Ukraine crisis to hit Turkish economy too

The crisis in Ukraine also closely concerns the Turkish economy and it is vitally significant for Turkey that it be solved through peaceful means. This crisis has coincided with a period when economic balances were already disrupted in the country.

Especially when considering the United States has mentioned an embargo against Russia, this constitutes an enormous threat to the Turkish economy. The foreign trade of Turkey – which will have to act together with the West in the event that the crisis is not solved and an embargo is implemented – and maybe more important than that, its entire energy supply security, will be at risk.

It should not be forgotten that at the end of 2013, Russia had become Turkey’s biggest importing partner. Imports worth $25.1 billion, or 10 percent of the total, are taken from Russia, and natural gas constitutes a very big portion of this. Besides, Russia is the fourth biggest country in Turkey’s exports. Turkey exports 4.6 percent of its total exports, or $7 billion, to Russia.

Even if energy is not included, this data reveals the importance of Russia in terms of the Turkish economy.

Further than that, a very big portion of Turkey’s natural gas imports are sourced by Russia. In other words, an economic embargo by the West, which Turkey would likely have to comply with, would create a series of major problems from the heating needs for Turkish households to production in major industries.

Besides this, Crimea which is at the center of the conflict between Russia and the West, concerns Turkey closely because of their cognates here. It is apparent that Turkey, also taking into consideration this closeness, is devoting great effort to ensure that Crimea remains a part of Ukraine. Meeting at the same point with the West almost obligates Turkey to comply with the sanctions to be imposed on Russia.

Already at risk

The major crisis Ukraine is experiencing has coincided with a period in which the Turkish economy was increasingly becoming fragile and political clashes had already become very intense. Maybe because of this reason, the Turkish Lira depreciated the second most after the Russian ruble. The reason for this is that domestic fragility has increased amid the probability that it will be deeply affected by this crisis.

The February inflation data announced the other day has revealed that the tendency that inflation will increase is continuing while the high hike in core inflation and wholesale prices will accelerate as well, together with the next term’s consumer prices.

Also, in Treasury, tenders held this week, government agencies were called out, both because interest rates have risen and because demand was insufficient. All of these are proof the Turkish economy has entered a very tough era, even if the Ukrainian crisis is solved. If the crisis in Ukraine deepens or if it is not solved in a short time, then it is obvious that very difficult days await Turkey’s economy.

The increase in inflation; the fact that Treasury borrowing has not been as comfortable as before; the pressure the crisis with Russia exerts on oil prices and foreign exchange rates will all be monitored very closely at a time when tension is in the domestic air because of local elections.