How Turkey is attracting Russian billions, bypassing Western sanctions

22 April, 08:17 PM
Russian dictator Vladimir Putin and Turkish President Recep Tayyip Erdogan meet in Russia in 2020 (Photo:Kremlin)

Russian dictator Vladimir Putin and Turkish President Recep Tayyip Erdogan meet in Russia in 2020 (Photo:Kremlin)

Despite Western sanctions, economic cooperation between Turkey and Russia continues. NV Business found examples of such cooperation, and looked into the reasons behind them.

Turkey has announced the creation of a new airline to transport Russian tourists to its resorts. It is already known that it will be called Southwind, and the fleet will consist of five aircraft. Moreover, the country plans to spend approximately $300 million to support Turkish tour operators based in Russia.

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Perhaps this is the most noticeable part of the interaction between the economies of Turkey and Russia. Last year, almost 4.7 million Russians visited Turkish resorts – the largest ever figure. So it’s not surprising that this Middle Eastern country wants to maintain this tourist flow. But it is very surprising now that Russia is waging full-scale war in Ukraine and the entire civilized world is imposing sanctions against the Russian economy.

It seems that Turkey, led by President Recep Tayyip Erdogan, wants to do more than just become a bridge between Russia and the civilized world. The Turks are not hiding their desire to gain benefits for their own economy at the expense of Russia, which has been in crisis for several years now.

But some analysts are already pointing to the story of the Turkish-Iranian businessman Reza Zarrab. In 2017, he admitted to helping Iran, which was under sanctions, to launder tens of billions of US dollars. The Turkish state-owned Halkbank was involved in these transactions. That is, Turkey has some experience in bypassing Western sanctions.

NV Business has found other examples of how, since the beginning of the war in Ukraine, Russian businesses and Russians have been escaping sanctions and their own economic crisis in quiet Turkish “harbors”.

1. Aviation

This is perhaps this is the most prominent sector of the Turkish economy that is continuing to cooperate with the Kremlin dictatorship. Now that almost all of Europe and the United States have closed their airspace to Russian aircraft, Istanbul remains the key air hub for Russian citizens. From there and from other airports in Turkey, the aircraft of the two largest Turkish carriers, Turkish Airlines and Pegasus Airlines, fly to Russia. The former recently resumed accepting payments in Russian rubles using a Mir bank card. The second began to fly to St. Petersburg.

Russian airlines do not operate flights to Turkey. They are afraid of the arrest and confiscation of the aircraft, which they brazenly stole from the lessors.

2. New business

After the West began to “tighten the screws” on the Russian economy, many Russians decided to conduct business activities outside their homeland. Among the most popular destinations are the UAE, Georgia and Turkey. In early April, Izzet Ekmekcibashi, the head of the Turkish-Russian Business Council (DEIK), said that over 1,000 new companies with 100% Russian capital were opened in Turkey in March.

For its part, Turkish business began to look closely at the Russian market. In particular, the media reported on the possibility of the work of the Turkish fast food chain Chitir Chicken instead of McDonalds. Clothing manufacturers from Turkey also intended to become more active.

Many Russian technology companies have taken their employees to this country. Among them are Yandex, Avito, Tinkoff Bank, etc. The number of Russians who have relocated at the initiative of the employer exceeds 1,000.

According to the Turkish newspaper Hurriyet, the total number of Russian citizens who moved to Turkey in the first three weeks of the war reached 14,000.

3. Real estate

The Wall Street Journal reported in early April that now six out of 10 apartments in Istanbul are being bought by Russians. It can be several apartments at a time, so that their total cost exceeds $250,000. Such an investment allows you to apply for Turkish citizenship. It seems that the Turks have already understood the scale of Russian demand, and that it is almost unlimited. Therefore, the country’s government decided to increase the amount of such an investment to $400,000.

It is noteworthy that until September 2018, in order to apply for citizenship, it was necessary to buy real estate worth $1 million. But due to the economic crisis in Turkey, the entry threshold was then significantly reduced.

4. Finance

The same WSJ reports that the Turkish banking system has already received billions of US dollars in deposits from Russian citizens through swap agreements. Local shops have begun to accept Russian payment cards Mir, cross-border transfers through the KoronaPay system are growing, and even street money changers are buying rubles.

5. Quiet harbor

Russian oligarchs and politicians have begun to transfer their yachts to Turkey. The first of these were Roman Abramovich (two yachts - Eclipse and Solaris) and Dmitry Medvedev, who is said to own the 74-meter vessel Universe.

Oleg Deripaska's yacht Clio entered the port of the Turkish city of Gocek on April 16.

This is all because the property of Russians against whom sanctions were imposed began to be confiscated en masse in European countries.

Why is this happening? Turkey has been suffering from an economic crisis for several years, connected with the populist actions of local authorities. That's why it needs investment.

Russia, in turn, is a long-standing business partner for the Turks. This concerns the supply of grain and sunflower oil, the construction of a nuclear power plant and the usual dependence on Russian energy. In particular, one of the largest players in the retail market of light petroleum products is Russia’s Lukoil.

The Turkish authorities openly declare their cooperation with Russia.

“So if one of the Russians wants to come to Turkey, he can come to Turkey, no problem... If one of the oligarchs wants to do business in Turkey, and if this business is legal and does not contradict international law, then I will consider it (granting the right to conduct business to such a Russian citizen),” Minister of Foreign Affairs of Turkey Mevlut Cavusoglu said at the end of March.

At the same time, Turkish business is afraid of being subject to Western sanctions due to cooperation with Russians.

Should Ukraine react to this? We also receive support from Turkey in the form of supplies of Bayraktar unmanned combat aerial vehicles, which have already become a legend in the Ukrainian-Russian war. Russian warships are not now allowed to pass through the Bosphorus to the Black Sea. And Turkish Airlines planes are sometimes the only way to escape from Russia for Ukrainians forcibly deported from the occupied cities and territories. In addition, Istanbul has become the venue for peace talks between Ukraine and Russia.

But the position of this country could be more active, as shown by the story of the citizens of Turkey, who since the beginning of March have been asking to be evacuated from Mariupol. In early April, the Turkish ambassador to Ukraine acknowledged that 25-30 of his fellow citizens remained in the city.

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