War in Ukraine. Turkey trades with Moscow… at the risk of sanctions

Turkey and war in Ukraine : Putin has an interest in keeping Erdogan in power

As Turkey engages in a diplomatic balancing act between Ukraine and Russia, trade with Moscow has surged since the start of the war.

The Shanghai Cooperation Organization summit on September 15 and 16 in Sarmarkand, Uzbekistan was the scene of multiple outpourings between Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin. Walking arm in arm or conversing at tables and laughing, many photos and videos have underlined their closeness, real or displayed.

Their previous meeting at the beginning of August, in Sochi, on the Russian shores of the Black Sea, had concluded with several surprising announcements, including the adoption by banks in Turkey of the Russian payment system Mir, a substitute for Mastercard and Visa, which excluded Russia after the invasion of Ukraine. But while Turkish public banks continue to use it for the time being, two large private banks, Denizbank and Is Bankasi, withdrew from it on September 19, worried about possible sanctions from the US Treasury.

If Turkey has refused since the beginning of the invasion of Ukraine to join the American and European sanctions against Moscow, its Western partners are now worried that it will allow Moscow to circumvent them. European and Asian companies would thus use Turkish ports as hubs, in order to continue their exports to Russia, with the complicity of Turkish companies. In May, Turkish exports to Russia exceeded $790 million, a 46% jump from the same month of 2021.

At the end of August, the US Treasury sent a letter to the Federation of Turkish Entrepreneurs, warning those who would use Turkey as a rear base to supply Russia with products prohibited by the sanctions. All this is explained by the approach of the presidential elections (in June 2023). The power is in very bad shape and it needs to raise the bar of the economy. The rapprochement with the Gulf countries that has taken place since the beginning of the year has not borne the hoped-for financial results. The only place to turn is Moscow, analyzes economist and consultant Atilla Yesilada. The annual rate of inflation in Turkey reached almost 80% in August, further eroding the popularity of Erdogan and the AKP in power for two decades.

While Putin may have an interest in keeping Erdogan in power, he nevertheless only has economic leeway limited by the sanctions and the cost of the war. Erdogan can hope to buy some Russian gas on credit to get through the winter, but not much more, and certainly not get the 30 or 40 billion dollars he needs, estimates the economist.

Especially since greater Russian economic support would require Ankara to make new concessions to Moscow, particularly in Syria, where substantial Russian forces remain mobilized in support of Bashar al-Assad’s regime. Russia is therefore pushing for a rapprochement between Damascus and Ankara, which has long supported the Syrian rebels. This strategy has led to an improvement in relations between the two countries, President Erdogan declaring that he does not intend to bring about the fall of the Syrian dictator, while the heads of the intelligence services of the two countries have increased their meetings in recent months. .