Moscow market closure strains Turkish ties
By Saban Kardas
As Russian Prime Minister Vladimir Putin prepares to visit Turkey in early
August, new items are being added to his agenda. In addition to energy
projects, bilateral trade issues, caused by recent problems encountered by
Turkish exporters, will occupy a large part of his itinerary. The Russian
government's crackdown on the Cherkizovsky market in Moscow in June added a new
dimension to Turkish-Russian trade issues.
Russian anti-smuggling teams raided the Cherkizovsky market, confiscating
thousands of containers for further examination, and shut it down. The charges
against the traders included violations of consumer safety and sanitation codes
as well as immigration rules. The incident cost countless jobs, many of whom
are
foreigners, including Chinese, Vietnamese and Turkish traders, and created
tension between Russia and China where most of the goods originated.
Why the Russian government decided to close Cherkizovsky market, after allowing
it to flourish for 20 years, remains unclear. Prior to the crackdown on the
market, Putin complained about the failure of the anti-smuggling mechanism, and
signaled his readiness to strengthen the fight against smuggling.
The Turkish press speculated that Putin used these allegations as a pretext to
punish the owner of the market, business mogul Telman Ismailov, for his recent
investments in Turkey. In May, Ismailov opened a luxurious hotel in the Turkish
city of Antalya, a frequent destination for Russian tourists, which is
estimated to yield US$1.4 billion annually for the local economy. Putin was
reportedly angered by the lavish opening party in the context of the global
financial crisis. Moreover, the Turkish press suggested that Ismailov's
decision to invest in Antalya was in defiance of Russian authorities' advice to
open the hotel in Sochi in Russia, which had further upset Putin.
In an interview to the Turkish press, Ismailov even expressed his desire to
obtain Turkish citizenship, which also negatively affected his reputation in
Russia. He did not officially file an application, but changes to the Turkish
citizenship code around the same time eased the conditions for citizenship on
exceptional grounds, such as for foreigners investing in Turkey.
However, the Turkish press initially preferred to present the market crackdown
as a measure against Ismailov, downplaying the broader context of the
developments in Russia. Last week, its coverage of the crisis took a new turn.
Several reports highlighted the "plight" of Turkish businessmen who were
affected in the midst of this crisis caused by Russia's internal competition.
Hundreds of Turkish firms are believed to sell textile, leather and other goods
by registering them and paying the necessary fees at this market first, before
they are further distributed within Russia. Turkish businessmen claimed that,
due to the ongoing Russian anti-smuggling investigation, they could not
retrieve their goods from storage facilities. Many criticized Russia's
treatment of the Turkish businessmen as unfair, and compared it to the "customs
crisis" between Ankara and Moscow, which has continued for more than one year.
Some Turkish businessmen, however, support these Russian actions and maintain
that this was long overdue. In their view, the smugglers in the market were
creating unfair competition for the traders who were operating legally.
The growing protests from the Turkish business community exerted pressure on
the Turkish government to protest officially to Russia. Turkish Energy Minister
Taner Yildiz, who is also the co-chair of the Russian-Turkish joint economic
council, described this development as an internal Russian affair, and stressed
that this issue was not raised in bilateral contacts with Russia. His Russian
counterpart, Igor Sechin visited Turkey last week to hold talks with Yildiz and
the Turkish Prime Minister Recep Tayyip Erdogan ahead of Putin's visit to
Turkey in early August.
Nonetheless, the State Minister responsible for Foreign Trade Zafer Caglayan
issued a written statement that described Russia as a major trading partner and
noted that the under-secretariat for foreign trade had formed a commission to
investigate the claims of Turkish businessmen and explore new marketplaces in
Moscow.
Although Caglayan recognized that the decision of the Russian authorities did
not directly target Turkey, given the volume of Turkish goods in the market, he
stressed that this did indirectly affect the country. However, the figures
released by Caglayan contradicted those which appeared in earlier press
reports. Whereas the Turkish press maintained that as many as 5,000 businesses
were affected by the market crackdown, Caglayan said that only 200 were owned
by Turks. Moreover, Caglayan noted that only 10% of the total goods sold in the
market were of Turkish origin.
Caglayan also signaled that he might raise this issue with Russian officials in
order to protect the rights of the Turkish businessmen in accordance with the
Russian and international rules. Moreover, he added that these problems and the
"customs issue" will be on the agenda when Putin visits Turkey next month.
A highly busy schedule awaits Putin in Turkey, most importantly over future
cooperation in energy projects. Despite Ankara's signing this month of a treaty
for the proposed Nabucco gas-pipeline, which the Kremlin has opposed as it
would provide an alternative route bypassing Russia for Caspian Sea gas fed to
Europe, Turkey is still pursuing joint investments with Russia in nuclear
power, and other gas transportation projects.
Turkish exports to Russia were damaged by the new customs regulations imposed
by Russia prior to the Georgian war in August 2008. Russia and Turkey reached a
deal in September 2008 to simplify customs procedures for Turkish goods, but
Ankara claimed that Moscow has not complied with the agreement. The problem was
not resolved during President Abdullah Gul's and Yildiz's visits to Moscow
earlier this year.
Although Russia was confirmed as Turkey's main trading partner, its reluctance
to resolve such issues remains a constant source of tension between both
countries. More importantly, the timing of those "commercial" crises provides
justification over the speculation that Russia is exploiting Turkey's economic
and energy dependence to punish Ankara for its political decisions.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
