Will Closer Turkish-Russian Business Ties Let Putin Skirt Sanctions?

There is mounting alarm in Washington and among its allies that Turkey, despite its membership in NATO, could be helping Russia to evade the strict economic sanctions imposed by the West since it invaded Ukraine in February. If true, it could undercut Turkey’s standing as a reliable NATO partner and even at some point put Ankara at risk of being sanctioned. According to the German newspaper Tagesspiegel, Turkey’s dependence on Russia is growing and the Turkish president, Tayyip Erdogan, “does not want to hear about sanctions against Russia, on the contrary.”Ties between Mr. Erdogan and his Russian counterpart, Vladimir Putin, received a boost last Friday when the two met at Mr. Putin’s residence at Sochi, on the Black Sea coast. Subsequent to that meeting, the Financial Times reported that six Western officials expressed concerns about pledges the leaders made regarding expanding cooperation on trade and energy. Those worries will likely be amplified by Ukraine’s interception of a document from Moscow that, the FT reported, “outlined ways to help Russia evade sanctions through Turkish banks.”The motivation for doing so is mutual. Russia’s economy is straining under the weight of sanctions, capital flight, and the escalating cost of the war on Ukraine. But the picture is not a lot brighter in Turkey, where according to Bloomberg the inflation rate approached 80 percent in July and “has yet to peak.” The Financial Times seconds that, saying Turkey needs foreign capital to plug a gaping trade imbalance caused by soaring global energy prices. Of course, that market disruption was triggered in part by Russia’s invasion of Ukraine. Turkey has so far sat out the West’s sanctioning of Russia. That makes it easier, at least in theory, for Ankara to hammer out commercial arrangements with Moscow that would likely be deemed unsavory at best and illegal at worst if proposed by any other NATO member country. According to the TASS Russian press agency, Russia’s deputy prime minister, Alex Novak, said that while at Sochi, Messrs. Putin and Erdogan discussed gas deliveries to Turkey and agreed upon partial payment in rubles. “Supplies will be partly paid in Russian rubles then at the first stage,” Mr. Novak said, adding, “this is indeed the new stage, new opportunities, including for development of our monetary and financial relations.” Such a move would, according to a separate report in the Financial Times, have the effect of enabling Russia to avoid the U.S.-denominated global oil market. It is more than just oil that is at stake: There is also the matter of nuclear energy. Tagesspiegel, the German newspaper, reported that shortly before the meeting in Sochi, Moscow paid $5 billion to Turkey toward an eventual $20 billion for the construction of Turkey’s first nuclear power plant. The financing is being coordinated with Russian banks that have already been sanctioned by the West.In a region already on fire, Mr. Ergogan is playing politics both ways. His government is keen on reminding the West of its role last month in negotiating the UN deal to ease Russia’s naval blockade and allow grain exports to resume from Ukrainian seaports. At the same time, Ankara has welcomed grain shipments that commence from parts of Ukraine that are currently under illegal Russian occupation. Turkey’s trade volume with Germany is double that with Russia, Taggespiegel says, and that is unlikely to change much anytime soon. Still, at some point, Western frustration with Turkey’s commercial rapprochement with Moscow may evolve into something more substantial: sanctions on Turkey. The FT reported that the American deputy treasury secretary, Wally Adeyemo, warned Turkish officials and bankers in June against allowing illegal Russian remittances that would let the Kremlin dodge sanctions. The cozy pronouncements post-Sochi point to those messages falling on deaf, or at least demonstrably insincere, ears. As more Russian-Turkish economic incentives coalesce, could Washington actually slap Ankara with secondary sanctions that target violations beyond American jurisdiction? It could, but a more likely scenario is that, as one unnamed Western official told the FT, governments could ask firms to reduce or even cancel their dealings with Turkish companies. If there is any silver lining to this somewhat murky state of affairs, it is that Turkey’s motivation may have less to do with lasting strategic alignment with the Kremlin than with Mr. Erdogan’s political survival. As Greek newspaper Ta Nea reported, “the Turkish leadership expects cooperation with Russia “to provide a boost to get the Turkish economy moving again ahead of next June’s parliamentary and presidential elections.” How big of a boost, and how enduring it will be as an unpredictable war rages very close by, is something not even the wily Mr. Erdogan can profess to know.

Will Closer Turkish-Russian Business Ties Let Putin Skirt Sanctions?

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