Europe

Turkey faces big losses as Russia sanctions bite

  • 2 January 2016
  • From the section Europe
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Istanbul Grand Bazaar - file pic Image copyright Getty Images
Image caption Istanbul's Grand Bazaar is a magnet for tourists from Russia and elsewhere

Russian sanctions are now affecting Turkish tourism, construction firms and food exports, amid a bitter dispute over the Syria conflict.

The Kremlin reacted with fury when a Turkish F-16 fighter shot down a Russian Su-24 bomber on the Syria-Turkey border in November.

Russia has banned:

  • The import of Turkish fruit and vegetables, poultry and salt
  • The sale of charter holidays for Russians to Turkey
  • Construction projects with Turkish firms in Russia unless a special exemption is granted

There are restrictions now on Turkish citizens working for companies registered in Russia.

And Russia has suspended work on TurkStream - a new Black Sea pipeline that was to boost Russian gas exports to Turkey.

Economist Erhan Aslanoglu says the sanctions are bound to have an impact on the Turkish economy in the short term, but in the medium term Turkey will recover.

He predicts that the cost for Turkey in lost business could be at least $10bn (£7bn).

Image copyright AP
Image caption A Moscow market: Turkish fruit and veg is being withdrawn from sale in Russia

Gas still vital

Russians have long been flocking to Turkey's Mediterranean resorts. It was the second most popular holiday destination for Russians in 2014, attracting about 3.3 million visitors.

Turkey risks losing $3.5bn annually in income from Russian tourists, and another $4.5bn annually through the cancellation of construction projects, Mr Aslanoglu said.

But he does not expect Russia to let the row hurt gas exports - the key economic sector in trade with Turkey.

Turkey relies on Russia for 55% of its annual natural gas needs.

"If Moscow stops or delays the natural gas flow, that will definitely have a serious impact on the Turkish economy. But I don't expect such a big change," Mr Aslanoglu said.

Image copyright AFP
Image caption A Russian pilot died when the Su-24 jet was shot down - the other Russian airman survived

Textiles hit

In Laleli, an Istanbul neighbourhood famous for clothing exports, the shopkeepers complain about the slump in trade since the Russian jet was shot down.

"It's very difficult to work at the moment. A lot of shops are closed. There are no customers," said Naile Cebic in her shop selling men's suits - predominantly to the Russian market.

Hasan Erin, a leather jacket exporter, also said the outlook was bleak, as 80% of his customers were Russian. He said he faced possible bankruptcy within two months if business did not pick up.

Image caption Losing Russian customers is bad news for clothing firms, says businessman Giyasettin Eyyupkoca

Turkish textiles are not officially included in the Russian sanctions. But exporters feel their goods are subject to an unofficial ban.

The head of Laleli Industry and Business Association, Giyasettin Eyyupkoca, said traders had already lost 60% of their revenue because of the slump in the rouble's value in the past year. That slump made Turkish goods more expensive for Russian buyers.

The Turkey-Russia tensions since November accounted for another 20% loss, he said, adding that traders would now seek other markets like Iran or African countries such as Ghana.

'Like a divorce'

Russia's ban on imported Turkish food will mean losses of about $764m, Turkey's agriculture ministry says.

"There was an initial shock in the sector but we have recovered from it," said Muhittin Baran, deputy head of Turkey's Fruit and Vegetable Markets Association.

"Turkey produces 45-50m tonnes of fruit and vegetable each year. We export only 5-6% of that. The crisis with Russia might affect citrus growers especially, but the government has promised to help them out with subsidies," he said.

There is also a cultural impact - the situation has alarmed Turkish students of the Russian language and literature.

Hundreds of them signed an online petition calling on Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan to end the quarrel.

Gaye Kural, a recent graduate, had hoped to get a job in Russia, but now she has shelved her plans.

"Turkey and Russia are like a couple that wants a divorce. And we are their children," said Cagla Kursun, another student.

"If they break up, then we are going to be miserable. We really hope our presidents will not ignore us," she said.

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