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Seçkin KÖSTEM*
e Political Economy of Turkish-Russian
Relations:
Dynamics of Asymmetric Interdependence1
into complex interdependence that
characterizes bilateral ties in the advanced
capitalist world. Despite the growing role
of business groups and humanitarian ties,
politics will continue to shape the prospects
of Turkish-Russian economic cooperation
in the foreseeable future..
Key Words
Turkish-Russian Relations, Economic
Cooperation, Asymmetric Interdependence,
Economic Interdependence, Turkey, Russia.
Introduction
Economic cooperation has
characterized Turkish-Russian relations
in the post-Cold War era. Considering
the history of conict and lack of trust
between the two countries prior to and
during the Cold War, the improvement
in bilateral trade and investments in the
post-Cold War period, as well as the
increase in humanitarian connections,
Abstract
In examining Turkish-Russian economic
relations, this paper puts forward three
arguments. First, the relationship
is characterized by an asymmetric
interdependence that favors Russia over
Turkey. e source of the asymmetry
lies in the divergent domestic economic
structures of the two countries. Moreover,
the developments in the aftermath of the
jet crisis of 2015 demonstrated Turkey’s
vulnerability to Russian economic
sanctions. To support this argument, I
use trade and foreign direct investment
data to analyze the evolution of Turkish-
Russian economic ties over the past decade.
Second, international developments
such as the global nancial crisis and
the West’s sanctions against Russia have
signicantly diminished the capacity of
Turkish-Russian economic cooperation.
ird, Turkish-Russian economic
interdependence cannot soon transform
* Assist. Prof., Bilkent University, Department
of International Relations, Ankara, Turkey.
Email: kostem@bilkent.edu.tr
PERCEPTIONS, Summer 2018, Volume XXIII, Number 2, pp. 10-32.
10
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
11
sectors, a positioning that oers Russia
leverage to be more inuential over
Turkey.
Secondly, Turkish-Russian economic
cooperation is heavily inuenced by
global economic developments. In
particular, the article will demonstrate
the negative eects of two important
developments for bilateral economic
ties: the global nancial crisis of 2008-
2009 and the sanctions imposed by the
United States (U.S.) and the European
Union (EU) on the Russian economy
after 2014. Finally, the paper argues
that Turkish-Russian relations cannot
evolve into complex interdependence
that resembles economic relations
between advanced capitalist states
in the age of globalization in the
foreseeable future. e main reason is
again related to the dierence between
the two countries’ economic structures.
As the post-jet crisis period has
demonstrated, the Russian economy
is still state-centric, which prevents
the ourishing of cooperation among
non-governmental actors between the
two countries without intervention by
the state. is reality also highlights
the importance of political will and
leadership to intensify trade, investment
and humanitarian ties between the
two countries, which will continue to
be inuential neighbors and actors in
various regions in the future.
have important ramications not
only for bilateral ties, but also for the
transformation of the larger region
of which the two countries are a part.
Recently, the literature has increasingly
focused on various aspects of Turkish-
Russian relations. However, little has
been done to oer a political economy
perspective, analyzing the dynamics of
economic cooperation between the two
countries.2
In exploring the evolution of economic
relations between Turkey and Russia,
this article puts forward three
arguments. First, Turkish-Russian
economic relations are marked by an
‘asymmetric interdependence’3 which
favors Russia over Turkey. e most
recent crisis period in Turkish-Russian
relations (November 2015-June 2016)
demonstrated that Russia holds the
upper hand in economic relations for
various reasons, the most important
being the structural dierence of the
two countries’ economies. While natural
resources dominate Turkey’s imports
from Russia, Russia in return imports
mostly machinery and equipment,
textiles and food products from Turkey.
As I will explore, that inevitably gives
Russia a structural advantage that
can be used as leverage in times of
political crises and disagreements
over strategic issues. Similarly, while
Turkey’s investments in Russia are
more diversied, Russian investments
in Turkey converge around strategic
Seçkin Köstem
12
world. is has also been the case for
Turkey and Russia, whose national
interests have frequently diverged,
especially regarding conicts in the
Black Sea region, the Caucasus and the
Middle East. Russia and Turkey have
both been regarded as emerging market
economies despite the dierences in
their economic structures, populations
and key sectors.
bilateral relations is costly for both
sides.4 Moreover, interdependence does
not result in gaining equal shares from
the bilateral economic relationship. On
the contrary, the costs associated with a
crisis in bilateral relations are in general
Asymmetric
Interdependence in
Turkish-Russian Economic
Relations
During the age of globalization,
economic interdependence has
characterized relations between many
countries in various regions of the
Dierent from a situation of
dependence, interdependence rests on
a reciprocity of economic transactions
between two countries. erefore, in a
situation of economic interdependence
between two countries, a break-up of
Figure 1: Russian and Turkish GDP
Source: World Bank Data, available at https://data.worldbank.org/indicator/NY.GDP.MKTP.
CD?end=2016&start=2002 (last visited 16 August 2018).
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
13
how great are the costly eects?”7
e second dimension, ‘vulnerability,’
explores the alternative economic
policy options that parties enjoy; the
bigger the number of alternatives,
the smaller the costs associated with
economic interdependence.8 Russia’s
economic sanctions demonstrated
that Turkey was highly sensitive to a
change in Russian policy. Also, Turkey
was more vulnerable to a change in
the rules of the economic exchange
with Russia. ree reasons exacerbated
Turkey’s vulnerability to Russian
sanctions. Firstly, it was harder for
Turkish exporters to nd an alternative
market that could replace Russia. As
I demonstrate below, Turkey’s exports
to Russia fell from US$ 5.9 billion in
2014 to US$ 3.6 billion in 2015, and to
US$ 1.7 billion in 2016, and recovered
to US$ 2.7 billion in 2017. Secondly, it
was very dicult to substitute Russian
tourists, the number of which had risen
to 4 million in 2014, constituting 12%
of total tourist arrivals to Turkey in the
same year. Russian tourists spent an
estimated US$ 3 billion in Turkey in
2014.9 Only seven hundred thousand
Russian tourists visited Turkey in 2016,
despite the gradual normalization
of relations that had started in the
summer of 2016. Finally, it was almost
impossible to do without natural gas
imports from Russia and immediately
nd alternative sources of energy.
Russia supplied almost 55% of Turkey’s
higher for the weaker party. erefore,
any asymmetry in the economic
relationship between two states
provides a “source of inuence” for
the stronger party.5 e developments
in the aftermath of Turkey’s downing
of the Russian jet demonstrated that
a crisis is costly for both sides, but
costlier for Turkey.6 In November
2015, the Russian government
announced a decree with a package
of economic restrictions on Turkey.
Russia’s economic sanctions against
Turkey included the abolishment of
the visa-free regime which had been
in eect since 2011, restrictions on
Turkish investments and labor in
Russia, restrictions on Turkish goods
exported to the Russian market, and
the abolishment of charter ights to
Turkey.
Keohane and Nye measure the
power asymmetries in economic
interdependence in two dimensions.
e rst dimension, ‘sensitivity,’ asks,
“how quickly do changes in one country
bring costly changes in another, and
Dierent from a situation of
dependence, interdependence
rests on a reciprocity of
economic transactions between
two countries.
Seçkin Köstem
14
produced 0.38 billion cubic meters of
natural gas, while importing 26.78 bcm
of natural gas from Russia. In the same
year, Turkey’s total imports of natural
gas stood at 48.43 bcm.13
Russia’s place in Turkey’s energy
imports have grown gradually since
the treaty signed in 1984 between
Turkey and the Soviet Union. In the
post-Cold War era, the Blue Stream
pipeline running through the Black
Sea has solidied the importance of
Russia for Turkey’s energy imports.
e Blue Stream, which has been in
operation since December 2002, has
been criticized for increasing Turkey’s
energy dependence on Russia and
preventing Turkey from focusing on
the East-West corridor, which was
supported by the U.S. and the EU in
that period. However, Turkey saw the
rival pipeline projects as a means of
increasing its geopolitical leverage.14
Nonetheless, Turkey’s increasing
domestic energy consumption has
resulted in a parallel increase in the
importance of Russian gas for Turkey.
As reported by Likhachev, Turkey’s
natural gas imports, and almost half of
Turkey’s electricity consumption was
produced by natural gas.10 We need a
closer examination of bilateral trade
and foreign direct investment (FDI)
ties between the two countries to
understand why the Turkish economy
was so vulnerable to Russian sanctions.
is is what the paper will turn to
now.11
Bilateral Trade Ties
e most important source of the
asymmetry in bilateral trade between
Russia and Turkey is the dierence
in economic structures, which results
in dierent comparative advantages.
Bilateral trade has expanded
signicantly in the post-Cold War
era, making Russia Turkey’s top trade
partner in 2008 (See Figure 2). As a
resource-rich country, Russia enjoys
a comparative advantage in energy
production and exports. In 2016,
almost 70% of Russian exports were
made up of petroleum, crude oil and
natural gas. Conversely, Turkey is
dependent on imported energy in
meeting its domestic consumption and
power production needs. According to
Çelikpala, Turkey’s energy ties with
Russia should be examined from a
perspective of energy security in which
Turkey should seek to mitigate its
dependence on natural gas imported
from Russia.12 In 2015, Turkey
Bilateral trade has expanded
signicantly in the post-
Cold War era, making Russia
Turkey’s top trade partner in
2008.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
15
During the World Energy Congress
that was held in Istanbul in October
2016, Russia and Turkey signed an
intergovernmental agreement for the
project. e agreement pledges the two
countries to the construction of two
pipelines, each with a capacity of 15.75
bcm of gas. While one branch will
supply gas to the Turkish market, the
other will deliver gas to the European
market through Turkish territory.19
Turkish Stream, once completed, is
expected to divert the 14bcm natural
gas that is imported annually via
the Ukraine-Moldova-Romania-
Bulgaria route.20 In November 2017,
the Turkish Stream pipeline entered
the Turkish exclusive economic zone,
and as of December 2017, 30% of
the oshore section of the Turkish
Stream pipeline was completed. e
future of the Turkish Stream project
depends signicantly on the political
ties between Russia and Turkey. But
even more importantly, the EU’s stance
on Russian plans to bypass Ukraine in
exporting natural gas to Europe will
shape the prospects of the project. So
far, the EU has not demonstrated signs
of willingness to import Russian gas
through the Turkish Stream. erefore,
it is not clear yet whether the second
pipeline that will deliver Russian gas to
Europe will be constructed.21
While Turkey is the more
vulnerable player in the asymmetric
interdependence game, it nevertheless
energy use increased from 45 million
tons of oil equivalent in 2005 to 131
million tons in 2015.15
From 2002 onwards, the European
Union promoted the Nabucco pipeline
project, which was planned to bring
natural gas from Azerbaijan and
Turkmenistan to Europe through
Turkey.16 As an alternative to the
Nabucco project, Russia developed the
South Stream pipeline project in 2007
with an aim to deliver natural gas from
the Russian port of Novorossiysk to
Bulgaria. e project therefore sought
to contribute both to Europe’s energy
security and Russia’s goal of bypassing
Ukraine.17 Pronouncing the South
Stream dead in December 2014 during
his visit to Ankara, Russian President
Vladimir Putin touted a new project
that would deliver Russian natural
gas to European markets via Turkey,
namely Turkish Stream. e Turkish
Stream, or ‘TurkStream’ project
should be understood in relation to
Russia’s geopolitical target of ending
Ukraine’s transit country status. While
this remains a long-standing goal, it
has intensied since 2014. Moscow’s
deadline is 2019, when the current
Russia-Ukraine gas transit contract
is set to expire. is explains Russia’s
desire to increase the amount of gas
delivered to Europe through Nord
Stream and to build the Turkish
Stream, a new pipeline through the
Black Sea to Turkey.18
Seçkin Köstem
16
global markets are shipped through
the Turkish straits, adding to Turkey’s
geopolitical importance for Russia;
around 150 million tons of Russian
crude oil pass through the Bosphorus
and the Dardanelles every year.26
Conversely, Turkey mainly exports
automobiles, machinery and equipment,
textiles and food products to the Russian
market. While the Turkish media has
primarily paid attention to the Russian
ban on Turkish tomatoes, the sectors
that were most severely damaged by
the Russian sanctions following the jet
crisis are the automobile industry, and
machinery and equipment. According
to data from the Turkish Ministry
of Economy, the value of Turkey’s
automotive exports to Russia fell from
US$ 289 million in 2014 to US$ 44.6
million in 2016. Similarly, the value of
machinery and equipment exports fell
from US$ 221 million in 2014 to US$
108 million in 2016. With an export
value of US$ 270 million, citrus fruits
replaced automobiles as Turkey’s top
continues to be an important energy
partner for Russia. Several reasons help
explain Turkey’s importance for Russian
natural gas exports. First of all, Turkey
is a reliable trade partner for Russia.
Despite several ongoing gas pricing
problems between the two countries,
Turkey has remained a reliable source
of revenue for the Russian economy. As
of 2017, with its consumption of 29.03
bcm of natural gas, Turkey is Gazprom’s
second biggest customer after Germany,
which bought 53.44 bcm of natural gas
from Russia in the same year.22 Russia’s
annual revenue from its energy exports
to Turkey amounts to US$ 15 billion,
which is higher than Russia’s annual
arms sales.23 Secondly, the fact that
Russia devised the Turkish Stream
upon the cancellation of the South
Stream demonstrates Turkey’s ongoing
geopolitical importance for Russia.
Moscow’s desire to bypass Ukraine and
thereby reduce its reliance on Ukrainian
territory to export natural gas to Europe
has enhanced Turkey’s position in the
energy relationship. Currently, more
than 40% of Russian gas exported to
Europe (and Turkey) goes through the
Ukrainian Gas Transmission System.24
e Nord Stream-2 and Turkish
Stream pipelines, therefore, serve a
common purpose for Russia: they will
allow Gazprom to continue to sell
natural gas to Europe while isolating
Ukraine economically.25 Moreover,
Russia’s oil and petroleum exports to
Moscow’s desire to bypass
Ukraine and thereby reduce its
reliance on Ukrainian territory
to export natural gas to Europe
has enhanced Turkey’s position
in the energy relationship.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
17
fruits were followed by machinery and
equipment, automobiles and sh.
Italy, France and the U.S. In the same
period, imports from Turkey accounted
for 3.2% of Russia’s total imports,
while its exports to Turkey accounted
for 8.8% of Russia’s total exports.27 All
in all, this discrepancy demonstrates
the asymmetric interdependence in
bilateral trade, which favors Russia.
export item to the Russian market in
2016 following the jet crisis. Citrus
In the past decade (2007-2016), with
a share of 11.2%, Russia has been
Turkey’s top import partner. Russia has
been followed by Germany and China
with 9.7% each. Conversely, Turkey’s
exports to Russia in the same period
accounted for only 3.7% of Turkey’s
total exports, placing Russia in the 7th
position after Germany, the UK, Iraq,
Figure 2: Russia’s Place in Turkey’s Foreign Trade, 2006-2017
Source: Author’s calculations based on data from the Turkish Statistical Institute and the Turkish
Ministry of Economy; at http://www.tuik.gov.tr/UstMenu.do?metod=temelist, https://www.ekonomi.
gov.tr/portal/faces/home (last visited 16 August 2018).
Seçkin Köstem
18
went up from US$ 3.6 billion to US$
32.7 billion, while FDI outows
similarly increased from US$ 870
million to US$ 3.1 billion.29 According
to OECD data, Russia’s outward FDI
stocks increased from US$ 139 billion
in 2005 to US$ 335 billion in 2016.30
Its outward FDI ows, on the other
hand, went up from US$ 16.7 billion
in 2005 to a historic high of US$ 70
billion in 2013, to decrease to US$
26.9 billion in 2016.31 In this context,
it is meaningful to examine Turkish-
Russian investment ties since the turn
of the new century. Unlike bilateral
trade, Russia and Turkey have a rather
balanced record of bilateral FDI
stocks. e Russian market has been
an important destination for outgoing
Turkish investments in the post-
Cold War era. As stated recently by
Russian Minister of Energy Alexander
Novak at the Izmir International Fair,
Russian investments in Turkey have
amounted to US$ 10 billion, which is
almost equal to Turkish investments
in Russia.32 Turkish rms are more
experienced in the Russian market
as Turkish construction companies
have been key players in the Russian
Bilateral Investment Ties
Another important dimension of the
economic interdependence between
Russia and Turkey is investments.
While the literature has paid
considerable attention to trade and
energy ties between the two countries,
bilateral investment ties have been
rather unexplored, despite the fact
that foreign direct investment (FDI)
and international production have
become highly signicant components
of national economic power in the age
of globalization.28 In the past decade,
Russian rms have increased their
presence in the Turkish economy,
which has closed the direct investment
gap between the two countries in
favor of Russia. at is primarily
because Russian investments in
Turkey concentrate on sectors such
as energy, metallurgy, banking and
the automotive industry, which are of
higher strategic importance and added
value compared to Turkish investments
in Russia. Turkish investments in
Russia concentrate on the construction
sector, which is of socio-economic
importance for Russia, as well as low
to medium technology sectors such
as alcoholic beverages, chemicals and
glass production.
In the new millennium, Turkish
outward FDI has increased signicantly.
As demonstrated by Bakır, from 2000
to 2013, Turkish outward FDI stock
Unlike bilateral trade, Russia
and Turkey have a rather
balanced record of bilateral
FDI stocks.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
19
the 1984 intergovernmental agreement
permitting Turkish investments in the
Soviet Union in return for natural gas
imports.33
of smaller Turkish companies are also
active in the Russian market, these big
Turkish rms account for the majority
of Turkish FDI in Russia. According
to Bakır’s calculations, from 2003 to
2013, Turkish rms operating in Russia
made 105 greeneld investments with
a total net investment amount of more
than US$ 9 billion.34 Moreover, with
investments worth US$ 2.6 billion,
Russia was also the rst market in
construction sector since the early years
of the post-communist period. In fact,
Turkish contractors started to develop
projects during the late 1980s thanks to
Currently, the leading Turkish rms
investing in the Russian market
include Anadolu Efes (alcoholic
beverages), Enka (construction),
Renaissance (construction), Şişecam
(glass), Trakya Cam (glass), Eczacıbaşı
(tiles and ceramic ware), Hayat (fast-
moving consumer goods and wood
products), Koç (household appliances
and banking) and Zorlu (household
appliances and energy). While hundreds
Figure 3: FDI Net Inows, Russia and Turkey
Source: World Bank, available at: https://data.worldbank.org/indicator/BX.KLT.DINV.
CD.WD?end=2016&locations=RU-TR&start=2002&view=chart (last visited 26 November 2017).
Seçkin Köstem
20
industrial enterprise, which began as
a greeneld foreign direct investment
project. MMK Metal also currently
operates Turkey’s biggest privately-
owned port in Dörtyol, Hatay.39 e
company has another plant in Gebze.
In 2012, Russia’s state-owned Sberbank
bought Deniz Bank for US$ 3.6 billion
from Belgian Dexia, a deal that became
Russia’s biggest overseas acquisition.40
In the past decade, Russia’s second
biggest oil company Lukoil has also
strengthened its presence in the
Turkish market. After buying Akpet in
2008, Lukoil has rapidly expanded to
become one of the biggest distributors
in Turkey. So far, Lukoil’s investment in
Turkey has exceeded $1 billion. Russia’s
largest commercial motor vehicles
producer, GAZ Group has been
producing its “Gazelle Next” brand in
Sakarya since 2014.
Nuclear energy has been the most
strategic area in which the Russian
and Turkish governments have agreed
to cooperate so far. When completed,
terms of Turkish investors’ mergers
and acquisitions in the same period.35
e Turkish Ministry of Economy
estimates that projects conducted in
Russia account for around 20% percent
of Turkish contracting businesses
abroad. Beko and Vestel, similarly,
accounted for 10% of the durable
goods sector in Russia.36 Anadolu
Efes, which has been operating in
the Russian market since 1997, was
the second biggest player in the beer
market with a 14.9% value share in
2016.37 e head of Anadolu Holding’s
executive board, Tuncay Özilhan, also
chairs the Turkish-Russian Business
Council within Turkey’s Foreign
Economic Relations Board (DEİK).
Şişecam, which is Europe’s biggest and
the world’s 4th largest glass producer,
currently has eight factories operating
in Russia. In October 2016, Şişecam
opened a at glass and an automotive
glass factory in Alabuga, Tatarstan. e
company’s investments in the Russian
market have exceeded US$ 1.1 billion.38
While the value of Russian FDI in
Turkey was quite minimal for the rst
two decades of the post-Cold War
period, it started to rise signicantly in
2011 (See Figure 4). at was mainly
thanks to the world’s biggest steel
producer, Russia’s Magnitagorsk Iron
and Steel Works (MMK Metal), which
opened a plant in Turkey in the southern
town of İskenderun in 2011. MMK
Metal is currently Turkey’s largest
While the value of Russian FDI
in Turkey was quite minimal
for the rst two decades of
the post-Cold War period, it
started to rise signicantly in
2011.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
21
of bilateral investment ties at Turkey’s
expense. It will be impossible for
Turkish investments in Russia to catch
up with Russian investments in Turkey
after the Akkuyu nuclear power plant
starts operating.
for only 0.3 % of the total FDI in the
Russian economy.41 is demonstrates
that the two countries have a long
way to go in terms of solidifying their
investment ties. In March 2017, during
President Erdoğan’s visit to Russia,
the Russian Direct Investment Fund
the Akkuyu nuclear power plant will
increase the value of Russian FDI in
Turkey substantially. It is estimated
that the Akkuyu project will cost US$
20 billion. is means that the Akkuyu
nuclear power plant will exacerbate the
asymmetric interdependence in terms
Similar to bilateral trade, bilateral
investment ties also favor Russia. In
the past decade (2007-2016), FDI
originating from Russia has accounted
for 2.8% of the total FDI inow to
the Turkish economy. Conversely, FDI
originating from Turkey has accounted
Figure 4: Bilateral FDI Flows
Source: Author’s calculations based on data from the Central Bank of Russia, Central Bank of Turkey
and UNCTAD.
Seçkin Köstem
22
aected by the global nancial crisis,
the Eurozone crisis and the West’s
sanctions on the Russian economy. A
close scrutiny of bilateral trade reveals
the causes behind the uctuations
in economic ties. In the past decade,
bilateral trade has experienced two
major shocks. Firstly, in 2009, Turkey’s
trade with Russia fell by 50.8% to
US$ 22.7 billion compared to the
previous year.44 at was because of the
credit crunch and pervasive recession
due to the global nancial crisis that
erupted in the U.S. housing market
and spread rapidly to the rest of the
world.45 It is important to recall that
the year 2008 witnessed Russia’s rise
to a new status as Turkey’s top trading
partner, surpassing Germany as total
bilateral trade hit US$ 37.8 billion. e
Russian economy experienced negative
growth in 2009, as GDP contracted
by 7.8%; the Turkish economy also
experienced negative growth in the
same year, contracting by 4.7%.46 As
Figure 3 demonstrates, both countries
experienced a sharp downturn in net
FDI inows in 2009, one year after
the great recession. In both countries,
incoming FDI ows fell by more than
50% from 2008 to 2009; from US$ 74.8
billion in 2008 to US$ 36.6 in Russia,
and from US$ 19.9 billion to US$ 8.6
billion in Turkey. In both countries, the
amount of incoming FDI has still not
returned to 2008 levels. It is important
to note that this trend in FDI has had
(RDIF) and the newly-established
Türkiye Wealth Fund (TWF) signed
a memorandum “to work together
to identify attractive investment
projects that could strengthen bilateral
economic ties and increase investment
ows between Russia and Turkey.”42
Each country’s sovereign wealth funds
are expected to invest up to US$ 500
million in the joint investment fund.
is is an important project that can
potentially boost mutual investments
in the future if used wisely. However,
the most important criteria for
increasing FDI ties will be the health
of the Russian and Turkish economies,
the condence of investors in each
economy, and the prospects for deeper
political cooperation between the two
governments.
e Importance of the
International Context for
Turkish-Russian Economic
Ties
As Erşen has recently argued, it is quite
dicult to examine Turkey’s political
relations with Russia in isolation from
international developments and both
countries’ ties with the West.43 is
section aims to demonstrate that one
can make the same argument with
regard to Turkish-Russian economic
relations. I show that Turkey’s trade
capacity with Russia has been negatively
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
23
to expand their markets in Russia.
Moreover, the sanctions resulted in a
rapid depreciation of the Russian ruble
vis-à-vis the U.S. dollar. Low oil prices
in global energy markets, coupled with
Western sanctions on the Russian
economy, pushed the ruble to a record
low of 86 rubles to one U.S. dollar in
January 2016.48
e depreciation of the ruble
indirectly meant that the ongoing
economic sanctions on the Russian
economy would hurt Turkish exports
to the Russian market. Also, the
Russian government wanted to turn
the Western economic sanctions
into an advantage for the Russian
economy. Soon after the rst wave of
sanctions, the Russian government
announced a program of import
substitution with the goal of enhancing
Russia’s economic sovereignty.49 e
depreciation of the ruble was also
regarded an opportunity to boost
domestic businesses. Most importantly,
the program aimed to reduce imported
more detrimental consequences for
Turkey, which structurally runs current
account decits.
e second critical juncture was
experienced in 2015 as Turkey’s exports
to Russia fell by 39.6% compared to
the previous year. is time however,
the downturn was caused not only
by the jet crisis, but by the sanctions
imposed by the U.S. and the EU on the
Russian economy. Since April 2014,
the West has expanded its sanctions
on the Russian nancial system,
targeting Russia’s banks and business
community. While Ankara has ocially
condemned Russia’s annexation of
Crimea, it has not joined the sanctions
imposed by the U.S. and EU on the
Russian economy. Turkish decision
makers and the business community
initially expected that the sanctions
would make Turkey an inevitable
partner for Russia. For example,
Mehmet Büyükekş, the head of the
Turkish Assembly of Exporters argued
that Turkey could boost its exports in
the fruit, egg and poultry sectors.47
Initial hopes were soon replaced by
pessimism, however, as Turkey’s exports
to Russia fell by 14% in 2014 compared
to 2013 (from US$ 6.9 billion to US$
5.9 billion). e immediate impact of
the Western sanctions on the Russian
economy was the main cause of this
downturn. As the Russian economy
started to experience negative growth,
it became harder for Turkish exporters
While Ankara has ocially
condemned Russia’s annexation
of Crimea, it has not joined
the sanctions imposed by the
U.S. and EU on the Russian
economy.
Seçkin Köstem
24
the Turkish economy enjoys a very
high level of integration into the global
economy, it does not benet from
political chaos in its neighborhood.
On the contrary, the ongoing sanctions
crisis demonstrates that Turkey’s export
capacity is highly contingent on its
partners’ economic well-being.
Towards Complex
Interdependence in Russian-
Turkish Economic Relations?
is section will discuss whether
Turkish-Russian asymmetric
interdependence can soon transform
into complex interdependence,
resembling for example, the relations
between the U.S. and Canada, or France
and Germany. In Keohane and Nye’s
framework, complex interdependence
between two countries is measured by
three main characteristics: multiple
channels between societies, the absence
of hierarchy among issues, and the
disappearance of military force in
bilateral intergovernmental relations.51
First, for asymmetric interdependence
to evolve into a more complex form,
societies need to be strongly connected
to each other without intervention from
governments. Societal ties include,
but are not limited to, humanitarian
connections and cooperation among
non-governmental organizations
(NGOs). While Turkish and Russian
food and invest in the agricultural
sector to contribute to Russia’s food
security. e Russian government
imposed retaliatory sanctions on food
imported from the European Union,
and increased subsidies for domestic
producers. Overall, the program has
been successful. As reported by the
Financial Times, agricultural products
have surpassed arms sales to become
Russia’s second biggest export sector
after raw materials.50 e jet crisis
between Turkey and Russia solidied
the Russian government’s commitment
to decreasing Russia’s dependence on
imported food products. at is why
it has proven so dicult for Ankara
to convince Moscow to lift its ban on
Turkish fruits and vegetables.
All in all, bilateral trade volumes have
not yet returned to the 2008 level. is
marks an important lesson for the
Turkish economy; if one of Turkey’s
major partners is going through an
economic downturn, that immediately
aects its ability to trade with that
country. More importantly, because
e depreciation of the ruble
indirectly meant that the
ongoing economic sanctions
on the Russian economy
would hurt Turkish exports to
the Russian market.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
25
Several factors in Turkish-Russian
relations reinforce the status quo,
and, with it, the absence of complex
interdependence between the two
countries. Most importantly, Turkey
and Russia lack international regimes
that bind them together. e Black Sea
Economic Cooperation Organization
(BSEC) has served an important
function since its establishment in
1992, but today it can best be referred to
as a loose form of regionalism that does
not foresee any deep form of economic
integration among its members.52
Moreover, the ongoing crisis over
Ukraine puts the prospects of the BSEC
under doubt. Even though both Russia
and Turkey are members of the World
Trade Organization (WTO), they
continue to be members of dierent
regional integration mechanisms.
Russia has pursued deeper economic
integration with the post-Soviet states
through the Eurasian Economic Union
(EAEU), while Turkey is a party to the
societies know each other much better
than they did three decades ago, the jet
crisis clearly demonstrated the limits
of trust between the two societies.
e rapid and substantial decrease
in the number of Russian tourists
visiting Turkey in the aftermath of
the downing of the Russian jet also
reveals the delicate nature of inter-
societal ties. According to Keohane
and Nye, the second condition for
complex interdependence is the
absence of hierarchy among issues that
connect the two countries. at, rst
and foremost, includes the fading
dominance of military security in
bilateral relations. e end of the Cold
War has without doubt reduced the
importance of military/strategic issues
in the agenda of Russian and Turkish
decision makers vis-à-vis each other.
Nevertheless, as demonstrated recently
by the disagreement over Crimea and
the jet crisis, the two countries continue
to have diverging strategic interests in
the Black Sea region and the Middle
East. Moreover, even if military issues
are not on the agenda, bilateral ties can
become entrapped in a rather narrow
focus on energy security. ird, the
threat of use of military force toward
one another should be eliminated
for two countries to enjoy complex
interdependence. Although highly
unlikely to be repeated, the jet crisis
did reveal the possibility of a military
conict between Turkey and Russia.
Complex interdependence
between two countries is
measured by three main
characteristics: multiple
channels between societies, the
absence of hierarchy among
issues, and the disappearance
of military force in bilateral
intergovernmental relations.
Seçkin Köstem
26
of economic cooperation between the
two countries.
Conclusion
Turkish ocials have often touted
the ocial target of Turkish-Russian
bilateral trade as US$ 100 billion. Albeit
exciting, this number is unrealistic
to achieve due to the asymmetric
interdependence in bilateral ties that
this paper has aimed to explain. Also,
for Turkey to increase its exports to the
Russian market, the two countries need
deeper forms of economic integration,
which do not seem likely to emerge
any time soon. More importantly, a
signicant enhancement of wealth
among both Turkish and Russian
societies is required for economic ties
to ourish. Finally, various regional
and international developments with
a security dimension interfere with the
economic interdependence between
the countries. While Turkey and
Russia have been cooperating toward
a peaceful solution to the Syrian crisis,
for example, they continue to have
divergent preferred outcomes regarding
the future of Bashar al-Assad and the
PYD.
As rightly observed by Öniş and
Yılmaz, partnerships with asymmetric
interdependence restrict the bargaining
leverage of the weaker side.54 In the
case of Russian-Turkish relations, the
European Union’s Customs Union. It
would be unrealistic and economically
irrational to expect Turkey to join the
EAEU in the foreseeable future.
e activities and inuence of non-
governmental actors such as business
groups in policy-making is also
important in examining the dynamics
of economic interdependence between
the two countries.53 Traditionally,
the semi-ocial Foreign Economic
Relations Board (DEİK) is inuential
in Turkey’s foreign economic strategy.
As mentioned above, Tuncay Özilhan,
head of the executive board of Anadolu
Holding, chairs the Turkish-Russian
Business Council within DEİK. e
Russian-Turkish Business Council is
headed by Akhmet Palankoev, who is a
member of Russia’s Federation Council.
A businessperson, Cavit Çağlar, played
a crucial role in solving the jet crisis
in June 2016. Yet despite the growth
of trade and investment ties among
business groups since the early 1990s,
the jet crisis demonstrated the ongoing
dominance of the Russian state in
guiding Russia’s foreign economic
relations. e radical decline in Russian
tourists arriving in Turkey in 2016 is
a clear indicator of the power of the
Russian state to inuence humanitarian
ties as well. Finally, Russia’s turn to
import-substitution in response to
the West’s sanctions, coupled with
Russia’s state-led economic system,
will continue to impede deeper forms
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
27
the economic agenda, bilateral political
ties through mechanisms such as the
High Level Cooperation Council
should be enhanced. In addition, despite
the diculties posed by both active and
frozen conicts in the region, the two
countries could once again strive to
revitalize BSEC as a platform for joint
investments and trade in the region.
e jet crisis provides lessons for Turkey ’s
foreign economic strategy. In its current
form, economic interdependence favors
Russia due to the structure of the two
countries’ economies. e structural
dierence, as explained above, aects
economic relations in terms of both
investments and trade. In the long
run, bilateral economic ties can evolve
toward a more equitable balance for
Turkey due to its diversied economic
structure. However, what is obvious at
this point is that Turkey needs to re-
formulate its foreign trade strategy vis-
à-vis Russia to reduce its vulnerability.
Intensifying Turkish direct investments
in Russia with a focus on sectors that
are of higher added value should be a
intensication of economic ties has
clearly strengthened Russia at the
expense of Turkey. As explored above,
the sanctions imposed by Russia in
the aftermath of the jet crisis have
highlighted the asymmetric nature of
the countries’ economic cooperation.
However, Russia needs Turkey as a
reliable energy partner at a time of
deteriorating ties with the West and
Ukraine. at is one reason why the jet
crisis was resolved within a time span
of seven months, despite the initial
anger and shock experienced by both
governments.
How can Turkey and Russia revitalize
their economic ties and assure that
economic relations will not be negatively
aected by disagreements over strategic
issues? One easy proposal might be to
‘bring compartmentalization back’ to
Russian-Turkish relations. However,
as Erşen has recently argued, the sharp
disagreements around Crimea and Syria
have demonstrated that the strategy of
compartmentalization, characteristic of
Turkish-Russian relations in the 2000s,
is no longer sustainable.55
Both countries’ international economic
activity depends to a signicant extent
on international political and economic
developments. e ups and downs in
Turkish-Russian relations demonstrate
the primacy of politics for sustained
economic interdependence in the future.
As politics will continue to dominate
e ups and downs in
Turkish-Russian relations
demonstrate the primacy of
politics for sustained economic
interdependence in the future.
Seçkin Köstem
28
foreign economic strategy should be to
develop a long-term plan that fosters
investments in high technology sectors,
which can eventually lead to greater
value added for Turkish exports. Such a
strategy would not only reduce Turkey’s
vulnerability to external shocks, but
also ameliorate its chronic current
account decit.
target. Employing a greater number of
Russian citizens would allow Turkish
companies doing business in Russia to
increase their power and inuence in the
Russian market, and curb the Russian
government’s ability to restrict their
economic activities in the future. Turkey
risks suering signicant economic
losses in a potential disagreement with
Russia on a strategic issue in the future.
As long as Turkey exports medium-
technology manufactured goods,
foods and vegetables, and imports
natural gas and petroleum products,
it is destined to be vulnerable. e
Turkish government should therefore
focus on diversifying Turkey’s energy
import partners, while at the same
time continuing to utilize Turkey’s
geopolitical importance for Russian
natural resource exports. However,
the most important goal of Turkey’s
e most important goal of
Turkey’s foreign economic
strategy should be to develop
a long-term plan that fosters
investments in high technology
sectors, which can eventually
lead to greater value added for
Turkish exports.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
29
Endnotes
1 e author would like to thank Mustafa Aldı, Ph.D. candidate, and Ömer Faruk Şen,
Ph.D. student of Bilkent University, for their research assistance.
2 For recent exceptions, see Ziya Öniş and Şuhnaz Yılmaz, “Turkey and Russia in a
Shifting Global Order: Cooperation, Conict and Asymmetric Interdependence in
a Turbulent Region”, ird World Quarterly, Vol. 37, No. 1 (2016), pp. 71-95; Tolga
Demiryol, “Interdependence, Balancing and Conict in Russian-Turkish Relations”,
Aharon Klieman (ed.), Great Powers and Geopolitics: International Aairs in a Rebalancing
World, New York, Springer, 2015, pp. 65-86; Mitat Çelikpala, “‘Rusya Gazı Keser Mi?’:
Son Gelişmeler Işığında Türkiye-Rusya Enerji İlişkilerine Bakış”, in Gencer Özcan,
Evren Balta and Burç Beşgül (eds.), Türkiye ve Rusya İlişkilerinde Değişen Dinamikler:
Kuşku ile Komşuluk, İstanbul, İletişim, 2017, pp. 205-223.
3 I borrow the concept from Robert O. Keohane and Joseph S. Nye’s seminal work entitled,
Power and Interdependence: World Politics in Transition, Boston, Little Brown, 1977.
4 Ibid., p. 8.
5 Ibid., pp. 8-9.
6 For the economic impact of the jet crisis on the Russian economy, see Natalya Shagayda,
“Resul’taty Embargo na Postavki Sel’skokhozyaystvennoy produktsii iz Turtsii”,
Ekonomicheskoye Rozvitiye Rossii, Vol. 23, No. 7 (2016), pp. 31-37.
7 Ibid., p. 10.
8 Ibid., p. 11.
9 Idil Bilgic-Alpaslan et al, “Economic Implications of Russia’s Sanctions against Turkey”,
European Bank for Reconstruction and Development, at http://www.ebrd.com/news/2015/
economic-implications-of-russias-sanctions-against-turkey.html (last visited 7
December 2017).
10 Emre Erşen, “Evaluating the Fighter Jet Crisis in Turkish-Russian Relations”, Insight
Turkey, Vol. 19, No. 4 (2017), p. 92.
11 For a similar approach, see Dimitris Tsarouhas, “e Political Economy of Greek-
Turkish Relations”, Southeast European and Black Sea Studies, Vol. 9, No. 1-2 (2009), pp.
39-57.
12 Çelikpala, “‘Rusya Gazı Keser Mi?’” p. 222.
13 Gareth Winrow, “Turkey and Russia: e Importance of Energy Ties”, Insight Turkey,
Vol. 19, No. 1 (2017), p. 18.
Seçkin Köstem
30
14 Volkan Ş. Ediger and Duygu Durmaz, “Energy in Turkey and Russia’s Roller-Coaster
Relationship”, Insight Turkey, Vol. 19, No. 1 (2017), p. 139.
15 Vladimir Likhachev, “State and Prospects of Russia-Turkey Energy Relations”, in
New Stage of Russia-Turkey Economic Relations, Moscow, Russian International Aairs
Council, 2016, p.11.
16 Agnia Grigas, e New Geopolitics of Natural Gas, Cambridge, Massachusetts, 2016, pp.
160-161.
17 Ole Gunnar Austvik and Gülmira Rzayeva, “Turkey in the Geopolitics of Energy”,
Energy Policy, Vol. 107 (2017), p. 539.
18 Nicholas Gvosdev, “2019 Could be a Very Bad Year for Ukraine”, e National Interest,
2 October 2017.
19 Ediger and Durmaz, “Energy in Turkey and Russia’s Roller-Coaster Relationship”, p.
151.
20 Volkan Özdemir, “Turkish Stream: Strategy Uniting Ankara and Moscow”, Russian
International Aairs Council, at http://russiancouncil.ru/en/analytics-and-comments/
analytics/turetskiy-potok-obedinyaya-ankaru-i-moskvu (last visited 6 December 2017).
21 For a discussion on potential scenarios for the future of the project, see Volkan Özdemir,
“Türk Akımı Gaz Boru Hattı: Mavi Akım mı, Rus Tanap’ı mı?”, Eppen, at http://eppen.
org/index.php?sayfa=Yorumlar&link=&makale=232 (last visited 6 December 2017).
22 “Delivery Statistics”, Gazprom, at http://www.gazpromexport.ru/en/statistics (last visited
27 November 2017). Turkey is followed by Italy, the United Kingdom and Poland.
23 Çelikpala, “‘Rusya Gazı Keser Mi?’”, p. 218.
24 Özdemir, “Turkish Stream”.
25 Jerey Manko and Jonathan Hillman, “Russia Seeks to Close Ukraine’s Window to
the West”, Financial Times, 6 September 2017.
26 Likhachev, “State and Prospects of Russia-Turkey Energy Relations”, p. 12.
27 Author’s calculation based on data from the Central Bank of Russia and the Turkish
Statistical Institute.
28 Zachary Elkins, Andrew T. Guzman and Beth A. Simmons, “Competing for Capital:
e Diusion of Bilateral Investment Treaties”, International Organization, Vol. 60, No.
4 (2006), pp. 811-846. On Turkish transnational companies, see Caner Bakır, Dünyayla İş
Yapanlar: Küreselleşme Sürecinde Türk Çokulusluları, İstanbul, Koç Üniversitesi Yayınları,
2016.
e Political Economy of Turkish-Russian Relations: Dynamics of Asymmetric Interdependence
31
29 Bakır, Dünyayla İş Yapanlar, p. 41.
30 “FDI Stocks”, OECD, at https://data.oecd.org/fdi/fdi-stocks.htm#indicator-chart (last
visited 1 December 2017).
31 “FDI Flows”, OECD, at https://data.oecd.org/fdi/fdi-ows.htm (last visited 1 December
2017).
32 “Turkish Investment in Russian Economy Amounts to $10 Billion”, Sputnik International,
at https://sputniknews.com/business/201708181056576740-turkey-russia-investments
(last visited November 21, 2017).
33 Öniş and Yılmaz, “Turkey and Russia in A Shifting Global Order”, p. 75.
34 Bakır, Dünyayla İş Yapanlar, pp. 66-67. Among the CIS, Azerbaijan, Ukraine and
Kazakhstan followed Russia in terms of the total number and value of Turkish greeneld
investments in the same period.
35 Ibid, p. 81.
36 Öniş and Yılmaz, “Turkey and Russia in A Shifting Global Order”, p. 78.
37 “Operations”, Anadolu Efes, at http://www.anadoluefes.com/index.php?gdil=in&gsayfa=
op&galtsayfa=operasyonlardetay&gicsayfa=rusya (last visited 30 November 2017).
38 “Şişecam’dan Tataristan’a 310 Milyon Dolarlık Yatırım”, Şişecam, at http://www.sisecam.
com.tr/tr/basin-odasi/basin-bultenleri/ssiecamdan_tataristana%20_yatirim (last visited
30 November 2017).
39 “MMK Port”, MMK Metalurji, at http://mmkturkey.com.tr/en/?page_id=68 (last visited
21 November 2017).
40 “Russia’s Sberbank ‘Ready Support Big Projects in Turkey,’” Hürriyet Daily News, 25
October 2012.
41 Author’s calculations based on data presented in the gures.
42 “RDIF, Türkiye Wealth Fund Create Russia-Turkey Investment Fund”, Russian Direct
Investment Fund, https://rdif.ru/Eng_fullNews/2310 (last visited 1 December 2017).
43 Emre Erşen, “e Transatlantic Dimension of Turkey’s Strategic Rapprochement with
Russia: e Turkish Perspective”, in Sasha Toperich and Aylin Ünver Noi (eds.), Turkey
and Transatlantic Relations, Washington, DC, Center for Transatlantic Relations, 2017,
pp. 203-216.
44 is calculation in this section is based on trade data that the author accessed from the
Turkish Statistical Institute’s website. For details please see, “Dış Ticaret İstatistikleri”,
Türkiye İstatistik Kurumu, at http://www.tuik.gov.tr/PreTablo.do?alt_id=1046 (last
visited 7 November 2017).
Seçkin Köstem
32
45 For a detailed account of the eects of the crisis on the global political economy, see Eric
Helleiner, e Status Quo Crisis, New York, Oxford University Press, 2014.
46 Data accessed through the World Bank; for Turkey see https://data.worldbank.org/
indicator/NY.GDP.MKTP.KD.ZG?end=2016&locations=TR&start=1993. For Russia
see https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2016&locatio
ns=RU&start=1990&view=chart (last visited 26 November 2017).
47 Quoted in “Turkey Hopeful of Boosting Exports to Russia Amid Ban on Western
Products”, Hurriyet Daily News, 8 August 2014.
48 Juliet Johnson and David Woodru, “Currency Crises in Post-Soviet Russia”, Russian
Review, Vol. 76, Issue 4 (2017), p. 630.
49 Richard Connolly and Philip Hanson, “Import Substitution and Economic Sovereignty
in Russia”, Chatham House Russia and Eurasia Program Research Paper, June 2016.
50 Neil Buckley, “Russian Agricultural Sector Flourishes amid Sanctions”, e Financial
Times, 19 August 2017.
51 Keohane and Nye, Power and Interdependence, pp. 20-24.
52 Öniş and Yılmaz, “Turkey and Russia in A Shifting Global Order”, p. 80.
53 Tsarouhas, “e Political Economy of Greek-Turkish Relations”, p. 52.
54 Ibid., p. 88.
55 Emre Erşen, “2000’li Yıllarda Türkiye-Rusya İlişkileri: Kompartımanlaştırma
Stratejisinin Sorunları”, in Özcan, Balta and Beşgül (eds.), Türkiye ve Rusya İlişkilerinde
Değişen Dinamikler: Kuşku ile Komşuluk, Fatih, İstanbul, İletişim Yayınları, 2017, pp.
147-161.
