Turkey welcomes Russian oligarchy money – but it is risky for its economy

Eclipse, the personal luxury yacht of Russian billionaire Roman Abramovich, anchored at the port of Cruz in the Marmaris district of the Mughals of Turkey on March 23, 2022.

Anadolu Agency | Anadolu Agency | Getty Images

Russian Oligarch Resources is looking for a new home and Turkey is fast establishing itself as a welcome host.

Turkish Foreign Minister Mevlুতt Cavusoglu told CNBC on Saturday that he would welcome Russian oligarchs into the country as both tourists and investors, as long as their business transactions comply with international law.

It comes a day after President Recep Tayyip Erdogan said “some capitalist groups” could “park their facilities with us”, which was seen as a direct reference to the recent arrival of a number of Russian-owned luxury properties in Turkey, including two luxury ones. Yacht and a private jet of billionaire Roman Abramovich.

The comments sparked speculation that Turkey – a non-EU country but a NATO member – could actively encourage blacklisted billionaires to invest as it seeks to shore up its troubled economy. Reuters reports that already rich Russians are actively seeking investment there.

But any potential gain for a country with a delicate balance between Russia and the West could be short-sighted.

Daphne Arslan, a senior director at Turkey’s Atlantic Council and a former economist at the US embassy in Ankara, told CNBC that “attracting Russian money could hurt Turkey in the long run.”

A fine balance hit

Turkey wants to follow a fine line in the ongoing war in Ukraine.

While sharply criticizing Moscow’s unprovoked aggression, it has stopped implementing sanctions imposed by the United States, the EU, the United Kingdom and others, saying it opposes them in principle.

Instead, it has taken on the role of a neutral mediator, facilitating peace talks between Russia and Ukraine. Talks in Istanbul on Tuesday raised hopes of a breakthrough after Moscow agreed to reduce military strikes on Kyiv and Chernihiv, when Ukrainian negotiators offered to take a neutral position in exchange for security guarantees.

If they park their yacht, that’s fine. However, Ankara will be very careful about the basis of the sanctions imposed by Turkey.

Emre Packer

Director of Eurasia Group and Turkey expert

Turkey’s position of nominal neutrality is largely due to its close economic and diplomatic ties with Russia, particularly in relation to energy, defense, trade and tourism. As such, Western allies have not pressured Turkey to join the embargo, nor are they likely to be punished for not doing so.

This makes it a legitimate outpost for the property of authorized Russians. Indeed, the influx of foreign investment and luxurious assets could be a boon for the troubled Turkish economy, which plunged into crisis mode last September as unconventional interest rate cuts have already pushed inflation higher.

However, according to Emre Peker, director of the Eurasia Group, a political risk adviser, and a Turkish expert, Western tolerance could decline if Turkey starts actively requesting approved assets.

“If they park their yachts, that’s fine,” Pecker said. “However, Ankara will be very aware of the basis of the sanctions imposed by Turkey and will be vigilant in preventing it.”

The Turkish embassy in London did not respond to CNBC’s request for comment.

A shaky economy

Given the war and the consequent pressure that Russia’s sanctions have already placed on its economy, Turkey could hardly hit with minor sanctions.

Last month, inflation reached a 20-year high of 54.4% amid a lira crash and rising commodity prices. Data that fully reflect the effects of the war have not yet been released.

“Russia’s invasion of Ukraine is making Turkey’s economic situation even more precarious,” Peker said.

“Things are clear,” he continued. “Higher inflationary pressures are destabilizing the Turkish economy. Sanctions will reduce or stop tourism from Russia and Ukraine, accounting for about one-third of domestic tourism. And it will affect Turkish investment in Ukraine and Russia.”

Meanwhile, Erdogan is keen to maintain Turkey’s reputation as an independent mediator in the ongoing conflict, seeking support from both sides at home and abroad ahead of the 2023 elections.

“Erdogan is desperate for next year’s election,” Timothy Ash, a senior emerging market strategist at Bluebe Asset Management, told CNBC.

On Tuesday, 17 October 2017, an advertisement of Starbucks was seen on the motorway near Istanbul.

Nurfoto | Getty Images

Nevertheless, there is an opportunity for Turkey to boost its economy and to benefit from the movement of resources from Russia without political or economic outrage.

According to Arslan of the Atlantic Council, this includes attracting investment from some of the 450 Western brands that have so far withdrawn from Russia.

“If done properly, I think it could be a huge opportunity for Turkey, not only in line with its Western allies, but also to attract potential investment from foreign companies,” he said, noting the similarities between Russian and Turkish geography and production lines. Said. Other factors.

In fact, Erdogan said last week that Turkey’s “doors are open” for companies seeking to relocate their businesses outside Russia.

“Not just American companies, but many brands and groups from around the world are leaving Russia. Of course, our doors are open to those who come to our country,” he said.

Leave a Reply

Your email address will not be published.