Turkey’s euphoria over Iran nuclear deal

July 17, 2015 8:47 AM (UTC+8)

 

While the Iran nuclear deal sparked optimism around the world, Turkey appears to be the one country where both the enthusiasm and expectations related to this new era with Iran are the highest.

Iran President Hassan Rouhani (left) meets Turkey President Recep Tayyip Erdogan in this file photo
Iran President Hassan Rouhani (left) greets Turkey President Recep Tayyip Erdogan in this file photo

The overall mood in Ankara is positive, and as evident in the remarks made by policy makers after the conclusion of the agreement between the P5+1 and Iran in Vienna, the deal is deemed first and foremost to be an economic opportunity of historic proportions, which will bring benefits for Turkey through increased trade, investments and energy flows.

There remain reservations about Iran’s possible intentions to increase its influence over the Middle East and establish some form of hegemony over the region’s affairs. However, for the Turkish government as well as the country’s business community, post-sanctions Iran means primarily a trading partner offering profound economic prospects.

It makes sense for Turkish policy makers to underscore the economic promises that the deal brings. In the period after the Arab uprisings with the entire Middle East sliding into sectarian conflicts, Turkey’s foreign policy towards the region has descended into incoherence and despair, which has cost the country dearly in terms of both eroding reputation and lost commercial markets.

Turkey needs to reformulate its Middle East policy, and the rational way to do so is by refraining from taking sides in sectarian divisions and playing different political actors against each other, while at the same time placing the emphasis on sustainable economic linkages over the long term.

If there is going to be a Turkish foreign policy reset in the Middle East, it will have to prioritize economic relations with neighboring countries, and the deal with Iran offers a window of opportunity in this respect because with Iraq and Syria in chaos, and relations with Egypt at an all-time low, it is Iran where the first bricks for such a new foreign policy approach can be laid.

Turkey’s keenness on economic prospects in post-deal Iran is remarkable. Several cabinet ministers have emphasized the possible positive impact of a normalized Iran on the regional economy and the direct gains that Turkey is likely to reap.

The trade volume between the two countries, which totaled $13.7 billion in 2014, is announced to be targeting $35 billion by the end of 2016. Turkey has a trade deficit with Iran, a $6 billion last year, which is related to imports of natural gas. Iran is Turkey’s second largest supplier of gas after Russia, providing 20 percent of the gas consumed within Turkey (Russia provides 57 percent).

More trade with Iran means more gas imports for Turkey in a sense. However, Turkey expects to have greater market access in this country and increase its export volume as well now that the sanctions are lifted. The preferential trade agreement signed between the two countries in 2014 will have a positive effect to that end, and Turkish companies are actively looking forward for the opportunities that arise in Iran.

To cite but a few examples, Istanbul Chamber of Industry reported on Iran’s large population and related opportunities in the consumer products sector; Istanbul Chamber of Trade is already preparing for the Expo Turkey in Iran that will be held in January next year; and the Association of Iranian Businessmen and Industrialists in Turkey is drawing Turkish companies’ attention to opportunities in mining, construction and tourism.

For many in Turkey, Iran after the sanctions may well be the new El Dorado.

This enthusiasm is not totally ungrounded, but the initial euphoria can easily turn sour depending on, first, how and to what extent the two countries’ political and economic interests will align in the near future, and second, how well Turkey can manage increasing competition in Iran.

To start with the first point, Ankara and Tehran have irreconcilable differences over the Syria issue, and a rapprochement does not seem likely in the near future. Despite these differences, the two countries have closely worked together in the economic realm, but whether this will still be the case is questionable.

Being freed from sanctions and becoming a ‘normal’ player in global markets, Iran has now less need for Turkey, which has over the past years helped Tehran to skirt international sanctions by swapping gold in exchange for the gas it has purchased.

David Goldman recently wrote in Asia Times about how “a resurgent Iran, confident in the acquiescence of the United States and flush with money, may turn Turkey into an enemy”. This is indeed a possibility that cannot be ruled out, especially given the fact that Iran is now less reliant on Turkey to generate cash flows.

However, not only has Tehran nothing to gain from making enemies with Turkey — the world’s seventeenth largest economy with the second largest army in NATO — but also new dependencies are likely to form in this new period between the two countries, such as Iran relying more and more on neighboring Turkey as a provider of construction services, consumer goods, transit routes for its hydrocarbons and other products, and so on.

Another, and much more favorable, scenario is therefore for these two countries to do more business with each other, without having to resort to gold-sale schemes or the like anymore, while at the same time keeping differences over Syria at a manageable level. For Turkey, this can be a main pillar for the much needed reset of the country’s Middle East policy.

In the meantime, Turkey, and particularly its business community, must take into consideration that there will be fierce competition in post-sanctions Iran. For sure, there will be greater business opportunities in this country, but the number of actors who want to have their share of the cake is already increasing at a higher rate.

Western companies that had to put their investment projects in Iran on hold due to sanctions are now back in the game, and so are the financially powerful Chinese state-owned enterprises, which have never been extremely concerned about the sanctions in the first place.

Turkey on the other hand has the advantage of sharing a land border with Iran and will have to better capitalize on this to stand out against increased competition.

The Iran nuclear deal heralds a new era for the Middle East where the Turkish-Iran relationship will remain one of the main axes. It remains to be seen how Iran’s “normalization” will impact this relationship and whether Turkey’s present euphoria can translate into actual results, but in any case the optimist scenario with increased economic ties ushering in positive spill-over effects on the region’s politics is not just wishful thinking.

Dr Altay Atlı is a research fellow at the Asian Studies Center of Boğaziçi University in Istanbul, and a lecturer at the Asian Studies graduate program of the same university.

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