Conflict With Moscow Has Devastating Effect on Economy – Turkish Economist

Russia's anti-Turkish sanctions, introduced in response to the Turkish downing of a Russian bomber over Syria late last year, are having a devastating effect on the Turkish economy, with exports to Russia down a whopping 65%. Turkish economist Hatice Karahan spoke to Sputnik about the damage that's been done so far.

On Monday, the Turkish Exporters' Assembly reported that the country's exports had suffered a 14.4% year-on-year decline in January. Exports to Russia, meanwhile, dropped a whopping 65%, from $313 million in January 2015, to $110 million in January 2016.

Hatice Karahan, an expert at Turkey's Foundation for Political, Economic and Social Research (SETA), spoke with Sputnik Turkey about the state of the Turkish economy, and the impact of Russian sanctions on the country's economic well-being.

"The volume of exports going to Russia has faced a decline. Naturally, Russian sanctions played the main role. In January, exports declined by 65%. According to Turkish Exporters' Assembly's figures, the most serious blow was faced by fruit and vegetable exporters, with the textile and automotive industries also observing a decline," Karahan said.

The impact on the tourism industry is another matter, according to the economist. "In 2015, unfavorable trends in the Russian economy saw an 18% decline in the number of Russian tourists vacationing in Turkey. We believe that, in connection with the additional wave of Russian anti-Turkish sanctions, the decline in this sector is likely to continue into the future. The consequences are likely to manifest themselves most strongly in the summer months."

Earlier this week, the Zaman newspaper offered its own accounting, reporting that some 1,300 hotels had been put up for sale in various Turkish resorts, with economic problems, terrorist attacks and the crisis in relations with Russia hitting the tourist sector hard.

Aegean Touristic Enterprises and Lodging Association Chairman Mehmet Isler told the newspaper that the country faces a shortfall of nearly 4.5 million Russian tourists this year, which could lead to some $4.5 billion in lost revenues in 2016.

All-in-all, Karahan noted that it would be difficult to put an exact figure on the losses Turkey will face this year stemming from its diplomatic conflict with Russia. "There is an optimistic scenario, which suggests that economic relations between Turkey and Russia will see a warming. Other possibilities include Turkey's reorientation to alternative markets, [especially] in those sectors which feel the impact of Russian sanctions most acutely. In any case, it's already clear now that the economic restrictions imposed by Moscow will have a significant impact on the economic situation."

One option Turkish economists are looking at is Iran. "Iran's [recent] reincorporation into the international financial system will play an important role in strengthening Turkish-Iranian economic ties. The Turkish Exporters' Assembly predicts 8% growth in exports to Iran in 2016. In this way, Turkey will try to compensate for the losses resulting from Russian sanctions via a turn in the direction of Iran's market." Moreover, the country is also looking to establish cooperation in the tourism sector with its eastern neighbor.

In any case, Karahan suggests, "we can only talk about a partial substitution, as fully compensating for the losses caused by the severance of economic relations with Russia cannot be compensated through Iran."

Relations between Russia and Turkey deteriorated sharply late last year after the Turkish Air Force downed a Russian Su-24M jet deployed for the anti-terrorist operation in Syria, citing airspace violations. Moscow disputed Ankara's claims and introduced a series of anti-Turkish economic measures, including sanctions on imports and a ban on the sale of tour-packages.