Exclusive Analysis | Putin-Erdogan meeting will have economic and political benefits for both sides, but limited global ...

On August 9, the Russian and Turkish presidents met in St. Petersburg to restore the relationship between their countries. This marked the first time Vladimir Putin and Recep Tayyip Erdogan had met since the Turkish Air Force shot down a Russian aircraft on the Syrian border in November. In response to that incident, the Russian government imposed economic embargoes on strategic Turkish sectors such as agriculture and tourism, and Putin accused Erdogan of supporting terrorism, illegal oil trade with the Islamic State (ISIS), and corruption. Erdogan retaliated with similarly harsh words. The quarrel brought the two parties almost to the brink of military conflict. After President Erdogan officially apologized to Russia a few months ago, and although last week’s meeting resulted in no major breakthrough, it will likely help normalize the relationship.

SGA’s Russia analysts are skeptical about the outcome of the negotiations between the Russian and Turkish presidents. The meeting has not led to an immediate thawing of the complex relationship that was soured in November. Some analysts argue Turkey and Russia could build a strategic alliance in the region against the West. We do not agree with this. The summit will have limited global consequences and will not cause any regional realignment or strategic partnership. Nonetheless, it is very important for both countries.

For Turkey, the talks are important because they will help revive its economic relationship with Russia. The overall cost of the crisis has been more than $9 billion for the Turkish economy, which was already struggling with high current account deficit and slow growth. From the geopolitical perspective, Turkey plans to use the Russia card in its negotiation with the US and Europe following the July 15 coup attempt. Currently, the Turkish government’s primary foreign policy objective is convincing the United States to extradite Fethullah Gulen, who is seen as the mastermind of the coup attempt. Recently, Turkish Foreign Minister Mevlut Cavusoglu stated that Washington should make a choice between Turkey and Gulen.

From Russia’s perspective, last week’s summit was a diplomatic victory. Putin made Erdogan officially apologize for the shot-down jet and engage with Putin in Russia and on Russia’s terms. It is symbolically significant and was immediately interpreted as Putin`s diplomatic victory, although the meeting itself yielded few tangible results. The Russian economy has also recently been shrinking, however, so the economic deals with Turkey play an important role.

The very fact that the meeting took place at all is significant to Russia for several reasons. First, there has been progress on resumption of Russian tourism to Turkey and some business ties in sectors ranging from construction to the agriculture industry. It is clear that this agenda received reserved praise in Russia. After all, Russians are expected to spend more money on vacationing domestically, especially in places like the Krasnodar Region and the Crimea. Furthermore, Russian farmers have been benefiting from Russian sanctions against the EU and Turkish agricultural produce. Many increased domestic output, substituting for imports while receiving state subsidies. Russian producers will be lobbying hard to keep agricultural imports to a minimum despite revocations of the bans. The full recovery may take longer than many expect.

Some progress has been made on the two Russian-Turkish energy mega projects: the Akkuyu nuclear power plant and the South Stream gas pipeline. While both sides have pledged to restart and support these projects, this must be treated with caution as well. First, substantive negotiations on both projects are yet to take place, and the timeline has not been set. Second, the medium-term beneficiaries of the projects are the Russian contractors of Gazprom ($14 billion for South Stream) and subsidiaries of Rosatom ($20 billion for Akkuyu). Therefore, it is more of a Russian domestic matter than a Russian-Turkish bilateral deal. The latter is yet to materialise and prove economically viable. As we have seen before, circumstances may change yet again, and these projects may never take off.

SGA believes that Turkey could use the current crisis as an opportunity to back away from the Akkuyu deal. It is obvious that Russia-Turkey relations are not immune to political risks, and Akkuyu has only added a new dimension to Turkey’s energy dependency on Russia. Re-negotiating a deal with Russia or engaging US or European companies would be a smart move on Turkey’s end. However, it seems as if the Turkish government does not see any risk in increasing its dependence on Russian energy. The recent crisis also showed that both parties do not refrain from using economic weapons for political gain.
 
Compartmentalized relations define the complex Turkey-Russia relationship. For decades, Turkey and Russia enjoyed economic relations even if they did not agree on many geopolitical issues. The Syria conflict showed that such strategy is no longer sustainable. The leaders did not discuss Syria, Crimea, or other divisive international issues. This signals a return to what Russian and Turkish counterparts did best to maintain normal relations: distinguish issues with potential for agreement and leave the rest to rest. Yet the one issue not on the agenda, but that many hoped to discuss, is Syria. While the Syrian civil war is central to the very matter that led to a Russia-Turkey bilateral crisis in the first place, respective positions were only reiterated. Still, Cavusoglu’s statement that Bashar Assad “may remain in power during [a] transition” signals Ankara’s likely backing away from its insistence on the immediate toppling of the Assad regime. The Turkish government hopes this may provide ground for agreement with Russia, provided that Russians keep the basic elements of the Baath regime while Erdogan can fulfill his promise of getting rid of Assad himself.

However, it is too early to claim progress. Turkey perceives the Kurdish militants’ strengthening in northern Syria as a major risk, and that remains the main tension with the US. The fact that both Turkey and Russia are very reluctant to recognize an American-controlled Kurdish entity in Syria will likely remain a factor that weakens the US efforts against ISIS. However, there are signals that US diplomacy is actively dragging Moscow to cooperate more with the Kurds against ISIS, something that shows that Ankara’s quest to break diplomatic isolation will likely prove more difficult than a quick meeting with Putin.    

SGA believes that the meeting will only have short-term impacts and will not impact Turkey’s long-term strategic alliance with NATO and the Western world. Even just normalizing the relationship will take more than a meeting. Both Putin and Erdogan are opportunistic leaders. They use each other to show the West that they can implement independent foreign policy. Putin does it to flex Russia’s muscles and Erdogan does it for potential short-term benefits. With an economy that is dangerously dependent on short-term capital inflows, however, Erdogan cannot move away from the West. The Turkish economy has already been suffering due to the increased political risk and security problems. Such a strategic movement would only cause further problems for Turkey and President Erdogan.