By ZIV HELLMAN
More than four billion dollars a year.
That was the figure that investors in the Tel Aviv Stock Exchange feared was about to evaporate on September 7 when Turkish Prime Minister Recep Tayyip Erdogan announced that Ankara was suspending trade ties between Turkey and Israel, and the predictable response was a sharp drop in share values.
The market recovered most of its losses when officials in Ankara issued a clarification later in the day, indicating that Erdogan’s intention was to freeze only direct defense industry contracts between the governments of the two countries, not put a stop to the entirety of civilian trade.
There appears to be little doubt, however, that the tensions between Israel and Turkey can only hamper economic ties. With Turkey having expelled Israel’s ambassador and all diplomats at the Embassy in Ankara above the second secretary level, Israelis traveling to Istanbul being singled out for harsh security measures, and Ankara hinting that more measures limiting bilateral contacts are in store for the future – Israeli businessmen are unlikely to place Turkey high on their lists of potential sites for trade expansion.
Prior to the explosion of official Turkish rage at Israel following the publication of the Palmer Commission’s report on the Mavi Marmara incident, Israeli-Turkish trade relations had been following a multi-year upward trajectory. The two countries attained $3.5 billion worth of economic interaction in 2010, up from $2.5 billion in 2009. The latest figures indicate that, despite more than a year of negative sentiments towards Israel in the Turkish public following the Mavi Marmara flotilla in May 2010, trade gained forward momentum in the past year: According to data collected by the Turkish Exporters Organization, $2.56 billion of trade took place between the countries in the first seven months of 2011, on track to reach $4.4 billion by the end of the year.
Businessmen from both countries have recognized economic complementarities for two decades and moved to exploit them. The Turkish-Israeli Free Trade Agreement, dating from 1996, only accelerated those ties. According to the Turkish Foreign Ministry, Israel’s main import items from Turkey are iron-steel products, mineral fuels, mineral oils, copper and copper wares. Turkey’s import items from Israel are in mineral oils, organic and inorganic chemical products and electronic machinery. Cross-border investments are also common. Israel’s Ofer Group has a significant shareholding in the Turkish Petroleum Refineries Corporation, for example, and carpet manufacturer Carmel Carpets has a controlling interest in Turkey’s carpet company Atlas Halı.
Meanwhile, Turkish construction firms have discovered that Israel can be a lucrative market, underscored by the contract signed last year under which Turkey’s Zorlu Holdings is to build four major electric power plants in Israel. And that is before taking into account the immense amount of Israeli tourism to Turkey, totaling 311,600 visitors in 2009. Package tours to Turkey from Tel Aviv were once touted as being cheaper than going to Eilat, but tourism is expected to be the industry that will suffer the greatest contraction as diplomatic relations go frosty.
From the Turkish perspective, cutting trade ties with Israel seems irrational. While the Turkish economy has been growing at a blistering pace of a reported 10 percent a year, the Ankara’s government deficit has ballooned to worrisome 9.5 percent. Its external debt has doubled in the past two years, and the unemployment rate is at 13%.
A period of world economic slowdown would appear to be a particularly inauspicious time to be contemplating restricting economic activity, especially given that Israel is one of the few countries with which Turkey has a trade surplus, with Turkey’s exports to Israel at $2 billion last year while it imported only $1.3 billion from Israel.
It is therefore not terribly surprising that the president of Turkish Exporters Organization, Mehmet Büyükeksi, issued a press statement in early September stating that “we should not mistake business ties for political relations.… These are two completely separate issues. We do not expect trade relations to worsen overnight.”
In parallel, the president of the Federation of Israeli Chambers of Commerce, Uriel Lynn, warned that a trade crisis with Turkey could cost hundreds of Israeli jobs.
By all indications, the business communities in both countries would prefer to let the political storms blow over their heads, while they quietly continue with business as usual. Whether or not that will be possible is, at this point, entirely in the hands of the decision makers in Ankara.
www.jpost.com, 17.10.2011
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