A recent trip to Germany and Türkiye offered a study in contrasts. The city of Berlin, usually bright, felt austere under the shadow of energy scarcity and NATO military action in the Russia-Ukraine war. In contrast, Istanbul, the international centre of Türkiye, was upbeat and exuberant. Spending by tourists makes invisible the high inflation. Despite the electoral run-off and a second vote between President Recep Tayyip Erdoğan and his opponent, economist Kemal Kılıçdaroğlu, there were few signs of tension. The city of 20 million, which straddles both Asia and Europe on either side of the Bosphorous River, has over the years seen dramatic development, and the restoration of its Byzantine, Ottoman and Republic heritage. It has an abundance of top global and local hotel brands, conference and entertainment venues, and is clean and safe, with city and country roads that rival China’s.
This is the outcome of steady development over the years, despite the crises, old and new, in Türkiye’s neighbourhood, a strained economy and 50% current inflation. President Erdoğan, who was elected for a fourth term, refused to participate in western sanctions or military action against Russia. This, and the cheap lira, has helped to buoy the economy. In multiple dimensions, Russia is helpful: A rolled-over immediate payment of $600 million for its gas bills till next year[1] has given Türkiye some breathing room and time to rebuild its depleted foreign reserves. An estimated 7 million Russian tourists are expected to visit Türkiye this year, up from 5.5 million last year.[2] Nearly 1,200 flights run between the two countries each week, according to the Russian Union of Travel Industry, up 50% from 2022. Sizzling up an already hot property market, Russians are now the top buyers of real estate in Türkiye according to the Turkish Statistical Institute (TurkStat), which also says trade with Russia doubled to nearly $70 billion in 2022.[3]
Türkiye’s cheap lira is luring other nationalities too, like the British, French, Indians and west Asian tourists, as also its own locals from other parts of the country. The charming Princes Islands off Istanbul are full of young visitors, cycling up and down the hills on e-bicycles imported from China, and filling the well-built domestic ferries that ply the Bosphorous River. The country’s shipyards[4] in the southern Mediterranean are becoming popular for repair work – Turks are hard-working, and the lira makes it affordable especially for the Russian mega yachts that were given sanctuary from western sanctions. The growth of this business in Türkiye had been apparent since 2021, when nearly 30 million (deadweight) tonnes worth of ships were repaired or maintained in Turkish shipyards[5], 42% higher than the year prior. The trend has accelerated.
Türkiye is not new to doing business with sanctioned nations. Its neighbouring countries, Iran and Syria, have both been blocked from the mainstream world, making Türkiye a natural pass-through for both. It has been a transit hub for Iran’s goods and people in the past, and has supplanted Iran as the region’s transportation hub.[6] Türkiye is reprising the same role with Russia, especially for energy, primarily natural gas[7] which it can deploy to and from Russia, West Asia and central and western Europe. It is not disloyal to NATO either: Turkish drones have been used to good effect by Ukraine against Russia.
Türkiye’s troubled neighbourhood also means that multiple nationalities from eastern Europe, Caucasus, central Asia, and all the way up to Xinxiang, find work and a home in the country. This is in addition to the nearly 4 million refugees sheltering in Türkiye, largely Syrian with some Afghans. Their conditions are controversial, but Erdoğan naturalised 230,000 Syrians as citizens in April this year, allowing them to vote – which they did in his favour. There is strong resistance in the country against this, especially with the opposition parties and many of the elite.
But it has made Türkiye today as cosmopolitan as it used to be when it was Ottoman. Greeks, Bulgarians, Albanians, Uighurs, Afghans, Syrians, Arabs, Bosnians, Georgians, Moldovans, Romanians add to the western Europeans who travel in and out of the country. It has enlivened the culture. Some Turkish experts worry that Erdoğan has become more socially conservative as he has grown older. It’s not so bad if he is reverting to economic conservatism as well: his appointment of former finance minister Mehmet Şimşek to the top finance post will return Türkiye to traditional economics, predictability and pragmatism to control the economic crisis.
This will make Türkiye a better partner to do business with – and draw in nations like India with which it has much in common, geopolitically and economically, but which Ankara has kept at a distance. India’s twin 2023 presidencies – of the SCO, where Erdoğan seeks full membership, and of the G20, where Türkiye can share India’s digitalisation benefits – are an appropriate opportunity to come closer. A step forward has been made: Türkiye did send a representative to the Youth20 meeting held in Kashmir last month. And strategic business is being conducted: India has a multibillion-dollar contract[8] with a Turkish shipyard for naval vessels.
Manjeet Kripalani is the Executive Director, Gateway House.
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References
[1] ‘Turkey Defers $600 MLN Russian Energy Payment – Sources,’ Reuters, 10 May 2023, https://www.naturalgasworld.com/turkey-defers-600-mln-russian-energy-payment-sources-105085.
[2] Compare this with the 3.5 lakh Indian tourists expected to visit Turkiye in 2023, compared to 2.3 lakh last year.
[3] In Jan-March 2023, Russia was Turkiye’s top importer, at $13 billion. See ‘Foreign Trade Statistics, March 2023,’ Türkiye Istatistik Kurumu, 28 April 2023, https://data.tuik.gov.tr/Bulten/Index?p=Foreign-Trade-Statistics-March-2023-49623.
[4] ‘Peer Review of the Turkish Shipbuilding Industry,’ OECD, 2021, https://www.oecd.org/turkiye/peer-review-turkey-shipbuilding-industry.pdf.
[5] ‘Repair and maintenance output of Turkish shipyards from 2008 to 2021,’ Statista, https://www.statista.com/statistics/900211/turkey-repair-and-maintenance-output-in-shipyards/.
[6] ‘Turkey, Not Iran Is Regional Transport Hub, Says MP,’ Iran International, 15 May 2023, https://www.iranintl.com/en/202305153138.
[7] Amit Bhandari and Saeeduddin Faridi,‘Turkey: Europe’s new gas hub?’,Gateway House, 11 August 2022, https://www.gatewayhouse.in/turkey-europes-new-gas-hub/.
[8] Martin Manaranche, ‘Indian MoD Signed A Contract With Turkey’s TAIS Shipyard For 5 Fleet Support Vessels,’ Naval News, 6 May 2020, https://www.navalnews.com/naval-news/2020/05/indian-mod-signed-a-contract-with-turkeys-tais-shipyards-for-5-fleet-support-vessels/.