Bilateral relations between Türkiye and Russia have been one of the frequently discussed issues among experts. This is due to both political and economic reasons. Türkiye and Russia play an important role in the Middle East and are involved in the resolution of the Syrian crisis by coordinating their policies. The Ukrainian crisis shows that Ankara does not follow the Western countries in imposing sanctions and prefers to retain political and economic ties. At the same time, Türkiye supports Ukraine. It played a key role in brokering and prolonging the Grain Deal, after which Ukraine resumed exports of agricultural and food products, contributing to global food security. Türkiye’s policy opened opportunities for Russian and international business. In 2022, Russians launched 1.363 new companies in Türkiye and hundreds of Western companies open their offices in Türkiye to circumvent sanctions and to continue trade with Russia. Moreover, the situation in Russia caused its citizens to migrate to Türkiye. Many Russians buy property, bank their savings outside the Russian economy, and apply for residence permits, more than 155 thousand of which were granted (Glinski, 2023). These relocation and migration processes stimulate business in Türkiye and positively contribute to the country’s foreign trade. Hence, it is important to determine how the geopolitical crisis and international sanctions changed mutual trade between Türkiye and Russia.
Ankara’s policy resulted in record levels of bilateral trade between the two countries (Figure 1). In 2022, the indicator skyrocketed and exceeded $68 billion, while in 2020 and 2021 it correspondingly equaled $22.3 billion and $34.7 billion. The previous peak was observed in 2008 when the bilateral trade reached $37.8 billion. It is important to note that the Presidents of the two countries declared a goal to increase the mutual trade turnover to $100 billion by 2030 (Ibadoghlu, 2022).
Türkiye’s exports to Russia increased from $5.8 billion in 2021 to $9.3 billion in 2022. During the same period, the country’s imports surged from $29 billion to almost $59 billion, increasing more than two times (Figure 2). As a result, the trade balance between the countries widened from $23.2 billion to $49.6 billion, increasing trade risks for Türkiye.
Figure 1. Total trade between Türkiye and Russia, billion $
Source: The Author’s compilation based on the International Trade Centre (ITC, 2023) data.
Figure 2. Türkiye’s exports to and imports from Russia, billion $
Source: The Author’s compilation based on the ITC (2023) data.
Product-based analysis shows that a substantial part of Türkiye’s imports from Russia consists of mineral fuels. In 2021, the value of mineral fuels imports was $14.3 billion (49.4% of the total), which in 2022 surged to $41.8 billion (71%). The country’s imports of agricultural and food products from Russia increased from $2.5 billion in 2021 to $3.1 billion in 2022. In 2022, Türkiye purchased organic chemicals and fertilizers worth more than $473 million and $355 million, respectively. In 2021, the country’s imports of these products correspondingly amounted to $239.6 million and $132.3. It is worth noting that Türkiye’s metal imports from Russia experienced a reduction. For instance, imports of iron and steel decreased from $5.24 billion in 2021 to $4.79 billion in 2022, while aluminum purchases changed from $1.28 billion to $1.17 billion during the same period.
High mineral fuel prices are one of the reasons for the substantial increase in mineral fuel imports. For instance, Macrotrends (2023) data shows that the average closing price of crude oil in 2021 equaled $68.17 per barrel (year high $84.65), while in 2022 it increased to $94.53 (year high $123.7). In 2021, the average closing Henry Hub Natural Gas Spot price amounted to $3.89 (year high $23.86), while in 2022 it increased to $6.45 (year high $9.85). Higher energy prices positively contribute to growth in prices of other commodities such as agricultural products. However, Russia’s fuel exports to Türkiye increased not only in value terms but also in volumes. For instance, Russia’s oil supplies increased from 40.000 barrels per day in December 2022 to 180.000 barrels per day in January 2023. In August-October 2022, oil exports amounted to 350.000 barrels per day. In January 2023, Russia supplied Türkiye and India with about 330.000 barrels per day and 210.000 barrels per day of oil products, respectively (Savenkova and Milkin, 2023).
Energy cooperation with Russia is crucial for Türkiye’s energy security and the competitiveness of its economy. However, the substantial growth of imports of Russia’s mineral fuels was not only for domestic use but also for re-exports. The country’s producers obtained this opportunity following Ankara’s policy of resisting imposing sanctions on Moscow. Türkiye has plans to become a major energy hub, while Russia proposes the idea of turning Türkiye into a regional trading center for Russian gas. Ankara has been able to buy Russia’s discounted oil, then refine it and export the finished product. Moreover, the country is buying discounted Russian diesel fuel for domestic use. Türkiye also boosted the purchase of coal from Russia. Between August-November 2022, the country’s monthly imports from Russia averaged 2.1 million metric tons, while in the same period last year, the amount of imports was equal to 630.000 tons (Cohen, 2022).
Indeed, Türkiye’s exports of mineral fuels increased significantly in 2022 (Figure 3), exceeding $16 billion, while the indicator of the previous year was equal to $8.5 billion. It is important to note that this change in exports is not only a result of increased prices for energy products. As it was mentioned above, Ankara started to refine the imported oil from Russia and re-export it. Country-based analysis shows that Türkiye increased mineral fuels exports to its traditional and new markets. In 2022, the country’s exports to the Netherlands reached $1.767 billion ($952 million in 2021), to Lebanon – $1.366 billion ($843 million in 2021), and to Cyprus – $998 million ($399 million in 2021). In 2022, Türkiye’s supplies to South Africa increased by 5.5 times, to Romania – 7.2 times, to Germany – more than 29 times (compared to 2021). Germany, Latvia, Moldova and Switzerland were the new markets for Türkiye.
Figure 3. Türkiye’s mineral fuels exports, million $
Source: The Author’s compilation based on the ITC (2023) data.
Figure 4. Türkiye’s mineral fuels exports to selected countries, million $
Source: The Author’s compilation based on the ITC (2023) data.
Trade in manufacturing products, especially sanctioned goods, which can be used for military purposes, is another concern of international trade relations following the conflict in Ukraine. Many Russian key trade partners were suspected of violating imposed sanctions. Figure 5 shows that Türkiye significantly increased exports of manufacturing products to Russia. In 2022, its exports of machinery and mechanical appliances amounted to $1.631 billion, while in the previous year, this indicator was equal to $837 million. Supplies of electrical machinery and equipment increased from $254 million in 2021 to $559 million in 2022. For the reported period, exports of monitors and projectors surged from low $0.4 million to almost $48 million, while supplies of telephone sets grew from $0.5 million to nearly $20 million.
Recently, the United States imposed sanctions on at least four Türkiye-based entities for violating U.S. export controls and helping Russia. An electronics company and a technology trader were accused of transferring “dual-use” goods. For instance, electronics firm Azu International, shipped foreign-origin computer chips to Russia. The sanctioned companies were Russia-owned or Russia-linked (Spicer, 2023).
Figure 5. Türkiye’s machinery exports to Russia, million $
Source: The Author’s compilation based on the ITC (2023) data.
In March 2023, it was announced that Türkiye halted the transit of Western-sanctioned goods to Russia after mounting U.S. and European pressure. The government instructed companies not to transship sanctioned products to Russia. According to the European Union officials, Ankara had given the European Commission verbal assurance that from March 1 goods would not transit onward to Russia if they are covered by sanctions. It is worth noting that goods produced in Türkiye even with components from other countries can still be shipped to Russia without restrictions (Caglayan and Spicer, 2023).
It is important to note that in 2022, Türkiye increased exports of agricultural products, which traditionally play a key in bilateral trade. The country’s supplies grew from $1.649 billion in 2021 to $2.130 billion in 2022. However, the share of agriculture in total exports decreased from 29% to 23%. In the same period, the country’s exports of organic chemicals surged from $21 million to almost $135 million, while plastics supplies changed from $251 million to $643 million. Türkiye also increased exports of tanning extracts, soap, and miscellaneous chemical products.
Thus, the following conclusions stem from the analysis of bilateral trade between Türkiye and Russia. Firstly, international sanctions reoriented global trade flows, and Ankara’s resistance to joining sanctions made it one of the key trade partners of Russia. Bilateral trade between the countries reached a record level with substantial growth in the share of mineral fuels. Growth in the mineral fuels trade was a result of both increases in prices and volumes purchased by Türkiye. If the current level of trade cooperation continues, the goal to increase mutual trade to $100 billion will be achieved prematurely. Secondly, independent policymaking allowed Türkiye to import raw materials from Russia, refine and export them to the global market. Türkiye showed a significant increase in exports of mineral fuels, especially oil products, including to the members of the European Union, which stopped importing the same products from Russia. Here, it is important to note that the current situation with trade in mineral fuels will strengthen bilateral energy cooperation between the two countries and contribute to the rise of Türkiye as an energy hub. Natural gas cooperation between the countries remains important and TurkStream Natural Gas Pipeline plays a key role in supplying gas to many European countries. It is worth noting that Türkiye and Russia are currently negotiating a potential gas discount. Besides oil and natural gas trade, there are other important joint energy projects, which will positively contribute to the bilateral trade flows. Recently, Presidents of Türkiye and Russia Recep Tayyip Erdogan and Vladimir Putin participated in the virtual unveiling ceremony on the loading of fuel into the first reactor at Türkiye’s Russia-built Akkuyu nuclear power plant. President Putin called it a flagship project, which would bring both mutual economic benefits and strengthen the multifaceted partnership between the two states. President Erdogan noted that Türkiye had risen to the group of nations with nuclear power. When completed, the plant’s four reactors will operate with a total capacity of 4800 megawatts (Moscow Times, 2023). Thirdly, Türkiye plays an important role in shipping sanctioned products, including chips, to Russia. However, to escape sanctions, the country’s authorities plan to halt this activity.
Hence, the geopolitical situation deepened trade and energy cooperation between Türkiye and Russia. The countries established mutually beneficial links, which would help Ankara and Moscow to address economic crises and find alternative sources of revenue. Integration between Türkiye and Russia will have long-lasting economic and political implications for the Eurasian region.
References
Caglayan, Ceyda and Jonathan Spicer (2023). Türkiye halts transit of sanctioned goods to Russia – exporter, diplomat. Retrieved from https://www.reuters.com/world/middle-east/turkey-halts-transit-sanctioned-goods-russia-exporter-diplomat-2023-03-20/. Accessed on 02.05.2023.
Cohen, Patricia (2022). Türkiye is strengthening its energy ties with Russia. Retrieved from https://www.nytimes.com/2022/12/09/business/turkey-erdogan-energy-russia.html. Accessed on 02.05.2023.
Glinski, Stefanie (2023). Türkiye’s balancing act between Putin and the West. Retrieved from https://foreignpolicy.com/2023/03/06/turkey-elections-russia-erdogan-putin-nato/. Accessed on 25.04.2023.
Ibadoghlu, Gubad (2022). Who stands to gain from closer relations between Russia and Türkiye? Retrieved from https://blogs.lse.ac.uk/europpblog/2022/09/21/who-stands-to-gain-from-closer-relations-between-russia-and-turkey/. Accessed on 01.05.2023.
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Macrotrends (2023). Energy. Retrieved from https://www.macrotrends.net/charts/energy. Accessed on 28.04.2023.
Moscow Times (2023). Putin, Erdogan Unveil Russia-Built Nuclear Plant in Türkiye. Retrieved from https://www.themoscowtimes.com/2023/04/27/putin-erdogan-unveil-russia-built-nuclear-plant-in-turkey-a80967. Accessed on 01.05.2023.
Savenkova, Darya and Vasily Milkin (2023). The export of oil and oil products from Russia has approached a historical maximum. Retrieved from https://www.vedomosti.ru/business/articles/2023/02/15/963134-eksport-priblizilsya-maksimumu. Accessed on 25.04.2023.
Spicer, Jonathan (2023). U.S. sanctions Türkiye-based entities it says helped Russia’s war. Retrieved from https://www.reuters.com/world/us-sanctions-turkey-based-entities-it-says-helped-russias-war-2023-04-12/. Accessed on 02.05.2023.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.