Written by Marek Drabik, GTM Governance – EMEA
The crisis in relations between Russia and Turkey started with an incident on November 24, 2015 in the skies over Syria, near the border with Turkey. A Russian Su-24 tactical bomber was shot down by the Turkish Air Force. Earlier on September 30, Russia began airstrikes in support of Syrian President Bashar al-Assad, over a year after a U.S.-led coalition began strikes in the country against the ISIS groups.
Turkey’s position remains unchained: according to Turkish representatives the Russian aircraft had violated Turkish airspace after being warned repeatedly to change its heading. Moscow maintains that the Su-24 aircraft stayed exclusively over Syrian territory.
This incident has split the former economic partners and bilateral economic relations have worsened considerably, with Russia introducing a package of sanctions against Turkey. These restrictive measures were implemented by two legislative acts adopted at the end of 2015.
On November 28, 2015 Russian President Vladimir Putin signed Executive Order No. 583, “On Measures to Ensure State Security and Protection of Russian Citizens from Criminal and Other Unlawful Actions and on Application of Special Economic Measures in relation to the Republic of Turkey”. Presidential Decree 583 announced the following restrictive measures:
- An import ban on certain Turkish-origin goods (except the goods for personal use imported by individual travelers within the limits allowed by the legislation of the Eurasian Economic Union) from January 1, 2016;
- A provision of certain services and performance of certain works by Turkish companies is prohibited or restricted on the territory of the Russian Federation;
- From January 1, 2016, Russian employers(other than those included on a special list adopted by the Russian Government) are prohibited from hiring and engaging Turkish citizens, unless they have already been hired or engaged by such an employer as of 31 December 2015;
- Visa-free entry of Turkish citizens into Russia has been suspended as of January 1, 2016;
- Travel operators and tourist agencies are recommended to refrain from selling Russian citizens tours and related services for visits to Turkey.
The validity of these sanctions has not been determined.
On November 30, 2015, Regulation No. 1269 was adopted to enforce Presidential Decree No. 583. The resolution, in particular, approves a list of agricultural produce, raw materials and food products originating from the Republic of Turkey, the import of which into the Russian Federation is banned a of January 1, 2016.
Thus, import of fruits (oranges, tangerines, grapes, apples, pears, apricots, peaches and nectarines, plums, wild strawberries and strawberries) and vegetables (tomatoes, cucumbers, cauliflower, broccoli, yellow onions), as well as supplies of frozen turkey, chicken, fresh Turkish pinks and salt has been banned. Additionally, a ban on charter air flights between Russia and Turkey has been introduced. The resolution also provides a number of other measures to implement: tightened control over Turkish road transport carriers operating in Russia, safety control in Russian waters and seaports in the Azov-Black-Sea basin and reduction of Russian permits for international road transportation issued for Turkish carriers down to 2000 for 2016.
The trade sanctions against Turkey were further supplemented by another Presidential Decree, No. 669, that extends the ban on performance of works and rendering of services to organizations controlled by Turkish citizens or companies. For the purposes of fulfillment of the Decree, the Russian Government adopted two Regulations, No. 1457 and No. 1458, which stipulate the list of specific works that cannot be performed in Russia by organizations under Turkish jurisdiction, as well as by organizations controlled by Turkish citizens and (or) organizations under Turkish jurisdiction. The list includes the following:
- Construction of buildings and engineering structures and specialized construction works;
- Architectural projects and engineering-technical designs, technical tests, research and analysis;
- The activities of travel agencies and other organizations providing services in the area of tourism;
- Hotel activities and those of other temporary residences;
- The execution of works and the provision of services for state and municipal needs;
- Timber processing.
The regulations also approved the list of 53 employers and companies that are exempt from the January 1, 2016 ban to hire nationals of the Republic of Turkey who were not providing services under employment or service contracts as of December 31, 2015. These are companies working in construction, car making industry, production of construction materials, plastic pipes and fittings, plumbing equipment, flooring; these companies are working on unique projects, including the stadiums for the 2018 FIFA World Cup in Russia.
Implications of worsening relations and growth of political tension between the countries
These restrictions have already caused significant losses for the Turkish economy. The trade turnover between Russia and Turkey is falling steadily; according to Russia’s Ambassador to Turkey, trade totaled $30 billion in 2014, but in 2015 it fell to $23 billion. The numbers are expected decline further in 2016.
The main sectors that have been affected by Russian sanctions are food and agriculture; overall the sanctions caused major problems and bankruptcy in the tourism, construction, food and textile industries. According to the Assembly of Turkish Exporters, in the period from December 2015 to January 2016, exports to Russia fell 56% compared to the same period a year earlier. Turkey may lose $3.5 billion annually in income from Russian tourists, and another $4.5 billion annually through the cancellation of construction projects. Russian visitors are crucial for Turkey’s tourism industry. Around 4.5 million Russians visited the country in 2014, and official Turkish data shows that more than 12% of all visitors were Russian, making them the second biggest group after Germans.
The crisis may also lead building contractors to lose their largest market, as there are approximately 300 Turkish construction companies operating in Russia.
As Russia restricted the number of bilateral permissions for truck shipments from Turkey for 2016 to two thousand, Turkey retaliated by halting the movement of Russian trucks to Turkey. Until February 1, the road accord between Turkey and Russia was being automatically extended every year; as the Turkish side hasn’t accorded the quota of agreements for 2016, all commercial road transport between the two countries and via Russia to Central Asia and other regions halted entirely.