BELGRADE, Serbia -- Turkey's economy and politics have been roiled since the air force shot down a Russian warplane near the Syrian border on Nov. 24.
Ankara said the Russian Su-24 fighter-bomber violated its airspace, while Moscow claimed there was no incursion. Turkey tried to smooth things over, but rejected Russian demands for an apology.
In response, Russia slapped sanctions on Turkey. That has cost the country big. Turkey is popular with Russian tourists, who are now staying away. Business opportunities in Russia have been squelched and Russia-bound food exports halted. Starting in January, Russia will bar Turkish nationals from the country and suspend visa-free travel between the two countries.
Another source of concern for Turkey is energy: It imports more than half its natural gas from Russia. If Moscow shuts off the flow, the economy will suffer more.
Investors fear the conflict may escalate, further weakening the sanctions-hit economy. Turkey's benchmark BIST 100 index fell about 5% between Nov. 23, the day before the incident, and Dec. 3. The Turkish lira also came under strong selling pressure. Weaker share prices and a falling currency are hurting the real economy.
Price of conflict
The Russian sanctions have also begun to bite. Because Turkey can no longer export fruit and vegetables to Russia, domestic prices are falling. An official involved in the export business said prices for cucumbers, a popular accompaniment with vodka in Russia, fell to 0.2 Turkish lira (7 cents) per kilogram from 1.80 lira before the sanctions. The weaker prices are driving farmers into a corner. A Turkish construction company was hit by the sudden cancellation of a 30 million euro ($32.5 million) utility contract as part of a sports stadium construction project in Moscow.
If the sanctions remain in place, they could cost Turkey $5 billion to $8 billion in 2016, or 1% of the country's gross domestic product, according to an estimate by Turkish brokerage Garanti Securities. The tourist industry, which is heavily dependent on Russian visitors, is likely to take the biggest hit. All told, the Russian sanctions could widen Turkey's current-account deficit by $5 billion or so.
To stop the bleeding, Turkey has no choice but to try to patch things up with Russia. In late November, Turkish President Recep Tayyip Erdogan said he was saddened by the incident and asked his Russian counterpart, Vladimir Putin, to meet with him during the Paris climate change talks.
So far, Putin has rebuffed the overtures, launching a propaganda campaign instead. Speaking in Paris on Nov. 30, Putin claimed Turkey downed the jet to protect the country's illicit oil trade with the Islamic State militant group. A senior Russian Defense Ministry official on Dec. 2 added fuel to the fire, accusing Erdogan and his family of personally benefiting from oil smuggling. Turkish Prime Minister Ahmet Davutoglu called the accusations groundless and said they were aimed at covering up Russia's violation of Turkey's airspace.
