therefore, the industry is severely affected right now. Insurance is common mostly in the EU region. So there will be a serious impact. Currently, exports are at a standstill," he said.
Gıyaseddin Eyyüpkoca, chairperson of the Laleli Industrialists and Businessmen's Association (LASIAD) said that they estimate that cancellations and postponements even exceed $200 million.
"This also affected the production. There are order cancellations even from Poland because the country shares a border with Ukraine. Half of the market in Laleli is in danger," he said.
Osmanbey Textile Business People's Association (OTIAD) Chairperson Eda Arpacı stated that after the military operation launched by Russia in Ukraine, they carried out a study to determine the kinds of problems Osmanbey could face regarding orders, shipments and collections, saying: "According to the information we received, there are order cancellations in both countries. Goods cannot be shipped to Ukraine. Shipments can be made to Russia, but they are pending."
"In this uncertain environment, our priority is to create a peaceful environment without harming the people. Only then will we be able to determine the extent of the damage," he said.
Russia is the country with the highest number of Turkish brands with 655 stores. In Ukraine, there are 267 stores of 24 brands. United Brands Association (BMD), the umbrella organization of the brands operating 922 stores in two countries, was set to hold a meeting Tuesday about the fate of the stores in the region.