Recep Tayyip Erdogan went on tour for money

Erdogan’s three-day tour of the Persian Gulf began on July 17, the Turkish presidential administration’s communications department said. According to the Hurriyet newspaper, during his visit, the Turkish leader expects to conclude investment agreements worth more than $50 billion, which may include deals on the privatization of Turkish state assets and cooperation in the defense industry. Accompanying Erdogan will be a delegation of 200 people, which will include government members, investors and company owners, according to the Foreign Economic Relations Council (DEIK) of Turkey.

Ahead of the Turkish president’s trip, Reuters reported on July 7, citing high-ranking officials, that Ankara expects to attract $10 billion in foreign direct investment from the Gulf states in the near future. In the future, according to the agency, the Turkish authorities hope to direct $30 billion of investments from these countries to the energy sector, defense industry and transport infrastructure.

“During my contacts with the leaders of the states of the region, they expressed their readiness to make serious investments in Turkey. I hope that we will conclude agreements during this visit,” Erdogan told the Turkish press on July 12 during the NATO summit in Vilnius.

Erdogan’s Middle East tour kicked off July 17 in the Saudi coastal city of Jeddah, where he plans to hold talks with Saudi King Salman bin Abdulaziz Al Saud and Crown Prince Mohammed bin Salman. On Tuesday, he will travel to Doha and expects to meet with the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani. The Turkish leader will conclude his visit to the UAE on July 19 after talks with President Sheikh Mohammed bin Zayed Al Nahyan in Abu Dhabi.

The financial aspects of the presidential trip are especially important for Turkey, whose economy has been struggling for several years caused by Erdogan’s unorthodox economic policies, which were accompanied by interest rate cuts amid high inflation. Although immediately after the presidential elections in May, Erdogan changed the economic bloc in the government and the regulator raised the key rate from 8.5% to 15%, inflation is still high in the country – over 38% in June in annual terms. This problem may also be exacerbated by the July 16 increase in the fuel tax by the Cabinet of Ministers by 200% at once as part of the stabilization of public finances and the reduction of the current account deficit. Turkey’s annual budget was adopted with a deficit of about $33 billion, but next year, according to the Sozcu newspaper, the deficit could rise to a record $100 billion. At the same time, the current account deficit for the first five months of 2023 exceeded $37 billion. the deficit was financed primarily by the sale of reserves, which have fallen by $25 billion to $105 billion since the end of the year, the lowest level since July last year.

The hydrocarbon-rich Gulf states have previously helped Turkey alleviate a currency crisis through direct currency swap agreements and by placing money directly in Turkish government accounts. In May 2020, Qatar provided $15 billion in currency swaps, and the UAE $5 billion in January last year. In March, Saudi Arabia deposited $5 billion into the account of the Turkish Central Bank to support the Turkish economy. In addition, at the end of 2022, the UAE was considering buying up to 120 Turkish Bayraktar TB2 drones, each of which is estimated at about $5 million. 20 drones were delivered to Abu Dhabi last November.

Interestingly, quite recently, from 2017 to 2021, Turkey and Saudi Arabia waged a trade war, and after the assassination of Saudi journalist Jamal Khashoggi at the Kingdom’s consulate in Istanbul in 2018, bilateral relations between states were frozen for a while. The reason for the cooling of relations was Ankara’s support for Qatar during the diplomatic crisis in the Gulf. Due to disagreements in foreign policy, Qatar found itself in a blockade by neighboring states, at the same time, Turkey provided humanitarian assistance to the Qataris and even deployed its troops on the territory of the emirate. The restoration of Turkey’s relations with the Arab monarchies took place after the resumption of diplomatic relations between Doha and other Gulf monarchies.

Turkey and Qatar are ideologically close: both states previously supported the Islamist Muslim Brotherhood movement (an organization recognized as a terrorist organization and banned in the Russian Federation) and related organizations, explains program coordinator of the Russian Council on International Affairs Ivan Bocharov. “This consolidation of positions was clearly manifested during the events of the Arab Spring at the beginning of the last decade, when the Qatari TV channel Al Jazeera provided information support to the Islamists, and Ankara provided diplomatic and political support,” the expert noted.

At the same time, despite the political disagreements of Turkey and Qatar with the rest of the Gulf monarchies, the parties are determined to establish economic cooperation with each other, Bocharov continues: “On the one hand, the Turks need Arab investments to cope with the difficult economic situation in the country. On the other hand, the Arab monarchies are interested in diversifying their foreign economic relations in order to strengthen their own economies.” The Gulf monarchies also want to take advantage of Turkey’s advantageous geographic position, Bocharov continues. “Arab businessmen are interested in cooperation with Turkish industrialists, especially with agricultural producers. In addition, Ankara expects to turn its country into a regional energy hub. Therefore, Turkey could be of interest from the point of view of the export of Arab energy resources to European markets,” the expert concluded.