According to a Financial Times article published on 15th of September, the United States and the European Union want to increase pressure on Turkey, in order to enforce sanctions against Russia. The article cites official Western sources who declared on condition of anonymity that the United States is monitoring the actions of Turkish banks that have adopted the Central Bank of the Russian Federation’s payments system. According to the same sources, the European Union is preparing a delegation to discuss this topic with Turkish officials. A few days after, on 20th of September, two Turkish banks, Isbank and Denizbank, announced that they were suspending payments through the Russian Mir system.
On 20th of August, Washington warned Ankara that Turkish companies will suffer consequences if they do business with Russian individuals and companies under sanctions. After the Russian invasion of Ukraine, Turkey was the only NATO state that did not impose sanctions on the Russian Federation. In recent months, Washington has closely monitored, and continues to monitor, the cooperation between Ankara and Moscow and the relations of Turkish companies and banks with Russian ones. Both the United States and the European Union do not want Turkey to help Russia avoid sanctions.
After his meeting in Sochi in early August with Vladimir Putin, Erdoğan said that five Turkish banks (Halkbank, Vakıfbank, Ziraat Bank, İşbank and Denizbank) will adopt the Russia’s Mir payment system. This has attracted the attention of the United States and the European Union who are concerned that Turkey could help the Russian Federation avoid international sanctions. European companies can import certain products that are on the sanctions list from the Russian Federation through Turkey. Russia can also import certain products from Europe and the United States through Turkey. Thus, Russian and Western companies could use Turkey to continue trade while avoiding sanctions. At the same time, they could make the payments using the Turkish banking system. The significant increase in trade between Russia and Turkey in recent months suggests that this is already happening. According to Turkish Statistical Institute, in July, exports to Russia increased by 75% compared with the same period last year. As for imports from the Russian Federation, they increased by 80% compared to July last year. In recent months, Ankara has strengthened its economic relations with Moscow, and trade between the two states has reached a level higher than before the war.
Turkey’s position on sanctions
After the annexation of Crimea, Turkey did not impose sanctions on Russia. Also, following the Skripal scandal in March 2018, Ankara did not expel any Russian diplomats. Thus, Turkey was among the six NATO member states (Luxembourg, Bulgaria, Portugal, Slovakia and Slovenia) that did not take such a measure after this incident. This way of acting is part of Turkey’s multilateral and balanced foreign policy strategy. Ankara emphasizes that solving problems, crises and conflicts between states, requires negotiations and does not consider the implementation of sanctions as a way of solving problems. Turkey proposes crisis prevention through win-win diplomatic negotiations and rules out the zero-sum game.
Ankara’s position must also be understood in the context in which it has economic and strategic interests regarding certain countries to which the United States and the European Union have imposed sanctions in the last decade (especially Russia and Iran). Moreover, since 2018, Turkey has been under US sanctions due to the purchase of the Russian S-400 system. Turkey has criticized and refused to implement sanctions imposed by the United States and the European Union on Iran, Venezuela and the Russian Federation. At the same time, we can see that these sanctions against the previously mentioned states, but also those against Cuba, North Korea, Syria and Turkey did not work and had only a limited effect. Although they affected the respective states, the sanctions failed to achieve their ultimate goal. This is mainly due to the fact that major and regional powers support the sanctioned states.
Another reason why Turkey has not imposed sanctions on the Russian Federation is that it is dependent on the import of natural gas, oil, grain and certain Russian ores. According to the Turkish Energy Market Regulatory Authority, the Turkish state imports about 99% of its natural gas and 93% of its used oil. In terms of gas imports, in 2021 the Russian Federation was the most important supplier of natural gas to Turkey. It imported 45% of natural gas from the Russian Federation. Russia is also Turkey’s second most important source of oil. In 2021, 24% of its oil imports came from the Russian Federation. At the same time, after the start of the war, Turkey increased its oil imports from the Russian Federation and reduced those from the North Sea, West Africa and Iraq. By August, Turkey imported twice as much oil from the Russian Federation compared to the same period last year, thanks to the lower price.
In terms of grain, in 2021 the Russian Federation was Turkey’s most important source of grain. According to Turkish Statistical Institute, in 2021 it imported about 72% of wheat, 99.5% of oat, 44% of barley and 41.5% of corn from the Russian Federation.
At the same time, in recent years the Russian Federation has been the largest importer of Turkish fruits and vegetables. In 2021 about 32.8% of Turkey’s fruit and vegetable exports went to Russia. Besides this, in recent years, most tourists who visited Turkey were Russian. The Turkish hotel industry has become dependent on Russian tourists. Of the 24.7 million tourists who visited Turkey in 2021, 4.7 million (19%) were Russians. In 2016, the Turkish economy was severely affected by the sanctions imposed by the Russian Federation following the downing of a Russian fighter jet by the Turkish Air Force. After this incident, Moscow imposed sanctions on Turkish fruit and vegetable imports and travel restrictions to Turkey.
On the one hand, the possible imposition of sanctions by Turkey on the Russian Federation would strongly affect the Turkish economy, which is already facing an inflation of 80%. Ankara aims to secure its long-term access to cheap raw materials and reduce the negative impact of the war on its economy. On the other hand, strengthening economic relations with the Russian Federation could attract sanctions from the United States and the European Union against the business environment and the Turkish banking system. This would also create serious problems for the Turkish economy, given that the European Union is Turkey’s most important trading partner and the United States is an important market for Turkish products.