Istanbul – Burhan Er picked a mandarin out of a crate and held it up. It had been destined for Russia, but following sanctions against Turkey it would have to be sold domestically.
“In Russia these would be sold for 4 TL/kilo [$1.30],” said Er, ruefully. “Here, it will sell for 2 TL/kilo.”
Keep readinglist of 4 items
Er, the owner of an export business and chairman of the Tumeskom trade association, was referencing the Russian boycotts of many Turkish agricultural products that officially came into force on Friday.
The sanctions – imposed in response to the downing of a Russian military jet near the Turkish-Syrian border by Turkish forces on November 24 – will have an impact on Turkey’s agricultural export industry.
Nearly 20 percent of Moscow’s vegetable imports are provided by Istanbul, and about $30bn in bilateral trade is at risk amid deteriorating relations between the two countries.
Turkey’s annual agricultural exports to Russia, amounting to more than $1bn, are in serious trouble, as Moscow has embargoed a range of products and foodstuffs, including fresh fruits, vegetables, poultry and salt.
Er’s firm exports around 30 to 40 percent of its total produce to Russia, and around half is now subject to sanctions.
Oranges, mandarins, grapefruits, tomatoes and onions are likely to be most affected as they are shipped to Russia in large quantities.
Nazmi Gurkan, owner of an eponymous export company, is also having to sell much of his produce that was once exported to Russia for around half the price in the domestic market until new export markets can be found.
Gurkan says he has begun to sell more produce to northern Iraq and is looking for other markets.
There are currently not many alternatives but we will find them soon. We will sell our products, whether Russia buys them or not.
“There are currently not many alternatives but we will find them soon. We will sell our products, whether Russia buys them or not.”
Gurkan is expecting a 20 to 30 percent loss in turnover in the short-term and said it was likely that many workers producing and packing foodstuffs would have to be let go. The price of Turkish fruit and vegetables is likely to fall domestically due to an increase in supply.
Exporters say that little will change on New Year’s Day, because the Russian boycott on Turkish foodstuffs has been going on unofficially since the crisis began in November.
Gurkan said he has ceased trading all of the 10 to 20 percent of his produce that was exported to the Russian market – even items that were not on the sanction list, such as lemons.
Impounded goods, delays and increasingly stringent checks at Russian customs have made some exporters decide not to risk sending any of their products through Russian customs. Banned goods entering Russia after January 1 will be destroyed rather than returned.
“There will be a crisis in the short-term, but in the mid- to long-term, things will pick up and get back to normal,” said Er, who said some of his goods were able to circumvent the boycott and find their way to Russia after passing through secondary countries such as Azerbaijan and Kyrgyzstan.
Turkish exporters suggested that Russia would struggle to find reliable export alternatives and wondered how long the boycott would last.
Some Turkish exporters had recently boosted their exports to Russia after Moscow banned food imports from the European Union, the United States and other Western countries last year, in retaliation for Western sanctions imposed on Russia after its annexation of Crimea from Ukraine in March 2014.
“Russia was used to buying cheaper Turkish products; now, they have to buy more expensive products from elsewhere if they want the same quality,” said Gurkan. “If we lose one lira, Russia loses double.”
However, the Russian export market has been lucrative for Turkish companies and finding new markets may prove difficult. Analysis by the European Bank for Reconstruction and Development (EBRD) suggests that Turkey will be much harder hit.
“It would be reasonable to assume that, if sanctions persist over the course of 2016 and if they are fully applied, the impact through the [lost] export of agricultural produce would be around 0.1 percent of Turkish GDP,” said Bojan Markovic, an Istanbul-based economist at the EBRD.
Markovic said that while the macroeconomic impact might be modest, individual companies and regions that depend on agricultural exports to Russia could be hit hard.
Turkey will be further hit by a raft of other sanctions too, including the suspension of visa-free travel for Turks travelling to Russia and measures designed to make it almost impossible for Russian firms to hire Turkish workers.
A ban on Russian charter flights to Turkey is likely to hammer the tourism industry, and Russia has called on tour operators not to sell holidays to Turkey.
|Can Turkey and Russia resolve their dispute?|
The sanctions have been carefully chosen by Russia – many energy and construction projects have been exempt – and Russia’s Ministry of Agriculture will not expand the list of banned Turkish imports, according to a ministry statement.
Commercial relations between Turkey and Russia are entrenched, although the difference in trade volume between the two countries is stark. Turkey exported $6bn in goods last year, while Russia sold to Turkey a total of $25.3bn worth of goods, including $16bn worth of natural gas.
So far Istanbul has not retaliated with its own sanctions and Turkish officials have been keen to de-escalate the dispute, although Turkey has announced its intention to source alternative supplies of natural gas.
Relations in 2016 are likely to reflect the evolution of Turkey’s and Russia’s competing strategies towards the conflict in Syria. Russia has launched a campaign of air strikes in Syria in support of President Bashar Al-Assad, while Turkey has supported rebel groups seeking to overthrow Assad.
“The two sides made an effort to keep their economic relationship and their energy relationship separate from the disagreement on Syria, but now we have a situation in which it’s certainly affecting it,” said Bulent Aliriza, director and senior associate at the Center for Strategic and International Studies’ Turkey Project.
“I don’t see the relationship going back to anywhere near normal until there is a resolution in the Syrian conflict.”