Economy · August 6, 2022

Vladimir Putin and Recep Tayyip Erdoğan vow to deepen economic ties

Recep Tayyip Erdoğan and Vladimir Putin have pledged to deepen economic ties between their countries as Moscow seeks to soften the blow from Western sanctions imposed on the invasion of Ukraine.

After a four-hour meeting at Putin’s Sochi residence on Friday, the Russian and Turkish presidents issued a joint statement calling for them to increase their bilateral trade volumes and deepen their economic and energy ties.

Deputy Prime Minister Alexander Novak, Moscow’s top energy official, told reporters that Turkey had agreed to start paying for Russian gas in rubles, according to Interfax.

Putin and Erdoğan had further discussed the development of banking ties and deals in rubles and lira, he added.

Novak said the agreements “will take our trade and economic relations to a new level in virtually every area,” including transportation, industry, agriculture, tourism and information technology.

Although both leaders nodded to the tensions between them, including the conflict in Syria, the economic fallout from the war in Ukraine provided reasons for rapprochement.

Western sanctions have largely cut the Russian economy out of the global financial system and forced it to struggle to replace banned imported goods or to find markets for its energy exports.

Turkey suffers from a huge trade imbalance caused by the surge in global energy prices, themselves largely caused by how the Russian invasion has disrupted the markets. Ankara is looking for foreign capital to bridge the gap.

The United States and other Western allies are concerned about Erdoğan’s ambivalent stance on the invasion of Ukraine. The US Deputy Treasury Secretary met Turkish officials and Istanbul bankers in June to warn them not to become a conduit for the evasion of Russian sanctions.

The Sochi meeting comes when Ukrainian intelligence services recently shared with NATO countries a document they claim to have intercepted from Moscow that contained proposals for Turkish-Russian cooperation, according to a Ukrainian intelligence official and a Western diplomat. . The latter said he believed the document to be authentic.

The proposals include ways to help Russia evade sanctions with the help of Turkish banks and cooperation in other sectors, including energy and industry, the people said. The Washington Post was the first to report that Moscow was seeking Ankara’s help in circumventing Western sanctions. It is unclear whether NATO member Turkey will accept these proposals.

Putin and Erdoğan have previously suggested that countries could use their own currencies in trade. Such a move would allow Russia to avoid the US-denominated global oil market, while allowing Turkey to limit the damage to its dwindling foreign exchange reserves by paying for energy in Turkish lira.

Erdoğan attempted to carve out a mediator role between Ukraine and Russia. Ankara has provided Kiev with armed drones and has been instrumental in securing a deal with the United Nations to lift a Russian naval blockade and allow Ukraine to resume grain exports from its Black Sea ports.

But Turkey also refused to join Western sanctions against Moscow, threatened to veto Sweden and Finland’s NATO membership, and allowed ships carrying wheat and corn from Russian-occupied parts of Ukraine to deliver. their cargoes to Turkish ports.

Putin and Erdoğan said the wheat deal “must be implemented in full respect of his spirit and letter”, including permission to resume Russian exports of wheat and fertilizers that Moscow says have been hampered by sanctions.

The US and EU have never directly sanctioned Russian agriculture, but have released clarifications that effectively lifted restrictions on it last month in tandem with the agreement on Ukrainian Black Sea ports.