Abdullah Bozkurt/Stockholm
Trade, investment and technology remain the most important influence the West has on Turkey, and the Turkish economy cannot survive without tens of billions of dollars flowing into Turkish treasury.
Trade with Europe and North America remains Turkey’s economic lifeline, according to a report compiled by Turkey’s Trade Ministry, despite decades of efforts to diversify by President Recep Tayyip Erdogan’s government, which has increasingly sought closer ties with Iran, Russia and China at the expense of NATO allies.
In 2023, 41 percent of Turkey’s exports will go to the 27 member states of the European Union, amounting to $104.3 billion out of a total export value of $255.8 billion that year. If other European countries and North America are included, the total will reach $160.6 billion, or 62.8 percent of the total.
The figures also show that trade is roughly balanced, meaning that Turkey’s imports are roughly equal to its exports to these countries. Turkey’s imports from the EU in 2023 will be $106 billion, roughly equal to its exports to the bloc. Turkey posted a trade surplus of about $10 billion in 2022. Last year, Turkish exports slightly exceeded imports from North American countries.
Germany was Turkey’s largest export market last year, with exports worth $21.1 billion, or 8.2 percent of the total, followed by the United States with $14.8 billion. Seven of the top 10 export destinations were Western countries, with the rest being Russia, Iraq and the United Arab Emirates.
In the first six months of this year, Turkish exports to Europe were recorded at $71.8 billion, accounting for 57.2 percent of Turkey’s total exports, a slight increase compared to the same period last year.
In contrast, Turkey’s trade with Russia and China posted large deficits last year, worsening its current account deficit. Turkey’s exports to Russia were $10.9 billion (4.3% of total exports), while imports from Russia were $45.6 billion (12.6%). In other words, Turkey put more than three times as much money into the Russian economy as it received from Russia.
A similar pattern can be seen in Turkey’s trade with China, where China is Turkey’s second-largest source of imports after Russia, worth $45 billion. China is not even in the top 10 destinations for Turkish exports, and Turkey’s trade balance is running a large deficit.
Part of the report issued by the Turkish Ministry of Commerce:
Turkish Ministry of Trade Report 2024
Western countries also remain crucial for Turkey when it comes to exporting services such as tourism, logistics and transport. Last year, 6.6 million tourists came to Turkey from Europe, accounting for 49.8 percent of the total and half of the $54.3 billion Turkey earned from tourism. The number of visitors from the United States was 372,000, accounting for 2.47 percent of the total.
Not surprisingly, 2022 and 2023 will see a dramatic increase in Russian visitors choosing to travel to Turkey, bringing in 1.8 million tourists per year. In 2021, the number was 854,000. This surge is primarily due to Western sanctions against Russia, which have made it harder for Russians to access financial and banking services in the West. As a result, Russians have chosen Turkey, a country that has publicly stated that it will not enforce Western sanctions and will make it easier for Russians to access Turkish banks and financial institutions.
When it comes to foreign direct investment (FDI) in Turkey, Western countries account for the majority of investment inflows, highlighting their key role in supporting the Turkish economy. According to the latest data, Europe alone accounted for 69.6% of FDI in Turkey last year, amounting to nearly $4 billion. The United States accounted for 4.6% of the investment share. By April 2024, investment from Europe had slightly decreased to 65.4%, while investment from the United States had surged to 20.9% of the total FDI.
During the two-plus decades of Turkish President Erdogan’s rule, from 2002 to 2024, investments from Europe amounted to $136.4 billion. During the same period, U.S. investors contributed $15 billion to the Turkish economy. Given the indirect investments and broader economic benefits derived from ties with Western countries, Turkey remains heavily dependent on Western support for its economic survival.
On July 8, 2024, Turkish Minister of Trade Omer Bollat and European Commission Vice-President Valdis Dombrovskis held the first Turkey-EU high-level trade dialogue aimed at strengthening trade relations.
Furthermore, Europe and North America are important markets for Turkey’s manufacturing industry, which relies on imported intermediate goods, chemicals and high-end precision machinery to produce products for export around the world.
These figures clearly show that Erdogan’s efforts over the past decade to cultivate rapprochement with Russia, Iran and China have not had the intended result of diversifying trade to replace the critical support provided by the West. Unless major changes occur, this trend is likely to continue for the foreseeable future.
This is the main reason why President Erdogan was forced to reverse his unorthodox economic and monetary policies last year and return to conventional macroeconomic policies. But his initial stance came at a high cost, costing Turkey tens and, by some accounts, hundreds of billions of dollars in losses, resulting in rising inflation, soaring unemployment and a widening current account deficit.
While President Erdogan is often criticized for his confrontational rhetoric against the West, in reality he has little choice but to align himself with the West on most, if not all, issues, as was made clear at the recent NATO summit in Washington, D.C. He understands that his political survival depends on serving the Turkish people, and he relies heavily on Western trade, tourism, investment and technology to achieve this.
However, this bitter truth does not stop him from seizing opportunities when they arise, such as by supporting Russian and Iranian sanctions evasion tactics or allowing China to gain a strong foothold in the Turkish economy in exchange for undisclosed agreements that enriched himself and his cronies at the expense of Turkish interests.
On July 8, 2024, Turkish and EU officials discussed overcoming trade barriers and improving commerce between Turkey and the European Union at the Turkey-EU High-Level Trade Dialogue Meeting.
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