Turkey has far to go to improve trade with Saudi Arabia, Egypt, UAE
“We will seek ways to repair the relationship with a more positive agenda with Saudi Arabia,” President Recep Tayyip Erdoğan’s Spokesperson Ibrahim Kalın said last week.
“Parallel to the developing diplomatic relations with Egypt, we want to strengthen our trade and economic ties in the coming period,” Trade Minister Mehmet Mus said on May 3.
There is plenty of room for improvement for Turkey in trade with both countries. And Turkey must try hard to achieve those gains.
“Turkey’s hard currency revenues have been significantly decreasing on the back of EU and US sanctions. Wooing Egypt and the Arab world is an attempt to loosen the noose on Ankara,” Rashad Abdo, head of the Egyptian Forum for Economic and Strategic Studies, told Al-Monitor last month.
Turkey’s exports to Saudi Arabia all but dried up in April, the Daily Sabah newspaper reported on May 4 citing Turkish Exporters Assembly (TIM) data. The trade remained at an historic low after a months-long informal blockade of Turkish goods in the Kingdom.
Sales to Saudi Arabia plunged by 94.4 percent year on year last month to only $11.25 million, according to the newspaper. Exports dropped from around $201 million a year ago.
Turkey and Saudi Arabia have made efforts in recent months to repair some diplomatic damage after a decade of tension, which increased after the 2018 murder of dissident Saudi journalist Jamal Khashoggi in Saudi Arabia’s Istanbul consulate.
But there are other elements in the dispute: Saudi Arabia’s rapprochement with Israel, its support for the 2013 military coup in Egypt and its stance on Libya and Syria have all kept Riad at sword’s point with Ankara.
For its part, Saudi Arabia exports to Turkey are quite small, valued at 11.27 billion Saudi reals, or about $2.9 billion in 2019, according to the country’s General Statistics Authority. Turkey imports most of its oil from Russia and Kazakhstan.
Saudi Arabia only exports a few types of products to Turkey. Petrochemical products like plastics chemicals and organic chemicals make up the lion’s share at a value of about $2 billion in 2018 (the latest available statistics). Other products including mineral fuels and oils, aluminium, precious stones, metals, fruits, base metals, and iron ore account for the balance.
So the economic impact of the blockade on Saudi businesses has been comparatively insignificant.
While the value of Turkish exports to Saudi Arabia before the informal blockade was only $3.3 billion, the types of products were more important for the country in economic terms. These included carpets, furniture, electronics, heavy machinery, clothing, stone, precious stones, cereal and flour.
Turkey’s massive textile export sector has been hardest hit by the blockade, Emre Calışkan, who specialises in the role of Islamic non-state actors in Turkish foreign policy at the University of Oxford, told Voice of America in December. With the Turkish economy reeling from the COVID 19 pandemic, Calışkan said Turkey was looking to Saudi Arabia to resolve their differences.
Turkey is mired in economic trouble, as a slump in the value of the lira, currently trading at about 10 to the euro, makes it difficult for businesses to pay foreign debts and to invest.
"Turkey had been suffering by the negative effect of COVID-19 outbreak, so the Turkish economy has had difficult days," said Calışkan. "So, Turkey hopes by approaching Saudi Arabia, it would help the economy to boost again.”
Turkey and Saudi Arabia have in the past enjoyed close ties, with Riyadh investing significantly in Turkey, Calışkan said. So a reset in Turkish-Saudi relations could also be a catalyst to a broader regional diplomatic reset for Turkey.
The informal Saudi blockade has posed a serious challenge to Turkish exporters, who have been moving products to other countries for export to Saudi Arabia, in an attempt to circumvent the curbs. It has been troubling enough to spark a complaint by Turkey to the World Trade Organisation.
Turkey is pursuing a similar strategy in its approach to improve trade with Egypt, although analysts say the strategy has not been effective.
“There’s some pacification from the Turkish side, but there’s no rapprochement,” Karam Said, an expert on Turkish affairs at the Al-Ahram Center for Political and Strategic Studies, told Al-Monitor last month.
Ties between Ankara and Cairo have been strained since 2013, when Egypt's army toppled a Muslim Brotherhood president close to Turkey, in what Ankara said was a military coup.
Nonetheless, Turkey’s exports to Egypt totalled $3.74 billion in 2019, according to the Observatory of Economic Complexity (OEC). It largest exports were in refined petroleum.
Egypt’s exports to Turkey totalled more than $1.6 billion in 2020, down from just over $1.7 billion a year earlier, according to Egypt’s state-run Central Agency for Public Mobilization and Statistics.
Egyptian imports from Turkey fell by $405 million to $3.1 billion last year, according to the statistics agency.
Said said Turkish and Egyptian businesspeople have agreed to separate business from politics.
“Turkey has already lost a number of Arab markets such as Saudi Arabia, Syria, Libya and Yemen,” he said. “Ankara has had political and economic tensions with the European Union and the United States. Egypt has remained a big market of great potential for Turkey. From a pragmatic point of view, Ankara wants to keep the status quo.”
Said said the outlook for bilateral trade would highly depend on how the two countries see the future of economic cooperation.
“For Turkey, Egypt is a gateway from the Arab and African markets. That could be a common ground for business for the future. In my opinion, a rapprochement would accelerate joint investment and lead to a qualitative leap in bilateral trade,” he said.
As for trade with the UAE, there is a kind of paradox, as the country is a very important trading partner for Turkey, yet there could not be a worse diplomatic relationship.
As one expert, Güven Sak, managing director of Tepav (The Economic Policy Research Foundation of Turkey) put it in the Hürriyet newspaper last week:
“Just have a look at Turkey-UAE bilateral trade… Turkey-UAE relations are also in a bad state. The two countries clash over status in Libya, Djibouti and elsewhere. Yet Turkish exports to the UAE have increased 118.8 percent between January-March 2020 to January March 2021.”
While the two countries are at loggerheads over Libya, Syria and the Muslim Brotherhood, both countries are majority Sunni Muslim. Bilateral trade reached $8.09 billion in 2019.
In that year, Turkey exported $3.53 billion to the UAE. The main products were jewellery ($1.07 billion), gold ($450 million), and refined petroleum ($134 million), according to the OEC. During the last 24 years, the exports of Turkey to the UAE have increased at an annualised rate of 13 percent, from $189 million in 1995 to $3.53 billion in 2019.
In 2019, the United Arab Emirates exported $4.56 billion to Turkey. The main products were gold ($3.42 billion), jewellery ($236 million) and refined petroleum ($232 million). During the last 24 years, the UAE’s exports to Turkey have increased at an annualised rate of 22.1 percent, from $38.1 percent in 1995 to $4.56 billion in 2019.
Clearly, political division is blithely ignored by businesspeople from the two countries happily making hay.