Russia and Turkey’s Deepening Ties Prompt Concern in West Over Sanctions Compliance
By Jared Malsin, Aug. 23, 2022, WSJ
Throughout the conflict, Turkey has been the only member of NATO that hasn’t imposed sanctions on Russia. Erdogan has chosen to preserve his relationship with Putin while attempting to shield the vulnerable Turkish economy from the worst of the fallout
from the war.
Following a meeting with Mr. Putin earlier this month, Mr. Erdogan said he had agreed to pay for Russian gas in rubles and that Turkey is working on expanding the use of Russia’s Mir card payments system that is an alternative to Visa and Mastercard,
which suspended operations in Russia in March. Seven major Russian banks were excluded from the vital Swift payments system in response to the attack on Ukraine.
The Russian state has also reinvested in Turkey, signaling that the Kremlin values the relationship with the world’s 19th largest economy.
In July, Russia transferred $5 billion to Turkey for the continuing construction of a nuclear power plant on Turkey’s southern coast operated by Russia’s state atomic power company Rosatom, the Turkish state-run news agency reported. Russia was
expected to send another $10 billion for the plant, the agency said.
The Russian cash and the summer tourist season have helped replenish Turkey’s depleted foreign assets after months in which Turkey has been spending billions to defend its ailing currency. Turkey suffered a currency crisis last year after Erdogan
pressured the country’s central bank into cutting interest rates despite rising inflation.
“It shows that Russia still has trust in the Turkish economy. This is because of Turkey’s position in the war in Ukraine,” said Aydin Sezer, the Turkish govt’s former trade rep to Russia. “Turkey has a crucial role, and Turkish policy on this
subject serves Russian national interests.”
The war triggered an influx of Russian money to Turkey as Russians—from young dissidents to oligarchs—fled the country, while others moved their assets out of Europe fearing sanctions. Roman Abramovich, the oligarch and former Chelsea Football Club
owner, moved two of his yachts to Turkey in recent weeks, joining two he had already moored there. Abramovich has played an unusual role as a backchannel between Russia and Ukraine and appeared in July at the signing ceremony for the grain-export deal.
Since April, Russians have become the number one foreign buyers of housing in Turkey, according to govt stats, leapfrogging Iraqis and Iranians as top investors. Russians bought over 1,000 units of housing in Turkey in July alone, nearly double what they
bought in March.
Russian-Turkish energy ties are also deepening. Taking advantage of a discount triggered by the war, Turkey doubled its purchases of Russian crude oil from January to August, trade data show. Turkey’s gas imports from Russia are up 51.9% so far this
year compared with the same period in 2020, according to the Turkish energy regulatory authority.
Meanwhile, Turkish exports to Russia are surging as Russian companies have turned to Turkey to source everything from textiles, kitchen utensils and industrial hardware to replace imports from Europe, according to industry leaders. Turkish exports to
Russia in July surged 75% compared with the same period last year, according to government data.
Mr. Eyyüpkoca of the Turkish trade group said his own business had expanded since the war began, with Russian firms looking to replace familiar Western brands.
“Brands like H & M and Zara stopped their operations in Russia, the Russians needed to supply the same products from somewhere. Now they started buying from me,” he said.
https://www.wsj.com/articles/russia-and-turkeys-deepening-ties-prompt-concern-in-west-over-sanctions-compliance-11661249222
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