Turkey: Trade and diplomacy

Trade and diplomacy took centre stage in 2010. In economic terms, it was a year in which Turkey was courted aggressively by both its Western partners and neighbours in the region. The country finished out 2010 with a number of trade agreements either inked or in the works, while the government made much headway in advocating Turkish business interests in its dealings with foreign partners. Meanwhile, Turkey’s main business centre, Istanbul, received a significant publicity boost thanks to its status as the European Capital of Culture for 2010.

Mehmet Simsek, the minister of finance, announced in early February that the economy had grown by over 8% in 2010. The nation’s debt-to-GDP ratio was reduced to 43%, within the targets set by the government’s 2010-12 Medium-Term Programme, and well under the European Commission’s Maastricht criteria. The latter is not a claim many Western European countries can make at the moment. Neighbouring Greece has a debt-to-GDP ratio of 140.2%, while Italy’s reaches 118.9%, and Belgium, Ireland, France, Germany and the UK all range between 75% and 100%.

The country’s economic track record in recent years has given the government greater leverage in regional trade affairs, and the ruling Justice and Development Party (AKP) is currently pursuing a number of agreements with nearby states. For example, six years of negotiations with Lebanon concluded with a free trade agreement (FTA) in November 2010.

Meanwhile, in mid-February, the government announced its intention to cultivate closer ties with the Gulf Cooperation Council (GCC), with hopes of signing an FTA with the bloc by the end of the year.

Trade between Turkey and individual members of the GCC is already on an upward trajectory, with bilateral trade with the UAE, for example, expected to reach $10bn over the coming four years. This follows the signing of a memorandum of understanding (MoU) that outlines the establishment of a joint coordination body between the Chamber of Industry of Ankara and the UAE Federation of Chambers of Commerce & Industry.

As Sultan bin Saeed Al Mansouri, the UAE’s minister of economy, told the local press, “We are looking to enhance bilateral relations at all levels, especially in the economic, trade and investment, energy, agriculture, small and medium-sized enterprises, and other areas and sectors which are considered common interests for both countries.”

The Turkish government has indicated an interest in expanding its cooperation on major infrastructure projects across the GCC, including a $50bn railway project to connect the Gulf’s major cities and economic centres.

Iran has also been a particular focus for the current administration. Turkey’s largest neighbour is a potential economic powerhouse that Turkish business interests are keen to access, with energy a major pillar of bilateral trade. Since 2008 Iranian natural gas exports to Turkey have increased 100%, to some 30m cu metres per day. The cross-border pipeline infrastructure has the capacity to handle as much as 15bn cu metres per year, which would entail a rise of around 30% on current levels.

While natural gas sales are a key common interest, Turkish-Iranian trade is by no means limited to energy resources. In January, the countries’ housing ministers finalised a deal for the development of joint housing and restoration projects. By mid-February a Turkish construction firm had been contracted to build 20,000 homes in a town near Tehran.

At the February 6 meeting of the Iranian-Turkish Joint Economic Cooperation Commission, officials signed a deal for increased trade cooperation, with a goal of reaching $30bn by 2015. At the signing, the Turkish planning minister, Cevdet Yilmaz, emphasised the importance of the “clear target for future trade”. “This goal is easily achievable given the current capacity,” Yilmaz told the press.

The increased Turkish-Iranian economic engagement has been a cause for concern for Europe and the US, and officials from both areas have been critical of Turkey’s position. The US, for its part, recently enacted a range of sanctions against Iran in response to its ongoing nuclear programme. In early February, the US went so far as to blacklist two Turkish individuals and three firms that have close business ties with Iran, including Macpar, Multimat and Step, which it accuses of being involved in the development of Iran’s nuclear procurement programme.

The move has angered Ankara, and while the US moved to freeze assets within its borders, the Turkish foreign trade minister, Zafer Caglayan, distanced the government from the US position.

“This is America's blacklist, not ours,” he told reporters on February 8. Adding that Turkey is bound by UN Security Council resolutions and its own laws, he said, “It is out of the question for us to impose any sanctions against those companies or to ban their activities outside the framework defined by Turkish law.”

This came just as Hayati Yazaci, the Turkish state minister, was involved in discussions with officials from the US Department of Homeland Security. The two countries have pledged to cooperate in efforts to combat terrorism.

Given Turkey’s strong economic position and more engaged diplomatic outlook, the Turkish government is poised to continue expanding the nation’s regional influence and continue redefining its global position. With over $40bn in trade deals inked for the coming four years, the country’s prospects look bright, although maintaining strong ties with both the West and Iran may require an increasingly delicate balancing act.