Seven months of fighting: how Russia and Turkey lost to the conflict

Seven months after Turkish air force shot down a Russian su-24 bomber and six months after the introduction of Russia’s economic sanctions against Turkish companies and citizens, Erdogan sent a message to Vladimir Putin in which he apologized. “I say sorry, <…> in the name of pain relief and severity of the damage, we are ready for any initiative”, — quotes the Kremlin fragment derived from Erdogan’s message to contact the representative of the Embassy of Turkey in Russia at the time of publication of the article failed).

understand how can be resolved the conflict between the two countries and what damage had been done to both parties.

The government is waiting for

A Russian bomber was shot down on the Turkish-Syrian border on 24 November 2015. Putin called the incident a “stab in the back” and repeatedly said that relations between countries established, Turkey should apologize and make amends. Cooperation with Turkish authorities was almost aborted, Putin did not meet with Erdogan at the end of November in Paris and did not respond to a request for telephone calls. In subsequent speeches, he accused the Turkish government of collaborating with ISIS (banned in Russia organization).

The message of Erdogan and Putin an apology made “in the Turkish manner, a compensation is not directly stated, that may leave space for interpretation, drew attention to the senior researcher of the IMEMO Victor Nadein-Raevskii. However, Turkish officials have claimed about the possible resumption of cooperation, which had been suspended since the end of last year, when Putin signed a decree dated November 28, has imposed economic and visa sanctions against Turkey. Among the measures included the ban on the recruitment of Turkish nationals from 1 January 2016, visas for entering Russia for Turkish citizens, an embargo on the Turkish imports, the ban on Charter air transportation between countries. The tour operators were ordered to “refrain” from sales of travel packages in Turkey.

The answer Turkey

For a long time, Turkey has not imposed retaliatory sanctions against Russia. But then the Turkish authorities demanded that from 1 June 2016, the drivers of Russian trucks crossing the border with Turkey, has received a visa. The head of the International transporters Association Fatih şener undersigned in an interview with Hurriyet explained this “principle of reciprocity”, implying the difficulties faced by Turkish drivers.

At the beginning of year it became known that Turkey is going to impose anti-dumping duties for Russian metallurgists. According to the newspaper “Kommersant”, during investigation on imports of hot-rolled steel (products in Turkey supply of NLMK, Severstal and MMK) and the Turkish Minister of economy has estimated the dumping margin “Severstal” at the level of 12.43%, NLMK is 9.42%, MMK — 13,66%. The results of the investigation Ankara is planning to legalize the duty to exporters of hot-rolled steel. But in April, the representative of NLMK reported that Russian steelmakers have convinced the Ministry to abandon the idea.

“Turkey and Russia have agreed without hesitation to take the necessary steps to improve bilateral relations,” — said Monday the representative of the Turkish President Ibrahim Kalin (quoted by Reuters). A source in Russian diplomatic circles said that after the apology, Erdogan can count on getting the defrost cooperation, as Ankara was waiting for these steps. The source did not rule out that after the apology “may come up on the gradual abolition of sanctions against Turkey.”

The opportunity to discuss the relations of Russia and Turkey might appear in Sochi July 1: there will pass session of Council of foreign Ministers of black sea economic cooperation Organization. CNN Turk reported that the Minister of foreign Affairs of Turkey Mevlut Cavusoglu plans to attend the meeting.

The government has not yet started the procedure for the lifting of sanctions. In the fall of 2015 the Russian authorities for the imposition of sanctions have used the Federal law No. 281-FZ “On special economic measures”, which was adopted in late 2006. It says that the decision to use restrictive measures in respect of a particular state and periods of validity of these measures taken by the President. And the government on the basis of the decision of the head of state sets the list of specific actions that a ban. The President takes a decision and the elimination of such measures “in case of elimination of the circumstances which warrant their application.” A proposal may be submitted to the President by the Council of Federation, the state Duma or the government.

A source in the financial-economic bloc of the government said that the recommendation to lift sanctions against Turkey, the government will prepare in the case that will be the order of Putin. “It is,” says the official familiar with the situation. A spokesman for Prime Minister Natalia Timakova said that the government is waiting for “political judgment and orders of the President.”

Last fall, the bloc economic measures “was” on the site of Ministry of economic development, said an official of that Department. The representative of the Ministry of economic development forwarded a request to the press-service of presidential administration.

How much was it to blockade

Go for an apology right now, Erdogan could make, firstly, the effect of Russian sanctions, and secondly, the deterioration of Turkey’s relations with the United States and the European Union due to the problem of refugees, says Nadein-Raevskii. In his opinion, the same reasons may explain the recent reconciliation between Turkey and Israel after six years of diplomatic confrontation.

Erdogan’s move was the result of pressure by the Turkish business, which suffered losses. This hospitality, and agricultural producers, agrees Professor, Department of world economy, HSE Alexei Portansky.

According to the Federal customs service (FCS), the trade turnover between Russia and Turkey in 2015 was $23.4 billion and for the first four months of 2016 (late April there are no statistics) it fell by more than $18 billion to $4.8 billion Exports of Russia to Turkey has decreased by 43%, import from Turkey — more than two times.

In December 2015, the Minister of economic development Alexei Ulyukayev in an interview to “Russia 24” predicted that the trade turnover between Russia and Turkey for the year will not exceed $18-19 billion, and in 2016 will drop at least $800 million Its first Deputy Alexey Likhachev said that the risks to the economy from the sanctions against Turkey will be minimized “proposed exemptions”, which can reduce the damage to the business: it is, for example, of a number of construction companies operating in Russia, which prohibition is not touched.

Turkish Deputy Prime Minister Mehmet Simsek in December said that the Russian sanctions may cost the Turkish economy about 0.3–0.4% of GDP, or $9 billion, the Russian Ambassador Andrei Karlov in an interview with TASS said that the damages may exceed $11 billion — the highest damage will incur the tourism and agricultural sector.

“The anti-sanctions were imposed in a minimum volume and touched in fact, only the supplies of some types of fruits and vegetables. Therefore, no long-term negative phenomena, it did not cause”, — says head of the laboratory of international trade Department of the Gaidar Institute Alexander Knobel. In this case, the deferred investment economic effect, and on activities already operating on the territory of Russia by the Turkish firms sanctions hardly affected, he insists: “So nothing serious from the point of view of the damage [the Russian economy], we did not detect”.

Fruits and vegetables replaced

Six months under embargo turned out to be a large number of seasonal vegetables, fruits and berries, such as Turkish tomatoes and cucumbers, onions and shallots, cauliflower and broccoli. The black list was also made of fresh apples, pears, apricots, peaches, nectarines, plums and sloes, fresh and dried citrus, grapes, strawberries.

The government ban on many of these products on the market was regarded as a radical measure, because Turkey for Russia was their main supplier. For example, according to the FCS at the end of 2015, the share of Turkey accounted for almost 53% of total imports of tomatoes in Russia in money terms and 54% in natural terms. In 2015 from Turkey was delivered 292,8 thousand tons of tomatoes at $the 281.1 million, Turkey was the largest supplier of grapes, and every fifth Mandarin that entered the country, were grown in Turkey.

In the economic monitoring of the Ministry of economic development dated June 27, States that the import of goods from Turkey, prohibited to be imported since early this year, for the first four months of the year compared to the same period last year decreased by $274,6 million — in fact, there was a “reset supplies”. The largest decline was recorded in respect of fresh tomatoes ($159.1 million), mandarins ($42.6 million) and oranges ($29.3 million). However, Russian imports of goods from all countries in January—April 2016 decreased by 21.2%.

In mid-January the Director General of the Agency FruitNews Irina Koziy, called the ban on Turkish tomatoes one of the most critical for the Russian consumers, which decided the government.

Then interviewed six of the major grocery retailers in Russia, which cover more than 20% of the retail market: by the time almost all of them managed to replace the Turkish supply of fruit and vegetables. The turnover of these companies, the share of Turkish products was reduced to 1-3%. The largest Russian retailer “Magnit” has replaced the Turkish products are mainly imports from Morocco, Armenia and Azerbaijan, said chief financial officer Khachatur Pombukhchan.

The probability of return of Turkish product head of the Association of retail companies (akort) Ilya Lomakin-Rumyantsev did not comment, saying only that the industry will operate in accordance with the government decisions. “There is no shortage in the prohibited categories is not” — he added.

A source in the management network, which is in the top 5 retailers, said that although the company switched to suppliers from other countries, it will be interesting to the Turkish proposal. “The more open markets, the greater flexibility, in terms of price and quality. Turkish supplies was always interesting to retailers because those countries that have replaced these products were often the compromise solution,” — said the source.

Tourism and airlines in the red

At the time of the imposition of sanctions, Turkey was one of the most popular destinations of outbound tourism: according to Rostourism, in the course of 2015, it was visited by 3.5 million Russians. More just traveled to Abkhazia to 3.8 million people.

Statistics for the year 2016, the office does not, but, as was estimated in February chief editor of the specialized portal Dmitry Danilenko, Turkey because of the sanctions could lose about 75% of Russian tourist flow, because the majority of travelers used the services of tour operators. For example, the turnover of large tour operator company “Pegas Touristik” — Turkey accounted for about 70% of sales. According to General Director of “Pegas Touristik” Anna Podgornaya, partially replaced Turkey Cyprus, Greece and Tunisia.

But the ratio “price-quality” Turkey can not be replaced, said the press Secretary of the Russian Union of travel industry Irina Tyurina. “While except the hope we have there is no news,” she commented, the assumption that reconciliation of Russia and Turkey.

The first flights it is possible to develop for 10-14 days, says Turina, and a full Charter product to offer you for the month. “Of course, two months of the season have already passed, and the remaining many Russians have already purchased tours, and no one will accept cancellations, therefore full flow can not speak”, — the expert believes. But she is convinced that if the direction is reopened, it will quickly return its position.

The representative of the Federal tourism Agency Svetlana Sergeeva said that before the official orders and decrees, the Agency does not comment on the situation with Turkey. “But, as we have said earlier, to begin to restore the tourist flow is technically possible within a month,” she said.

Sanctions against Turkey a serious blow and Charter carriers, says one of the participants of the airline industry: some of these companies in Turkey and Egypt (flying in this country is completely prohibited from November 6, after the crash of the Russian airliner over the Sinai A321) accounted for 90% of all flights. According to estimates of the Director of the Agency Cyril Faminskii, the loss of Charter airlines in the first half of the summer season because of the ban of flights to Turkey will amount to at least RUB 15 billion.

But Charter airlines was a time in response to the commercial Director “the Ural airlines” (Turkey accounted for about 10% of all flights) Kirill Skuratov: since the ban was introduced in the winter, the company managed to reorient themselves to other directions; for “Ural airlines” they were Crimea and Sochi.

Tour operator “Anex tour”, the main partner of Charter carrier Air Azur, even in the winter quickly refocused route network in Thailand, Goa and Sri Lanka, says a representative of the airline. And in the summer the replacement of Turkey Spain, Bulgaria, Tunisia and Greece. All 14 aircraft Air Azur is reserved for these purposes until October. Previously, Turkey had 30-35% of the airline. The rest of the season there are no available flights “Ural airlines”, says Skuratov.

Meanwhile, there are still vacationers who do not use early booking, said a representative of Azur Air. They are most likely interested in Turkey, if the direction will be open, she said: “Everything will depend on the mobility of tour operators”. Even if in the near future the Russian tour operators and would allow the sale of tours to Turkey, it is likely that the 2016 season will be very weak, recognizes faminsky of According to him, the operators need at least two to three weeks to form sentences, organize Charter flights and bring them to market. “In the best case will be able to capture August—September,” he says.

At major air carriers prohibition of charters not affected. For example, “Aeroflot” as it was performed, and operates regular flights to Turkey, assured the representative of the company. Between the two countries now also fly Turkish Airlines and Pegasus. Aeroflot flies twice daily to Istanbul and once a day in Antalya. Assessment all three companies collectively do together to Turkey more than 50 flights per week.

The representative of Federal air transport Agency declined to comment.

The return of the builders

In December 2015, the government has developed the so-called white list of Turkish builders, who were allowed to continue work in Russia until the completion of current contracts. The list includes such large builders, as Enka, previously reconstructed building of the state Duma, Renaissance Construction, built in Saint-Petersburg office of “Gazprom” and Odak Group — contractor for the construction of the mosque Kul-Sharif in Kazan. As wrote “Kommersant”, the total turnover of the Turkish real estate developers in Russia reached at the time was 50 billion rubles. per year.

According to partner Goltsblat BLP Vitaly Mozharovsky, a possible return of the Turkish construction companies on the Russian market will not be a significant event. “In the six months that have passed since the dramatic events market in Russia, on the one hand, adapted to it, on the other — the volume of new construction decreased significantly,” explains Mozharovsky.

According to him, the Turkish construction companies in Russia were main contractors on the construction of the costly commercial property, which with the onset of the economic crisis suffered the most. In late April, managing partner of Colliers International Russia Nikolay Kazanskiy was estimated that in 2016 in the Moscow region will be commissioned 500 thousand square meters of office property, which is 215 sq m less than in 2015. If last year we opened 14 shopping centers total leasable area of 620 thousand square meters, in this writing the only claimed 12 with a total area of 476 thousand sq. m.

If restrictions on Turkish companies will be removed, to active work in Russia, can return the company Enka, which is before the aggravation of diplomatic relations announced plans for the reconstruction of the belonging to her of shopping centers “Capitol”, said Mozharovsky.

Gaza is not an obstacle

Russia and Turkey traditionally associated energy interests. The deterioration of relations between the two countries had practically no impact on the gas trade, said a senior analyst, Vygon Consulting Maria Belova: Turkey is the second market for Gazprom after Germany. In 2015, Russia has put the Turkish side of 26.9 billion cubic meters (in 2014 was a little over — 27.3 billion cubic meters), or 55% of its needs, says Belov. For the first four months of 2016 the volume of deliveries amounted to 8.1 billion cubic meters, providing 49% of the needs.

Gas is supplied via Ukraine and the Blue stream gas pipeline, which runs under the Black sea. In December 2014, Gazprom and Turkish Botas signed a Memorandum to build a second gas pipeline across the Black sea “Turkish stream” (originally planned capacity of 63 billion cubic meters, then it was reduced by half), he had come to replace the project “South stream” blocked by the European Union. But this project did not last long and due to the deterioration of relations between Russia and Turkey was frozen.

“We have always been open to dialogue on “Turkish stream” open now”, — said the official representative of “Gazprom” Sergei Kupriyanov. For the past six months, negotiations are unlikely to be moved, but the project can be thawed at any time, I’m sure Belov.

Since the freezing of negotiations with Turkey contractor of the “South stream” Saipem has charged “to Gazprom” the claim for €759 million for the termination of the contract and the penalty. To avoid these claims, Russian state company Saipem offered to participate in the “Turkish stream”, but these plans remained on paper.

A major player in the Turkish fuel market is another Russian company — LUKOIL. In 2008 it acquired for $555 million network of local gas stations, she now has more than 600 gas stations and about 7% of the market of Turkey. In December 2015, the President of LUKOIL Vagit Alekperov said that the company has no plans to leave this business to the Turkish market focused its refineries in Bulgaria and Romania, and “acute political issues at the household level has not dropped”. On Monday, a company spokesman said plans had not changed.

Investments in Turkey have the power companies: “inter RAO” in 2012 acquired 90% stake in the gas power station Trakya Elektrik for $67.5 million, and a year later increased its share to 100%. In late may, during a teleconference with investors, the representative of “inter RAO” announced that Trakya Elektrik shows good results and the company has no plans to sell it. On Monday, the press service refused to comment.

“Daughter” of “Rosatom” “Atomstroyexport” in 2010, signed a contract on the construction of Turkey’s Akkuyu “nuclear power plant worth $20 billion it is Expected that this nuclear power station will consist of four reactors with capacity of 1,200 MW, the first reactor should be commissioned no later than 2022. But still, work is underway on obtaining licenses for the construction.

After the deterioration of relations, Erdogan said that the conflict will not affect the construction of nuclear power plants. Reuters sources in the energy Ministry of Turkey said that Ankara is considering other potential candidates for partnership on the project. Work on the preparation of documents to justify the licence continuing, said Monday the official representative of Rosatom Sergey Novikov.

With the participation of Sergey Titov, Polina Nikolskaya, Olga Volkova, Lyudmila Podobedova, Natalia Derbisheva and Denis Puzyreva