Economic Fallout: Turkey's Trade with Russia Stalls as Sanctions Bite

The flourishing trade between Turkey and Russia has hit a snag under the weight of sanctions, according to a report by Bloomberg.

Turkish exporters of machinery products, who benefited most from the sharp increase in shipments to Russia, may see their sales shrink by $1 billion this year due to sanctions and struggles with the supply of goods potentially for military use.

Bloomberg cites Kutlu Karavelioğlu, the head of the Association of Machinery Exporters, who highlights a 30% drop in sales to Russia compared to last year.

Machinery such as lathes, pumps, and electric motors have experienced some of the largest declines.

“It seems impossible for any serious equipment manufacturer to sustain their previous interest in Russia amidst growing pressure on the banking system and supply chains,” stated Karavelioğlu.

This downturn is unwelcome news for Turkish companies but underscores the increasing effectiveness of US and EU sanctions against Russia, even in foreign jurisdictions like Turkey, which seeks to maintain economic ties with Moscow despite the war in Ukraine, Bloomberg reports.

According to preliminary data released on Thursday by the Turkish Ministry of Trade, exports to Russia in the first quarter fell by 33.7% compared to the previous year.

Turkish-Russian trade surged after the invasion of Ukraine in February 2022.

This prompted criticism, and later sanctions from the US and EU, which sought to stem the flow of goods such as industrial equipment and spare parts that could aid Russian military efforts.

“The EU contends that Turkey, the United Arab Emirates, and China are among the countries circumventing the bloc’s restrictions on trading in sanctioned technologies with Russia,” Bloomberg reminds.

This year’s decline in exports to Russia comes against the backdrop of Ankara’s efforts to improve relations with Washington, including by tightening control over Russia-related banking operations involving Turkey.

China has also intensified scrutiny of banking client connections with Russia after the US threatened to impose secondary sanctions in December.

Companies worldwide are grappling with a plethora of Russian sanctions they must navigate. According to Castellum.AI, a compliance verification company, as of February, the US and its allies had announced nearly 18,000 sanctions, compared to approximately 2,600 prior to the full-scale invasion of Ukraine by Russia.