Economy, Domestic Economy
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Exports to Russia Face Threat of Turkish Reemergence

Exports to Russia Face Threat of Turkish ReemergenceExports to Russia Face Threat of Turkish Reemergence

As much as Iran disapproves of neighborly tensions in the region, it saw Moscow’s severance of economic ties in recent months as an opportunity to boost food exports to the Russian market.

But now things are poised to change after Turkish President Recep Tayyip Erdogan sent a letter to his Russian counterpart Vladimir Putin last week calling for the restoration of “traditional friendly ties”.

The two leaders had a phone conversation on Wednesday with Putin ordering the Russian government to take steps toward normalization of relations. This is likely to result in a decision to place Turkish food exports back in Russian stores.

The breakdown in the two neighbors’ relations came after Turkish fighter jets shot down a Russian military plane on the border with Syria in November last year. The pilot was killed as he attempted to parachute to safety.

In retaliation, Russia imposed a series of bans on Turkey including, but not limited to, the one on Turkish food imports, such as vegetables, fruit and poultry. Bilateral trade between Russia and Turkey reportedly dropped by almost 50% to $4.8 billion in the first four months of this year as a result of the ban, low oil prices and weaker ruble.

Food and agricultural products constituted a third of Russian imports from Turkey prior to the ban.

Before the November incident, Russia and Turkey were trading in a “green corridor mode”, according to RT, meaning the two sides enjoyed easier customs formalities to speed up clearance of Turkish cargoes.

After the imposition of Russian sanctions on Turkish goods by its Agriculture Minister Alexander Nikolayevich Tkachyov, the idea of setting up the same customs mechanism with Iran was discussed to substitute sanctioned Turkish food products with Iranian products.

“We need to establish modern logistics on the way of Iranian goods to Russia, create a ‘green corridor’ on the Russian border for Iranian goods and ease customs formalities to speed up the clearance of Iranian cargoes,” the minister said after meeting his Iranian counterpart Mahmoud Hojjati in Tehran in January.

Earlier, Russia’s Federal Service for Veterinary and Phytosanitary Surveillance announced it gave its green light to the export of seafood and dairy products by a number of Iranian firms. Iran exported its first shipment of 12 tons of hard cheese to Russia early in March with another similar consignment shipped in late April.

In May, Iranian deputy agriculture minister, Hassan Salehi, said a direct flight route was launched between Tehran and Astrakhan for the facilitation of Iran’s exports.

“Representatives of some big food retail chains in Russia expect the lifting of sanctions on imports from Turkey will allow Turkish goods to return to Russian markets over the next few weeks. Turkish food imports were blocked at Russian border gates after January 1 and since it has not been easy for Russia to find alternatives to some fruit and vegetables, Moscow had serious difficulty in implementing sanctions on products,” wrote Turkey’s daily Sabah.

It’s patently obvious that Turkey is all-set to reclaim its share of the Russian market as they boast that there is no replacement for their products in Russia.

Transportation and banking issues are still under discussion between Iran and Russia. Heavy tariff duties levied on Iranian products by Russia is another major impediment to expansion of trade.

All these might ultimately translate into a failed attempt to boost annual bilateral trade between Tehran and Moscow from its current $2 billion to $10 billion in the near future, as stipulated in a roadmap drawn up by the two countries’ joint economic commission late 2015.

According to a report by the Islamic Republic of Iran Customs Administration, Iran exported 57.8 million tons of goods worth $46.94 million to Russia in the first quarter of the current Iranian year (started March 20).

Financialtribune.com