Turkey: Business as usual with Iran

While this year has seen several stories in the Western media about Turkey's "turn east", the country’s efforts to maintain positive trade relations with Iran despite recent sanctions on its nuclear programme are likely more pragmatic than political.

Iran and Turkey have built strong business ties over the past decade, with bilateral trade volumes reaching $10bn in 2009 and $5.4bn in the first half of 2010, up from $1bn in 2000. Prime Minister Recep Tayip Erdogan reiterated in October that he expected to see these reach $30bn per annum by 2015.

Despite Turkey’s EU candidacy and military ties with the US, the country has strongly resisted pressure over bilateral economic sanctions imposed by Brussels and Washington in July. These followed a UN Security Council resolution approved a month earlier that placed financial and military restrictions on Iran’s uranium enrichment plans.

“Nobody can ask us to cut our economic ties with Iran,” Turkey's foreign minister, Ahmet Davutoglu, told Foreign Policy magazine in September. “Turkey will maintain these ties because it is in Turkey's national interest."

Accusations in the West that some Iranian companies’ activities in Turkey violate the UN sanctions have been denied by the Turkish government, which insists that its dealings with Iran are in fields not subject to the UN decision.

There are some 1300 Iranian firms currently operating in Turkey. In September, six trade and cooperation agreements were signed on customs and cross-border trade, transportation, industry and higher education. The border routes of Razi-Kapipoy and Maku-Bil Oju were also re-opened in an effort to increase the flow of goods.

These agreements followed deals earlier this year to establish an industrial estate on the nations’ shared border and on housing cooperation. The latter, signed in July, includes plans for urbanisation projects and the construction of new cities in Iran. It also specifically addressed assistance for the construction of 20,000 condos in the Iranian city of Parand.

New links are also hoped to boost trade. Currently, some 300,000 tonnes of trade goods travel between Turkey and Iran annually via a ferry on Van Lake that carries train wagons. However, Iranian rail capacity is some 3m tonnes per year, and new ferryboats will be constructed with a capacity of 50 wagons each to expand the trade volume to an estimated 2m tonnes per year.

There are also plans to boost cooperation in manufacturing, particularly the automotive sector is also under way. Iran was globally the 12th-largest auto manufacturer in 2009, and the carmaker Iran Khodro (IKCO) and Turkey's Hema Endustri are finalising a $262m deal for the construction of two automotive plants. IKCO envisions a car that is brand targeted for Muslim customers and is courting the Turkish car company, the Türk Otomobil Fabrikasi Anonim Sirketi, as a possible partner, with plans for manufacturing facilities to be located at a free zone on the nations' shared border.

Energy is another burgeoning field of cooperation. Iran supplies one-third of Turkey's energy needs, primarily in the form of natural gas. The country purchases some 10bn cu metres of gas from Iran per year – worth $7bn in 2009 – according to a contract signed in 1996. This consumption is expected to increase, as the Turkish petroleum firm, Som Petrol, signed an agreement in July to construct a 660-km pipeline for the transport of natural gas from Iran's National Iranian Gas Export Company (NIGC). The pipeline is expected to have a capacity of between 50m and 60m cu metres per day. The €1bn deal will not only increase Turkey's gas import capacity, but also enable Iran to deliver its gas to European markets.

While it is clear that Turkey’s interactions with Iran frustrate Western powers, it is difficult to deny the sound economics underpinning these deals. For a nation sharing borders with eight countries, six of which are in Asia, perhaps it is simply the logic of geography motivating Turkey’s turn east.