French Senate’s approval of bill puts ties on razor’s edge

ISTANBUL - Hürriyet Daily News

France-based Dassault’s employees work on a jet-fighter Rafale at an assembly plant in Merignac. A row between Turkey and France may hit the defense business. Abaca photo

The rising tensions between France and Turkey, a result of the approval of a bill by the French Senate on Jan. 23 imposing a fine and possible jail sentence upon denial of the “Armenian genocide,” is increasingly threatening business between the two countries. 

In the run-up to the vote, Turkish officials have suggested repeatedly France might be excluded from Turkey’s massive energy tenders, privatizations and defense purchases should the law go through. 

Nearly 100,000 Turkish people currently work in 350 French firms across Turkey, according to recent data provided by Turkish-French Trade Association (CCIFT). These companies include worldwide industrial and financial companies such as Schneider, Areva, Lafarge, Danone, L’Oreal, Carrefour, Total, BNP Paribas, AXA, Groupama and Dexia.

Total investments of the French firms in Turkey currently stand at nearly $8.6 billion today, according to a recent report on broadcaster CNNTürk’s website. 

France ranks the fifth biggest European direct investor in Turkey with $10.3 billion worth of investments between 2000 and 2010, following the Netherlands, Germany, the United Kingdom and Luxembourg, respectively, according to data from Turkey’s Central Bank.

Turkey ranks 11th in France’s export markets with 6.26 billion euros, according to official figures for 2010. Turkey’s exports to France rose to $6.26 billion in 2011 from $6.05 billion the previous year. Turkish imports from France also hit nearly $8.55 billion last year compared to $8.17 billion in 2010. 

Turkey’s defense industry ties with France will also be badly affected by the approval of the bill, according to Turkish procurement officials who spoke to the Daily News earlier this month.

Turkey’s short-range defense plans, for example, include a long-range missile and air defense systems project worth nearly $4 billion. The pan-European Eurosam, owned by the Italian-French MBDA and Thales Group from France, is competing with United States, Russia and China companies. The contract is expected to be finalized by this summer, according to an official. 

In the area of commercial aviation, Turkish Airlines, the state-owned company, adopted a balanced policy in purchases from the U.S. Boeing and the French Airbus. “If the bill passes, the business of France here will come to an unofficial end. You can be sure of that,” said a procurement official.

The number of French tourists visiting Turkey rose to 1.25 million in the first nine months of last year, up from 930,000 in 2010, according to official data. Any further disputes may also jeopardize this sector.

Turkey’s Central Bank has a chance to shift nearly 30 billion Turkish Liras ($16.4 billion) of investments in French bonds to other European powerhouses as part of its recent row with France, according to Erol Katırcıoğlu, professor of the economic department of Istanbul Bilgi University. However, such a move could also risk Turkey’s already semi-paralyzed bid to become a full member of the European Union, Katırcıoğlu told the Daily News in a recent interview.