Steady gas supply to protect Russia, sanctions to damage trade partner

ŞEYMA ERAZ @seymaeraz
ISTANBUL
Published 29.11.2015 20:41
Updated 29.11.2015 20:44
Exports to Russia make up most of the workload at the Black Sea port of Samsun in northern Turkey.
Exports to Russia make up most of the workload at the Black Sea port of Samsun in northern Turkey.

Russia begins to implement sanctions on Turkish goods to take revenge for its downed warplane, while protecting its energy-dependent economy by maintaining its gas supply

Russian President Vladimir Putin has signed an executive order imposing economic sanctions against Turkey following the downing of a Russian warplane by Turkish jets on Nov. 24. This is not the first time that Russia has restricted the bilateral trade benefits with a country because of a political crisis. While the new sanctions will prevent some Turkish goods from entering Russia and prohibit the employment of Turkish citizens by Russian employers, the energy-dependent economy's governors have not risked cutting natural gas supply to Turkey. Russia's deputy energy minister, Anatoly Yanovsky, said Tuesday that the Russian gas supply to Turkey will continue without interruption under the ongoing contract terms. Last year, Turkey purchased 27.4 billion cubic meters worth around $6.5 billion of natural gas from Russia's state-owned gas company Gazprom, which makes Turkey the biggest importer of Russian natural gas. Russia tries to protect its energy-dependent economy as well as its reputation as a giant energy supplier despite the political conflicts; however, the country shattered its reputation as a reliable trade partner due to the political conflicts by proving that its trade partners' losses means nothing for the country's angry top officials. It is obvious that Turkey needs Russian gas until alternative projects that can cover its demand are completed. But it is also clear that the Russian government's attitude will force all customers to rapidly diversify supply.

According to a statement issued by the Kremlin Saturday, Putin signed a decree that imposes a ban on economic operations of several organizations under Turkish jurisdiction as well as a temporary limitation on certain goods originating from Turkey.

The decree, which is titled "The implementation of special economic measures against the Republic of Turkey to ensure the national security of the Russian Federation and to protect Russian citizens against illegal activities," prohibits the employment of Turkish citizens by Russian employers as of Jan. 1, 2016. The prohibition will exclude employees who have already been officially hired as of Dec. 31, 2015.

The sanctions include the unilateral suspension of the visa-free regime for Turkish nationals traveling to Russia starting in 2016. Russian travel agencies are also to suspend sales of products to Russian citizens considering vacationing or visiting Turkey. The order excluded Turkish citizens who have temporary or permanent residence permits in Russia, as well as Turkish citizens, including their family members, who have been assigned to diplomatic mission and consulates. The restrictions also ban or restrict foreign economic operations that stipulate the entry of various food products produced in Turkey to Russia. The decree places a ban or restriction on the various activities of Turkish institutions operating in Russian territory as well. Additionally, the sanctions also introduced a ban on charter flights between Russia and Turkey. Moreover, Russia is also set to aggravate security regulations on Turkish ships within Russian waters in the Sea of Azov and in the Black Sea.

Meanwhile, the Foreign Ministry asked its citizens early on Saturday to delay non-urgent and non-significant trips to Russia amid strained relations between the two countries.

Turkish F-16 fighter jets on an aerial patrol intercepted an unidentified warplane on Nov. 24 within the rules of engagement when it intruded into Turkish airspace along the Syrian border. The intruding aircraft was warned about the violation 10 times within five minutes before it was shot down. The Russian Defense Ministry later announced that one of its SU-24s had been shot down. It crashed in the Syrian region of Bayırbucak, close to the Yayladağı district of Turkey's southern Hatay province. NATO confirmed the accuracy of the information shared by Turkey about the violation. It was not the first time Russian fighter jets had violated Turkish airspace. In early October, Russian warplanes breached Turkish airspace. Russian officials apologized and pledged that no such incident would be repeated. Turkey had also renewed its warning on its rules of engagement, including an indiscriminate military response against violations of Turkish airspace.

The incident, which has driven a wedge between the two countries, has had major impacts on markets, as share sales in the Borsa Istanbul stock exchange saw an upsurge and the dollar exceeded TL 2.90 once again.

This week, according to a statement released on the Russian government's website, Russian Prime Minister Dmitry Medvedev said: "This damage will be difficult to repair. The direct consequences are likely to be the renunciation of a number of important joint projects and the loss of Turkish companies' positions in the Russian market." Two major projects on the agenda are the Turkish Stream natural gas pipeline project and the Akkuyu nuclear power plant. Turkey's first nuclear power plant is being constructed by Russia in the southern province of Mersin, which experts believe that Russia cannot simply stop building. The Turkish Stream, on the other hand, which was planned to carry Russian gas to Europe via the Turkish-Greek border, could be in danger.

President Recep Tayyip Erdoğan called on Russia to loosen strained relations, saying that Turkey and Russia should not let this problem aggravate, become backbreaking and lead to sad consequences in the future. Urging both sides to approach the issue in a more positive manner, Erdoğan said Turkey and Russia should discuss and resolve the problem without letting it go beyond the borders of the two countries.

Erdoğan stressed that the United Nations Climate Change Conference, which is scheduled to be held in Paris starting from today, might be an opportunity for the two countries to mend their relations. "I think we can hold talks there and turn this conference into an opportunity to restore ties," Erdoğan added.

Meanwhile, Prime Minister Ahmet Davutoğlu said Russia is a friend and neighbor of Turkey, and stressed that there are deep-rooted economic and social relations between the two countries. Expressing his hope that Erdoğan and Putin will hold a bilateral meeting in Paris, Davutoğlu said communication channels should be kept open in such situations and the problem should be addressed within its own domain without letting it spread to other spheres.

Businessmen anxious about bilateral trade

Foreign Economic Relations Board (DEİK) President Ömer Cihad Vardan said the tension between Turkey and Russia has led to anxiety in traders in both countries, and stressed that reactive practices will not benefit anyone. Vardan said trade relations between Turkey and Russia have gained great momentum over the past decade, and this has created close ties that cannot be easily broken. Turkey aims to increase its foreign trade volume of $31 billion with Russia to $100 billion in the upcoming years, Vardan said, adding that practices that Turkish businessmen face in Russia might shake the faith of other countries' companies that take interest in the country. "I am happy to learn that our Russian partners agree with us over the matter," Vardan said.

Turkey a major trade partner for Russia

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.

Share on Facebook Share on Twitter