Trade between Israel and Turkey has thrived for decades, weathering multiple diplomatic storms between the two countries, reaching billions of dollars a year, but Israel fears the latest rift over the Gaza war may not hold up.
Turkey this month suspended all bilateral trade with Israel until the war ends and aid can flow unhindered into the Gaza Strip. Israel said Turkey’s measures violate World Trade Organization rules.
Israeli importers have been scrambling to find alternative sources of supplies of key items ranging from cement to food to cars in the wake of Turkey’s decision, which economists say may lead to short-term supply shortages but is unlikely to hurt Israel’s $500 billion economy.
“Turkey is an important trading partner for Israel, but we are not totally or even completely dependent on Turkey,” said Shmuel Abramzon, chief economist at the Israeli Finance Ministry, who is confident Israel’s economic growth in 2024 will exceed current projections of 1.6 percent.
“While some alternatives may entail higher costs, we do not expect Turkey’s actions to cause significant or lasting disruption to the Israeli economy.”
Bilateral trade is expected to fall nearly 23% in 2023 to $6.2 billion, with Israeli imports accounting for about three-quarters of that, according to Israeli government data.
After Ankara’s move, several Turkish exporters told Reuters they were looking for ways to send goods to Israel via a third country, but importers and exporters in both Turkey and Israel have since said there was no sign this would be successful.
Trade officials say Greece, Italy and other countries are willing to fill Turkey’s loophole and a deal is close, but the main sticking point is that more than $1.5 billion of Israeli exports, mainly fuel, chemicals and semiconductors, will have alternative destinations.
“I don’t think our economy should be dependent on countries that say, ‘we want to trade,’ one day and ‘we don’t want to trade,’ the other day,” said Roy Fisher, director general of the Department of Economic Affairs’ foreign trade department.
“Trade should be reliable and sustainable, so I think our goal is to find reliable sources of supply in the long term,” he told Reuters.
Cold Bonds
Turkish President Erdogan has strongly criticised Israel’s military attacks on the Palestinian militant group Hamas in Gaza.
The war began on Oct. 7 when Hamas militants stormed into Israel, killing about 1,200 people and taking more than 250 hostages, according to an Israeli tally. About 36,000 Palestinians have been killed in subsequent Israeli attacks, according to the Gaza Health Ministry.
Just before the war broke out, Erdogan and Israeli Prime Minister Benjamin Netanyahu met in person as relations between the two countries, long strained over the Palestinian issue, slowly improved, but plans for them to visit each other’s countries were later shelved.
Turkey recalled its ambassador to Israel in November for consultations and air travel between the two countries was suspended. President Erdogan has called Hamas a “liberation movement” and hosted Hamas leader Ismail Haniyeh in Istanbul last month.
Israel’s Finance Minister Bezalel Smotrich said that in retaliation for the trade ban, the country would scrap a free trade agreement with Turkey, at least until Erdogan steps down and is replaced by “a sane leader who does not hate Israel.” He said the plan would be presented to the cabinet for approval.
Turkey is the first, and so far only, major trading partner to suspend trade with Israel due to the Gaza war. Although Turkey is Israel’s fifth-largest trading partner, it still accounts for less than 5% of total imports.
“It’s not a disaster.”
But Shay Pauzner, deputy secretary general of the Israel Construction Association, said Turkey accounts for about 40 percent of Israel’s cement imports.
The industry is turning to European suppliers, but that would be much more expensive than sourcing from Turkey, known for cheap industrial products, he said.
“This is not a catastrophe but a problem,” he added.
Meanwhile, two major Israeli car importers said certain Toyota and Hyundai models were stuck in Turkish ports due to the trade ban.
Union Motors, Toyota’s importer in Israel, said the ban was affecting deliveries of Corolla and C-HR models and that it was looking for a solution.
Cormobil, which imports Hyundai cars from Turkey, said it had suspended orders for some models and was working with the manufacturer on a supply solution.
Similarly, Diplomat, one of Israel’s largest importers, said it was looking for alternatives to Turkey to import a wide range of consumer products, including brands such as Heinz, Gillette, Braun and Pampers.
Israeli officials have said they plan to increase domestic production to avert shortages. A survey last week by the Israel Manufacturers Association showed that 80 percent of manufacturers had non-Turkish alternatives and 60 percent said they had three months’ worth of stock.
“We rely on cheap imports from Turkey, but we can do without them,” said Ron Tomer, president of the association. “As a country, we need to reduce our dependency on hostile countries as much as possible and increase our production independence.”
