What does Russia-Ukraine crisis mean for Turkey's economy?

* Photo: raillynews.com (Antalya Airport, which receives millions of tourists from Russia and Ukraine every year)

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Amid the recent escalation of tensions between Russia and Ukraine, the Turkish Lira (TRY) lost value by up to 1.5 percent against US Dollar (USD) yesterday (February 22), which has marked the highest loss of value in Turkey's currency since early January 2022. While the exchange rate of the USD saw 13.9025 TRY, it dropped to 13.85 TRY as of 4.25 pm.

On the other side, Ukraine and Russia are two important partners of Turkey in several fields such as tourism, agricultural products and weapon systems among many others. Then, how may the current tensions and a possible war between Ukraine and Russia affect the economic relations? What is the scope and volume of Turkey's economic relations with these two countries?

As reported by Bloomberg HT based on an analysis by its research team, Ukraine and Russia are major trade partners for Turkey and a potential war between the two may seriously affect Turkey's economy.

Turkey's role in their world trade

Russia's largest foreign trade partners are as follows based on trade volumes: China, Germany, the United States of America (USA), Belarus, the United Kingdom (UK), Turkey, Italy and Netherlands.

Russia's major exporting partners are China, the UK, Germany, Turkey and the USA while its major importing partners are China, Germany, the USA, Belarus and Italy. Turkey ranks 9th in the latter list.

Ukraine's major foreign trade partners are China, Russia, Germany, Poland and Turkey. While the largest exporting partners of the country are China, Russia, Poland, Turkey and Italy, its largest importing partners are China, Germany, Russia, Poland and the US.

What about their trade volume with Turkey?

The total foreign trade volume stands at 34.7 billion USD with Russia and 7.4 billion USD with Ukraine. By the end of 2021, Russia's share in Turkey's total exports was 2.6 percent while the share of Ukraine was 1.3 percent. Russia is the second largest importing partner of Turkey after China with 10.7 percent. Ukraine's share is 1.7 percent.

Turkey's export, import with Russia, Ukraine

According to the official statistics of the Turkish Statistical Institute (TurkStat), Russia and Ukraine were among the major exporting partners of Turkey in 2021. While Russia ranked 10th in this list with 5.8 billion USD, Ukraine ranked 20th with 2.9 billion USD.

Similarly, Russia and Ukraine are also among the top 20 importing partners of Turkey. While Russia ranks second with 29 billion USD in this list, Ukraine ranks 12th with 4.5 billion USD, according to TurkStat.

Agricultural products

In 2021, Turkey's total import of agricultural products from Russia amounted to 4.3 billion USD. While Turkey imported 6.7 million tons of wheat for 1.8 billion USD from Russia in 2021, Ukraine ranked second.

According to the data of Turkey's Ministry of Trade, 64.6 percent of the wheat import is from Russia while 13.4 percent is from Ukraine.

When the import of sunflower oil is considered, it is seen that Russia is on the top of the list. Again according to Turkey's Trade Ministry, in June 2021, Turkey imported 65.5 percent of sunflowers from Russia. This rate was 4.2 percent for Ukraine. Moreover, with 70 percent, Ukraine's exports to Turkey mostly consist of crops and metal products.

The effects on Turkey's tourism

When tourism is concerned, Russia and Ukraine have been among the countries from which Turkey has generated the most revenue since 2016. While 8 percent of tourists were from Russia and Ukraine in 2016, it has increased to 27 percent today. In 2021, 24.7 million foreign nationals visited Turkey: 2.06 million were from Ukraine and 4.7 million were from Russia.

Turkey is also expected to be an important destination for tourists from Russia and Ukraine in 2022 as well. In the past three years, Turkey has received over 20 million tourists from these two countries.

Construction and infrastructure

Turkey also has important ties with the two countries in construction and infrastructure. According to the Trade Ministry data, Russia ranks first with 21 percent when Turkey's construction activities abroad are considered. In 2020, this rate was over 35 percent.

The February report of the Contractors' Union has shown that Turkey's construction sector has undertaken 413 projects in 69 countries for a total of 30.7 billion USD, 11.2 billion USD of which is in Russia.

Defense industry

Moreover, Turkey has been cooperating with both Russia and Ukraine in the field of defense industry.

While Turkey has been taking steps about Russia's S-400 air defense systems, Ukraine has purchased armed drones from Turkey. (AEK/SD)