Russia Minister of Foreign Affairs Sergei Lavrov stressed on Nov. 1 on the TV channel Rossiya-24 that Russia and China were at a high point in their relations, but if “allied relations imply a military alliance, then neither Russia nor China are planning to set up such an alliance.” Much like Lavrov, this statement aims to end speculation about the future of possible military cooperation between the two countries. The senior diplomat also summarized Russia's main current foreign policy objectives in his comments.
Russia’s foreign policy aims to maximize the country's economic and strategic benefits; pragmatism and opening the door for any country that wants to interact with Russia are the primary drivers of Moscow's approach. For this reason, Russia avoids creating military relations or alliances with any countries except for post-Soviet states. Moscow’s goals are to attract foreign investment, negotiate for the use of its national currency, and increase trade turnover with China.
Lavrov was speaking about Russia's view on China, but we can also use these priorities to evaluate the relations between Turkey and Russia. I claim that Turkey's primary assumptions about Russia, from the economy to the purchase of the S-400 defense missile system, are unrealistic, and Russia is far from an alternative for Turkey when compared to NATO and the West.
Turkey and Russia have seen a rapprochement in their relations since the Cold War. The 1990s were a transformative era for Russia’s foreign policies regarding Turkey, and in the 2000s, both sides cooperated and had stable economic relations with one another.
Bilateral trade between Turkey and Russia has increased significantly, from $4.5 billion in 2000 to $25 billion dollars in 2018. However, according to Turkish Statistical Institute (TÜİK) data, Russia imported $3.4 billion dollars worth of goods from Turkey in 2018 and sold $21.9 billion dollars worth of goods to Turkey. The latest trade figures indicate that Turkey's trade deficit against Russia is $18.5 billion dollars. Turkey’s trade deficit has increased by almost $2 billion dollars since 2017. These figures show that although both countries may aim to improve their trade relationship, Turkey's economic conditions cause Russia to benefit more than Turkey.
In addition to trade relations, it can be claimed that although Russia and Turkey signed a strategic partnership agreement, Foreign Direct Investment (FDI) data also signals that Russia and Turkey are not attractive partners for one another. Let’s look at why.
FDI is a significant indicator for measuring economic interaction between countries. According to the most recent numbers, the majority of FDI inflows to Turkey between 2010 and 2018 have originated from Europe, North America, and Gulf countries. Russia is ranked tenth with 4.1 percent of the share of FDI in Turkey, while the EU and U.S. make up over 50 percent. What about the Russian side of the equation? According to the Russian Central Bank, FDI inflows from EU countries to Russia were over half of the total FDI in Russia, while Turkey's was just 0.3 percent. These FDI figures show that Russia and Turkey do not have an attractive partnership, while the EU is vital for both of them.
Besides the trade imbalance and FDI problems, the intention of both countries to set up trade relations with their national currencies creates other significant problems for Turkey. This step is beneficial for Russia, but can we claim the same for Turkey? The Russian Finance Ministry signed a bilateral agreement with Turkey, and with that, the usage of ruble and lira in mutual trade is supposed to gradually increase.
The statistics for both countries when it comes to currency in trade lets us clarify the picture. Russian Central Bank figures demonstrate that, in regards to imports from Turkey to Russia in 2018, 31.8 percent were in rubles, 44.3 percent were in dollars, 22.2 percent were in euros, and 1.7 percent were in other currencies. On the other hand, in regards to Turkey's payment for imports from Russia, 81 percent were in dollars, 4 percent were in euros, 11.1 percent were in rubles, and .3 percent were in other currency. As Uğur Gürses asks in his column: where is the term Turkish lira in official data from the Russian Central Bank?
In this vein, we can also analyze how the sale of the Russian S-400 defense system strengthens Russia’s hand while posing problems for Turkey. Russia is the second-most prominent arms trader after the U.S. with 17 percent of the world arms market. While the U.S. market share increases year by year, Russia’s goes down. Making arms deals with new customers provides Russia an opportunity to increase its market share—and Turkey’s desire to buy the S-400 opens the door for this opportunity. Russia kills two birds with one stone by selling the S-400 to Ankara, as Moscow gains new customers while also causing strife between NATO countries.
On the other hand, Turkey has faced problems with its traditional allies. First, after urging all Turkish F-35 personnel, including 20 individuals assigned to the Joint Program Office, to leave, Washington removed Turkey from the F-35 joint strike fighter program. Turkey will lose its production work on the jet by March 2020. Secondly, with the delivery of the S-400, the U.S. plans to impose the Countering America's Adversaries Through Sanctions Act (CAATSA) on Turkey. The imposition of CAATSA will impact the economic, financial, and diplomatic relations of Turkey.
From trade imbalances to the usage of national currencies, Turkey needs to review its relations with Russia. Moreover, instead of using epic rhetoric within domestic politics and threatening its Western allies, Ankara should start to calculate the positive and negative sides of buying the S-400. If one considers the data and financial figures, the picture that emerges about relations with Russia may be different than Ankara’s current assumptions.