Iran, Turkey: Partners or rivals

Iran, Turkey: Partners or rivals

By Sadeq Dehqan & Farzam Vanaki

Iran Daily - 27/6/2015

As two main regional powers, Iran and Turkey have long been major economic rivals.

Experts believe that it is in the interest of both sides to, initially, become trade partners and use each others' capacities to access the markets of surrounding states.
Turkey sees Iran as the gateway to great Eastern markets while Tehran holds that it can boost presence in major Western markets through Ankara.
In case the two countries share resources and capitals, they will manage to send their products to more regional markets.
Both sides, however, have not yet used opportunities in boosting joint production and investment properly and even do not have any comprehensive information of one another's capacities and potentials.
In an exclusive interview with Iran Daily, Jalal Ebrahimi, the chairman of Iran-Turkey Joint Trade Council, maintained that Turkey's hesitation in investing in Iranian projects, will be greatly harmful for both sides, particularly Ankara, since, given the increased probability of Tehran's success in nuclear negotiations with P5+1, a large number of states are now in a rush to enter the country's market once they find the time is ripe. This will make the competition even more intense for Turkey.
Excerpts of the interview follow:
IRAN DAILY: Would you please expound on the history of the two countries' relations?
JALAL EBRAHIMI: The two sides' trade ties date back to a long time when the Eastern Roman Empire ruled both Ancient Rome and Anatolia. Iranian traders used to travel to Mediterranean coasts and exchanged goods with European merchants. Throughout history, Turkey has always been Iran's best gateway to the markets of European countries. Iran played the same role for Turkey with regard to Eastern markets.
The two countries have always needed to maintain favorable trade ties with each other. At present, Turkey still plays very much the same role, though Iran has tried its luck to find other entries to Europe including Georgia, Azerbaijan and Armenia. Turkey sends products to East and Central Asian nations and the Persian Gulf littoral states through Iran.
Two free trade and industrial zones of Aras and Maku have been established on the two countries' joint borders which are also adjacent to Georgia, Armenia and Azerbaijan.
The two strategic zones play a very significant role in boosting mutual trade.
How do you evaluate transactions?
In 2014, transactions between Iran and Turkey amounted to $14.2 billion, of which $9.2 pertained to exchange of oil, gas and petrochemicals and the rest were related to trade of non-oil products. In the first five month of 2015, Iran imported non-oil goods worth $1.59 billion from Turkey and ranked eighth among the country's export destinations.
Major Iranian export items to Turkey include gas, oil products, petrochemicals such as methanol, paraffin wax and different types of ethylene, salambor sheep skin, nuts, minerals, building stones and honey. In addition, agro crops constitute a major portion of Tehran's exports to Ankara.
Turkey's exports to Iran comprise of Medium Density Fiberboards, different kinds of wood, clothes, textiles, jewels and gold, industrial spare parts, machineries and metals. Trade balance between the two countries, including oil and gas exports, is hugely in favor of Iran. Leaving out trade of hydrocarbon resources, though, tips the balance in favor of Turkey.
What factors have contributed to Turkey's favorable economic development in the past few years?
Ankara's economic growth began to accelerate in 2002, when the outcomes of the doctrine adopted by the country's former president, Turgut Ozal (1927-1993), began to emerge. The policy called on Turkish expats to return their capitals to the country and asked Turkish workers in other states, particularly Germany, to go back to Turkey and serve in their homeland. These workers, who knew German language, had accumulated great capitals in Germany and were very well familiar with modern technologies and sciences. They were of great assistance to Turkey in transferring modern technologies to the country and establishing industrial relations with Berlin.
At that time, the Turkish government promised the expats loans and facilities four times bigger than their capitals. This marked the beginning of an upward industrial movement in Turkey, which was followed by the construction of a large number of big and small factories across the country.
These capitals boosted by the cheap domestic workforce, Turkey's favorable strategic and geographical location and its access to suitable land, marine and air trade routes speeded up the country's economic progress.
Low insurance rates and cheap fuel and energy prices in Turkey, compared to those in Europe, also contributed a lot to its speedy economic boom.
Moreover, Turkey's climatic conditions allowed the government to establish a number of industrial units whose construction was prohibited in other European countries due to environmental concerns.
At present, 84 banks are operating across Turkey, of which 78 are using European capitals as their main assets. These foreign banks were initially established to support domestic industries.
This, nevertheless, could also prove very risky for Turkey in case the country was subject to international sanctions. Therefore, Ankara protects its foreign capitals very well.
How do you evaluate the current level of Turkey's exports and foreign rade?
The country's exports dropped remarkably in 2014, due to domestic political tensions and international crises. Turkey's electoral issues aggravated by domestic crises such as Gezi Park protests also adversely impacted its economic growth.
International economic crises reduced imports by European countries from Turkey. In addition, following the Islamic spring, Egypt, Libya and Tunisia reduced transactions with Turkey.
In 2014, Turkey's total exports stood at $157.62 billion. Germany, Iraq and the UK were the three main destinations for Turkish goods.
What about Turkey's exports to Iran?
Iran's imports from Turkey declined in some sectors, particularly industry, in 2014. Steel exports to Iran in this period, for example, dropped 30 percent due to Iran's raised output. Ankara's export of fishery products to Tehran also fell 78 percent in the same time-span.
This is while, in the same duration, the country's export of gold and jewels and textiles and clothes to Iran grew $400 million and 40 percent respectively.
Also, following the expansion of Iran's chocolate industry, Tehran raised hazelnut imports from Turkey.
Have political and regional issues affected mutual ties?
After Turkish President Recep Tayyip Erdogan sided with Egypt's overthrown president, Mohamad Morsi, Egyptian President Abdel Fattah el-Sisi prevented Turkey from shipping and transiting products through the Red Sea, limiting Turkey's connection with other states through the Mediterranean Sea and Bab-el-Mandeb.
Regional conflicts have also restricted Turkey's relations with Iraq and Syria, turning Iran into the main transit route for Turkish products destined for the Persian Gulf littoral states and other regional countries.
In his latest visit to Iran, Erdogan signed a transit agreement with Iranian officials based on which Turkey can export 6,000 trailers of domestic goods to the Persian Gulf littoral states and Saudi Arabia through Iran. The products are sent to the destinations through Bandar Lengeh, Bandar Abbas and Bandar-e Mahshahr.
In addition, at present, 300 trailers of Turkish goods transit eastern Iran to East and Central Asian countries, of which 120 trailers carry foodstuff. This is definitely beneficial for Iran as well, since each foreign trailer plying Iranian roads has to pay customs taxes and bear the costs of loading and unloading products and port services.
What about the two countries' preferential tariffs?
Following years of negotiations, eventually, Iran and Turkey agreed to lower tariffs on certain products including Iranian agro products and Turkish industrial goods. Since only five months have elapsed since the enforcement of the contract, the project's strengths and drawbacks have not yet been revealed clearly. Joint expert meetings, however, will help resolve any probable problem in this respect.
How do you predict the future of the two countries' economic cooperation? Would you please name the fields for boosting cooperation?
The increased chance of a final nuclear deal between Iran and P5+1, has encouraged many countries to enter Iran's market. In case Turkey is also willing to grasp the opportunity, it has to increase efforts in this regard at the earliest.
The Turkish government is very well aware of the European countries' enthusiasm to invest in Iran.
Turkish investors are keen on participating in Iran's petrochemical, coal extraction, mining and agro projects.
In 2014, Turkey's export of clothes and textiles to Iran stood at $800 million. Given Tehran's high potentials, both sides can begin joint production in this sector.
A worker's annual average salary in Turkey amounts to $12,500. This is while, the figure stands at $4,500 per annum in Iran. Also, electricity and energy prices are lower in Iran compared to Turkey.
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