Turkey Russia Free Trade Agreement

The Turkey-Russia Free Trade Agreement: Opportunities and Challenges for Both Sides

In the midst of the geopolitical tensions and economic uncertainties, the Turkey-Russia Free Trade Agreement (FTA) signed in 2020 marks a significant milestone in the bilateral relations between these two regional powers. While the FTA promises to boost trade and investment cooperation, it also poses challenges and risks that need to be addressed by both sides.

Background and Scope of the FTA

The Turkey-Russia FTA builds on the existing economic ties between the two countries, which have been growing closer despite their diverging interests and alliances in various regional and global issues. The FTA covers a wide range of goods and services, including agricultural products, textiles, machinery, tourism, and e-commerce. The two sides have agreed to abolish or reduce tariffs on about 900 goods and gradually phase out quotas and restrictions on others. They have also committed to liberalizing their services sectors through mutual recognition and harmonization of regulations.

Benefits and Opportunities for Turkey

For Turkey, the FTA represents an opportunity to diversify its trade and reduce its dependence on its traditional partners, such as the European Union and the United States. Russia is already Turkey`s second-largest trading partner, after Germany, and accounts for about 10% of its total trade. By eliminating or reducing barriers to trade, Turkey can increase its exports to Russia, particularly in sectors where it has a competitive advantage, such as agriculture, textiles, and automotive.

Moreover, the FTA can facilitate Turkey`s integration into the Eurasian Economic Union (EEU), a regional bloc led by Russia and comprising Armenia, Belarus, Kazakhstan, and Kyrgyzstan. Turkey has expressed its interest in joining the EEU as an observer, which could lead to deeper economic ties and geopolitical alignments. The FTA with Russia can serve as a stepping stone for Turkey to explore other opportunities for cooperation with the EEU.

Challenges and Risks for Turkey

Despite the potential benefits, the FTA also poses challenges and risks for Turkey. One of the main concerns is the impact on its domestic industries and employment. The agreement may lead to an influx of cheaper goods and services from Russia, which could hurt Turkish producers and workers. Turkey has imposed safeguards and exemptions to limit the negative effects, but it remains to be seen how effective they will be in practice.

Another challenge is the geopolitical context of the FTA. Turkey and Russia have been on opposite sides of the conflicts in Syria and Libya, and have conflicting interests in the Caucasus, Central Asia, and the Black Sea. The FTA may not be immune to these tensions and could become a bargaining chip in their broader relations. Moreover, the FTA could create complications for Turkey`s relations with its NATO allies, who have been wary of Russia`s influence in the region.

Benefits and Opportunities for Russia

For Russia, the FTA represents an opportunity to expand its economic footprint in the Middle East and North Africa (MENA) region, where Turkey serves as a gateway and hub. Russia has been seeking to diversify its trade and investment away from Europe and the United States, which have imposed sanctions on Russia over its annexation of Crimea and interference in Ukraine. The FTA can also help Russia to enhance its soft power in the region, by demonstrating its willingness to engage in economic cooperation and respect for international norms.

Moreover, the FTA can boost Russia`s exports of energy and raw materials to Turkey, which is highly dependent on imports for its energy needs. Russia is already Turkey`s largest supplier of natural gas, and the FTA can facilitate the construction of new pipelines and infrastructure to transport Russian oil and gas to European and Asian markets.

Challenges and Risks for Russia

Despite the potential benefits, the FTA also poses challenges and risks for Russia. One of the main concerns is the impact on its domestic industries and competitiveness. The agreement may expose Russia to more competition from Turkish goods and services, particularly in sectors where Turkey has a comparative advantage, such as tourism, construction, and food. Russia has imposed safeguards and exemptions to protect its strategic sectors, but it remains to be seen how effective they will be in practice.

Another challenge is the asymmetric nature of the FTA, which favors Turkey in terms of its size, diversification, and integration into global markets. Russia may find it harder to take advantage of the FTA, given its heavy reliance on energy exports and limited diversification of its economy. The FTA could also create complications for Russia`s relations with other countries in the EEU, which may feel excluded or disadvantaged by the agreement.

Conclusion

The Turkey-Russia Free Trade Agreement represents a significant step forward in the economic relations between these two regional powers, despite the challenges and risks it poses. The FTA can offer benefits and opportunities for both sides, in terms of trade, investment, and integration into regional and global markets. However, it also requires careful management and monitoring, to ensure that the benefits are shared in a fair and sustainable manner, and that the risks are mitigated and addressed. The success or failure of the FTA will depend not only on its economic merits but also on its political and strategic implications for both Turkey and Russia, and their relations with other regional and global actors.