Category: Iran

ANKARA: Iranian President Hassan Rouhani’s upcoming visit to Turkey next Monday is expected to lay a foundation for the future recovery of bilateral trade and economic cooperation that withered substantially last year.

Trade volume between Turkey and Iran was 21.9 billion U.S. dollars in 2012. It dropped to 14.6 billion dollars a year later, a decline of 33 percent. And the downward trend continued throughout the first four months of this year. “The huge distortion in the trade volume partially came from gold-for-gas scheme through which Iran, pressured under the unilateral financial sanctions by Western powers, was purchasing lots of gold from Turkey to circumvent sanctions,” Mesut Cevikalp, Ankara-based analyst told Xinhua.

“What we see now is the return of trade volume figures to a more realistic level which is still short of what we should see given the size of economies of both countries,” he added. Previously, both sides announced that they agreed to bring the annual two-way trade volume up to 30 billion dollars in 2015. Though the ambitious target seems unlikely against the backdrop of sharp trade regress, Rouhani’s maiden Turkey visit, which were delayed several times since taking office last summer, may provide a breakthrough in boosting their economic ties.

According to Turkish media reports, both sides are expected to convene their first High-Level Strategic Cooperation Council during the visit. The Council is a kind of inter-governmental conference, which is participated by cabinet ministers and hosted by heads of governments, so as to fast-track talks, and cut bureaucratic red- tape. A high-level delegation is going to accompany the Iranian leader, whose members includes several ministers. Rouhani will meet both Turkish President Abdullah Gul and Prime Minister Recep Tayyip Erdogan during his tour.

In Tehran this January, Erdogan and Rouhani witnessed the signing of a preferential trade agreement finally reached between the two sides after years of talks. Several agreements on trade, culture, tourism and education are expected to be inked during the Iranian president’s visit, according to some Turkish media reports. Rouhani’s visit will be first official state visit to Ankara since then President Hashemi Rafsanjani visited Turkey in 1996. Former President Mahmoud Ahmadinejad only visited Istanbul twice. One was a working visit in 2008, while the other was because of his participation of an international conference in 2009.

Chief among the disputed issues between the two countries is the pricing of natural gas Turkey imports from Iran. In 2012, Ankara took Tehran to an international court of arbitration over prices and quality of imported natural gas. Turkey later won the arbitration. Much of the problem in the gas trade between Tehran and Ankara derives from a “take or pay” condition that requires Turkey to import pre-determined amounts of natural gas, which is 10 billion cubic meters per year, according to a gas deal signed in August, 1996 with a 25-years-validity.

Turkish Energy and Natural Resources Minister Taner Yildiz recently said his country will most likely receive more than 2 billion dollars from the lawsuit filed against Iran over gas pricing. The pricing issue is expected to come up during a discussion between Rohani and Erdogan.

via Iran president’s maiden Turkey visit to benefit declining trade cooperation.

Turkish Prime Minister Erdoğan’s visit to Iran last month symbolized a pivot toward Tehran and a shift in Ankara’s Middle East foreign policy. Declaring a desire to stand “shoulder to shoulder” with Iran in combating terrorism, and driven by Turkey’s evolving policy toward Syria, Erdoğan’s trip highlighted Ankara and Tehran’s tendency to pursue mutual interests when their paths cross. This is significant in terms of its implications for the Syrian conflict and for the region’s landscape, as both countries have the ability to influence the course of future events throughout the Middle East.

History of Turkish-Iranian Ties

Turkish-Persian history was characterized by centuries of rivalry, which remains the case today as both powers seek to shape the Middle East consistent with their respective visions. The Turkish Republic oriented itself toward the West (and away from the Middle East) throughout the 20th century; Iran was therefore not a central focus of Turkey’s Cold War foreign policy. However, the Iranian revolution of 1979 did create tension, as Turkey’s ruling secular elite viewed Iran’s post-revolutionary regime as a menace. This perception was in part fueled by Ankara’s belief that Tehran sponsored terrorist groups in Turkey with the intention of exporting the Islamic revolution to neighboring countries. In turn, Iran’s post-1979 political order viewed Turkey as a threat to Iran’s post-revolutionary objectives, given its membership in NATO and secular ideology.

As Western powers and Sunni Arab states united behind Saddam Hussein during the Iran-Iraq war, Iran had to pick its battles conservatively, therefore Tehran did not pursue a confrontational policy toward Turkey. At the same time, Turkey (which viewed the former Soviet Union and Iraq as graver threats than Iran) maintained a neutral position during the eight year war. This enabled both countries to preserve the status of their relationship and created options for each toward the other in the future.

Following the Gulf War relations began to thaw as Ankara and Tehran pursued cooperative measures to address the ‘Kurdish question’, which threatened both states’ territorial integrity. Bilateral relations blossomed after Turkey’s Justice and Development Party (AKP) rose to power in 2002. Iran welcomed the rise of an Islamist order in Turkey that stressed the importance of improving Turkey’s relations with its Middle Eastern neighbors. Over the past decade Turkish demand for Iran’s energy resources and Iran’s desire for reliable trading partners in light of the imposition of Western sanctions motivated the two states to enhance bilateral economic and business relations. Between 2000 and 2011 bilateral trade increased from $1 billion to $16 billion, and between 2002 and 2011 the number of Iranian firms based in Turkey increased from just over 300 to more than 2,000.

Despite this, regional politics limited the extent to which the rapprochement could develop. For example, as Erdoğan evoked the Palestinian cause in various corners of the Arab world, Tehran viewed this as a threat to Iran’s role as the main state sponsor of anti-Israel movements (such as Hezbollah, Hamas and Palestinian Islamic Jihad). Since then Turkey has been jockeying for influence in the region and Iran has continued to perceive this as a threat to its own influence.

The Impact of the Syrian Crisis on Bilateral Relations

The Syrian conflict brought unprecedented tension to the Turkish-Iranian relationship. Following its commencement in 2011, Turkey assumed that Bashar al-Assad would suffer a fate similar to that of Zine El Abidine Ben Ali, Hosni Mubarak and Moammar Gaddafi. Ankara soon abandoned efforts to broker a negotiated settlement between the Syrian government and the Muslim Brotherhood-dominated opposition, and by late 2011, Turkey aggressively sponsored the armed rebellion. Viewing Assad’s ouster as inevitable, Turkey tried to establish itself as a post-Assad Syria’s closest ally.

Syria has been Iran’s closest Middle Eastern ally since the Iranian revolution (Syria being the only Arab state to support Iran in the Iran-Iraq war). The Iran-Syria alliance has largely influenced the regional landscape ever since. Thus, Turkey and Iran became opposing stakeholders in Syria once Turkey decisively sided with anti-government forces. In recent years, Iranian officials have accused Turkey of sponsoring Salafist jihadist currents in Syria while Turkish officials have maintained that the Kurdistan Workers’ Party (PKK) receives support from Iran. At Davos last month, Turkey and Iran’s foreigner ministers exchanged swipes at each other about the Syrian crisis’ sectarian dimensions.

Apart from generating approximately 600,000 Syrian refugees in Turkey, enduring bombings and inflamed sectarian tension within its own Alawite/Alevi communities, the most damaging effect of the Syrian crisis on Turkey has been its demonstration of the limits of Turkish power in the Middle East. Prior to the Arab Awakening, the ‘Turkish model’ was hailed across the region as a prototype for blending moderate Islamic politics in a democratic framework. Numerous polls found that Erdoğan was the most popular political leader on the Arab street. But his anti-Assad stance was maintained long after it became clear that Assad was not going anywhere, which prompted many in the region to perceive the AKP as a pan-Sunni Islamist force intent on empowering the Muslim Brotherhood. As the Syrian conflict became a regional crisis, the AKP’s “zero problems with neighbors” approach to foreign policy lay in tatters.

Ankara’s evolving Syria strategy has become more focused on the economic and security threats posed by continued conflict in Syria. Turkey must address the menace posed by foreign Salafist jihadist militants that have established a presence on both sides of the Turkish-Syrian border, and the ongoing financial burden of meeting the Syrian refugees’ needs in Turkey. Within this context, Turkey has an interest in pursuing more cooperative relations with Iran, which shares its concerns about al-Qaeda’s footprint in Syria and other corners of the Arab world, while supporting international efforts to negotiate peace in Syria.

Regardless of how the conflict between the Assad regime and its enemies unfolds, it is likely that al-Qaeda-linked groups will maintain a presence in areas of Syria, including villages situated several miles south of the Turkish-Syrian border. Recent developments in western Iraq also indicate that Anbar province may become the new hub for such al-Qaeda-linked militias, as the Assad regime maintains an upper-hand in Syria’s bloody stalemate. Either way, with a growing al-Qaeda influence across the Levant, Turkey and Iran have every reason to continue their effort to enhance a security partnership as economic ties deepen.

Turbulence Rekindles an Old Friendship

Turkey now looks to Iran as a partner that can help Ankara mitigate the risks posed by the Syrian crisis, despite their divergent political aims in the conflict. This cooperative dynamic was underscored by Turkey’s insistence that Iran participate in Geneva II, despite opposition from other governments and elements within the Syrian rebellion.

Economic factors unrelated to Syria are also driving this realignment. Erdoğan traveled to Iran with his ministers for economy, energy and development in the hope of pursuing lucrative contracts in the aftermath of sanctions being loosened on Iran. Tehran expects bilateral trade to increase from $20 to $30 billion next year. Ankara also views the potential opening of Iran to the West as a strategic opportunity to reduce the impact of Turkey’s own economic challenges, which threaten to reduce the AKP’s grip on power in an election year.

The extent to which the two states can re-establish a deep partnership will remain limited by NATO’s military platform in Turkey and other regional issues where Ankara and Tehran’s interests diverge. The ultimate question will be whether the two countries’ common ground will outweigh their areas of disagreement, and to what extent other players in the region — such as Israel and Saudi Arabia — will influence the future of Turkish-Iranian relations.

In the longer term Tehran knows that Turkey will play a key role in building potential bridges between Iran and the West. Ankara knows that if it seeks greater influence within all corners of the Arab world, including Shia populations, a cordial relationship with Iran is important. Additionally, as a resource poor country, Turkey will continue to value an energy partnership with Iran. Thus, while the regional landscape remains complex and in motion, Turkey and Iran have more to gain than lose by continuing to build stronger ties.

Daniel Wagner is CEO of Country Risk Solutions, Senior Advisor with Gnarus Advisors, and author of the book “Managing Country Risk”. Giorgio Cafiero is a research analyst with CRS based in Washington.

Reprinted with permission from Eurasia Review.