Moscow can no longer use the ‘Russian tourist’ card on gas deals

Moscow can no longer use the ‘Russian tourist’ card on gas deals

Volkan Vural was Turkey’s last ambassador to the Soviet Union. He went to Moscow in 1988, a year after the first ever gas transfer started between the two countries, and came back in 1993.

When I met him last month, I had asked him about Russia’s decision to suspend the South Stream and deliver gas to Europe from a hub on the Turkish-Greek border. “As a former envoy to Moscow, it always makes me happy to see cooperation between Turkey and Russia increase,” he said. But he felt the need to underline that early agreements with Moscow always included set-off mechanisms, in order to foster a proper trade balance. It is thanks to that understanding that Turkish construction companies entered the Russian market, gaining experience that made them outstanding competitors worldwide. As the Turkish economy grew, Turkey’s dependence on Russian energy sources increased tremendously, and as emphasized by Vural, the initial set-off mechanisms did not match the realities of the day, so the gap began to get bigger. 

The initial deal was struck before the fall of the Iron Curtain, in other words before freedom of movement was granted to Russians. I don’t think either Ankara or Moscow predicted that hundreds of thousands of Russian tourists would come to Turkish holiday resorts. As a neighboring country offering plenty of sun, good food and entertainment, Turkey was a natural destination for Russians. Each time Ankara asked for a discount on the gas price, or some sort of an additional set-off mechanism, Moscow would talk about the hundreds of thousands of Russian tourists visiting Turkey.

No one can deny the contribution of Russian tourists to Turkish tourism. Turkey last year hosted nearly 4.5 million of them. Yet, the contribution both in terms of economic and cultural gains of those who decided to buy summer houses and become part of Turkish society is much more valuable than those who came with charter flights and do not even bother to go outside the five-star holiday resorts for the duration of their stay. Indeed it is true that they came by the millions, as it was quite cheap because representatives of the Turkish tourism industry kept their profit margins very low. 

Russia’s tourism giant Tez Tour’s Turkish unit, Alkan Group, which alone brought over 1 million tourists to Turkey last year, yesterday requested the suspension of bankruptcy for its debts due to economic problems in Russia and Egypt. 

As Russia increasingly feels the effects of the international sanctions, the number of Russian tourists coming to Turkey will inevitably decrease.

Antalya has already started suffering, not because of tourism, but because of drops in its exports to Russia. The Turkish construction sector active in Russia will no doubt also be affected by the economic problems.

Russia’s answer to the European sanctions has been to cancel South Stream and ask the Europeans to get their gas from the Turkish-Greek border. Turkey has welcomed Russia’s new step, at the expense of alienating the Europeans - who are trying to respond to what they see as Russian aggression in Ukraine - and also in order to decrease its energy dependence. Those two policy aims are not necessarily against Turkey’s interests.

It is with that background that Turkey is renegotiating the price of gas with Russia. So far, it has not been happy with the price reduction offered by Gazprom. 

There is always talk of interdependence between Turkey and Russia, but as Turkey has always been more dependent on Russia than Russia is on Turkey, the Justice and Development Party (AKP) government has not always struck the best deals with Moscow. Let’s not forget that Turkey’s first nuclear power plant will also be constructed by Russia. So as the negotiations continue on the new gas prices, Turkey should play its hand better.