December 03, 2015

Russia and Turkey have started a geopolitical cold war and an economic war

Russia's President Putin indicates that Russia will have revenge on Turkey at some appropriate time.

Mr. Putin did, however, threaten further, unspecified actions beyond the scattered measures already announced.

“If someone thinks they can commit war crimes, kill our people and get away with it, suffering nothing but a ban on tomato imports, as well as a few restrictions in construction or other industries, they’re delusional,” he said.

Alexander Novak, the energy minister, announced soon after the speech that Moscow was halting talks with Ankara over the Turkish Stream gas pipeline, a $10 billion construction project meant to funnel Russian gas to Europe.

BBC News reports that Russian president Putin said Turkey "will regret" the downing of one of its fighter jets near the Syrian border last week

Honor is priceless

The Russian vow to punish the Turkish economy has yet to be fully detailed, but at stake is a $30 billion trade relationship that, while also important to Russia, is existential for Turkey.

Russia needs the roughly $4 billion worth of fruits and vegetables it has been buying in Turkey since the sanctions, but it will find such produce in other warm countries, just like it will find alternative clients for the $1.5 billion in grains that it sold Turkey last year.

Turkey’s tourist resorts are certainly not crucial for Moscow, even though 3.3 million Russians vacationed there last year. To the Turks, however, the Russian tourists are crucial because they comprise a full one tenth of annual tourist arrivals.

Russia’s economic disruptions are doubly harmful because Turkey, unlike Russia, is socially restive, due to the Kurdish problem and the Syrian civil war. Farmers whose harvests will lose the Russian market, and employees of the hotels and restaurants that will soon lose their Russian clientele, will join those Turks who already grapple with more than a million Syrian refugees’ pressure on the Turkish labor market.

Meanwhile, Russia will assist and incite Turkey’s rebellious Kurds while also loudly backing the Cypriots in their conflict with Turkey, not to mention the Armenians, who have historically been the latter’s proxy and the former’s foe.

Things can get altogether nasty if Russia stops its gas supplies, which dominate the two countries’ trade.

Yes, $20 billion is a lot of money even for Russia, but it’s not the kind of sum it can’t afford to lose. Turkey, on the other hand, if deprived of Russia’s gas, will nearly come to a standstill. Not only does Russia supply more than half of Turkey’s fuel, Erdogan is at loggerheads with the main alternative suppliers: Egypt, Saudi Arabia and the rest of the Gulf states, since he supported the Egyptian Muslim Brotherhood; Iran, since he demanded its proxy Bashar Assad’s removal; and Israel, since the Mavi Marmara incident in 2010.

Russia’s sanctions for now exclude gas supplies, and also the four nuclear reactors it agreed to build in Turkey for $20 billion and the TurkStream pipeline project that is meant to lead Russian gas to Turkey across the Black Sea. Still, judging by his past conduct Putin will not hesitate to close the spigot, the way he did repeatedly to Ukraine since 2005.

Moreover, when Europe responded to his Crimean adventure with sanctions, Putin not only failed to back down, he fired sanctions of his own, banning some $12 billion worth of annual food imports from the countries sanctioning Russia.

In other words, when faced with a choice between national honor and financial loss, Putin chooses honor.

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