Turkey-Israel spat’s costIn Turkey, diplomacy and commerce go hand in hand: when ministers travel abroad, they take a train of businessmen.
And when Vladimir Putin, the Russian prime minister, stood next to Recep Tayyip Erdogan, his Turkish counterpart, at a summit in Istanbul this week, the message was telling. A new pipeline running from Russia to Turkey might carry gas onwards to Syria or Lebanon – but not Israel.
After last week’s attack on the Gaza convoy shattered an already strained Turkish-Israeli alliance, businesses were counting the cost for trade flows worth $2.5bn (€2.1bn, £1.7bn) last year, partnerships in the defence industry, and once-thriving traffic in tourism.
Mass cancellations of holiday bookings have been the most immediate effect, with Israel formally advising its citizens to steer clear of Turkey. Turkish ministers, for their part, said all defence co-operation was under review – although they stressed that an order for Israeli drone aircraft would be delivered as planned.
But the truth is that commercial ties have weakened rapidly in the past two years as bilateral relations have soured. The number of Israeli visitors to Turkey roughly halved in 2009, after Mr Erdogan attacked Israel’s Gaza offensive at the World Economic Forum in Davos. Israelis accounted for little more than 1 per cent of tourist arrivals in Turkey last year.
Bilateral trade, which reached a record $3.5bn in 2008, fell almost 30 per cent the following year. Israeli business leaders said this reflected the broader economic crisis but also the worsening political relationship. When it comes to trade, Israel is clearly the needier partner: it exports more to Turkey than vice versa.
Moreover, Turkey is deepening its commercial ties with Arab countries, announcing a new trade accord with Lebanon, Syria and Jordan on Thursday.
Defence deals with Israel have been particularly affected. “We haven’t seen big military deals since 2003, when Erdogan took office,” said Alon Liel, a former Israeli ambassador to Ankara. He professed concern that “military ties will fade away”, adding: “Apart from tiny deals, I don’t think there will be further Turkish contracts for Israeli defence companies.”
The question is how far hostility at government level will spread to private sector ties, ranging from defence technology to Turkish exports of kosher chocolate.
Turkish Airlines (THY), which carried 332,000 passengers between Turkey and Israel in 2009, is one company that might be expected to suffer. THY said 10 per cent of bookings for flights during the holiday months of June to August had been cancelled since May 31.
Another vulnerable group was Turkey’s Zorlu Energy, which has four natural gas power plant projects in Israel.
But the owner of a mid-sized Turkish defence company, which works with about 10 Israeli counterparts as a sub-contractor, was relatively sanguine. “I’m not too worried. In the short-term, Israeli companies can’t be the main contractor in [Turkish government] tenders, but they will continue to be sub-contractors,” he said. “Some people are worried, but we Turks forget very quickly.”
Some in Israel also argued that business and politics could be kept separate. “The business community is not too influenced by these events. We haven’t heard of any dramatic disturbances so far,” said Menachem Carmon, the chairman of the Turkey-Israel Business Council.
Mr Carmon conceded that joint investment projects might be delayed, and Israeli companies bidding for Turkish public tenders could encounter difficulties. Pure business-to-business contacts, however, should not be affected. “Politicians come and go on both sides. But business people have a long-term perspective,” he said.
Tusiad, Turkey’s business lobby, thought the real challenge would be to boost investment flows between the two countries that have amounted to less than $2bn over the past 20 years.
“There is a very similar business culture,” said Osman Boyner, who led a Tusiad delegation to Israel this year. Israeli and Turkish executives shared a willingness to take risks and focus on short-term profits. They could benefit from twinning Israel’s high-technology expertise with Turkey’s more plentiful land and labour.
But a Tusiad visit planned for this month has been postponed and Mr Boyner was candid about the difficulties that any Muslim businessman could face in Israel.
“My first name is Osman, my grandfather’s name is Ismail – I’m used to being questioned for at least half an hour at the border,” he said.