Turkey welcomes Russian oligarch money — but it’s risky for its economy
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The private yacht Eclipse of Russian billionaire Roman Abramovich anchors in Cruise Port, Marmaris, Turkiye, on March 23rd 2022.
Anadolu Agency | Anadolu Agency | Getty Images
Russian wealth is looking for a home. Turkey quickly established itself as an attractive host.
Turkish Foreign Minister Mevlut Cavusoglu told CNBC SaturdayHe said that sanctioned Russian oligarchs would be welcomed into his country to invest and tourists, provided their business transactions adhered international law.
The announcement came just days after Recep Takyip Erdogan stated that certain capital group could “park their facility with us.” This statement was taken to refer directly to the recent arrival in Turkey of several Russian-owned luxury assets. two luxury yachts a private jetRoman Abramovich is a billionaire.
The comments have sparked speculation that Turkey — a non-EU country but a NATO member — may be actively encouraging investment from blacklisted billionaires as it seeks to shore up its embattled economy. According to reports, Russian wealthy are already actively searching for investment opportunities in the country. Reuters reports.
For a country that orchestrates a delicate balance act between Russia, the West and China, however any gains might be temporary.
CNBC’s Defne Arasian, a former economist at the U.S. Embassy Ankara and senior director of the Atlantic Council Turkey, stated that Turkey could be hurt by Russian money.
Finding the right balance
Turkey wants to be a good neighbor in the current war in Ukraine.
Although it strongly condemned Moscow’s invasion without provocation, the United States has resisted imposing sanctions similar to those of the EU, U.K, and other countries. It said it opposed them in principle.
It has instead taken on the role of neutral mediator and facilitating peace negotiations between Russia, Ukraine. After Moscow agreed to reduce military aggression on Kyiv-Chernihiv on Tuesday, negotiations in Istanbul raised hopes for a breakthrough. However, Ukrainian negotiators offered to adopt neutral status in return for security assurances.
It’s fine if they park their yacht. Ankara, however, will be extremely aware of Turkey being grounds for sanctions.
Emre Peker
Eurasia Group Turkey Director and Turkey Specialist
The Turkish stance on nominal neutrality has been well understood due to its close economic, diplomatic, and military ties with Russia. As such, the West’s allies haven’t pressured Turkey into joining sanctions and they are unlikely to penalize it.
It is therefore a safe haven for Russian-sanctioned assets. A flood of luxury assets, foreign investment, and fresh capital could help the Turkish economy. It was already in crisis mode after spiraling inflation increased due to unorthodox rate cuts.
Emre Peker is a director at Eurasia Group and a Turkey specialist. However, if Turkey starts actively seeking sanctioned riches, Western tolerance will likely decrease.
Peker explained that they can park their yachts if they wish. Ankara will pay attention to Turkey’s potential sanctions risk and take preventive measures.
CNBC reached out to London’s Turkish Embassy for clarification.
Flailing Economy
Due to the economic pressures that Russia and the war have placed on Turkey, it can’t afford secondary sanctions.
The combination of a fall in the lira, and rising commodity prices saw inflation rise to 54.4% last month. The full impact of war is yet to be revealed.
Peker claimed that Russia’s aggression on Ukraine has made Turkey’s economic position more unstable.
He continued, saying that the ramifications were clear. He said that inflationary pressures have increased, which has destabilized the Turkish economy. Tourism from Russia and Ukraine will be affected by the sanctions. They account for approximately one-third inbound tourist. It will also affect Turkish investments in Russia and Ukraine.
Erdogan will continue to defend Turkey’s image as an independent mediator during the conflict. He is also keen to earn support at home and abroad before 2023 elections.
CNBC’s Timothy Ash told CNBC that Erdogan is determined to win the next election. He was a senior emerging market sovereign strategist with BlueBay Asset Management.
A Starbucks advertisement was seen near Istanbul, Tuesday 17 October 2017
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Turkey has many opportunities to boost its economy without attracting political or economic ire.
This includes the ability to attract investment from certain countries. 450 Western brandsAccording to Arslan of the Atlantic Council, they have not yet withdrawn from Russia.
“If Turkey plays it right,” she stated, emphasizing the similarities in Turkish and Russian geography, production, and other factors.
Erdogan declared last week, in fact, that Turkey was open to foreign companies seeking to move their operations to Turkey.
Russia is being left by many companies from America, as well as brands and associations around the globe. “We are open to all who visit our country,” he stated.
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