Manuel Almeida

By : Dr. Manuel Almeida

This week’s Gulf tour by President Recep Tayyip Erdogan is another indicator of how much the ruling Justice and Development Party (AKP) has invested in deepening Turkey’s relations with the Gulf Cooperation Council (GCC) states.

In part, this leap toward the GCC bears the imprint of Ahmet Davutoglu. The former prime minister and minister of foreign affairs was the main architect of AKP’s foreign policy doctrine, based on a neo-Ottoman vision and Islamic (namely Sunni) identity and solidarity. Close ties with the West were gradually replaced by a suspicion about Western values and a greater focus on the Middle East.

Despite disagreements between Turkey and some of the GCC states over political developments in Egypt since the Arab uprisings, events in the region over the last few years have pushed the two sides closer. This is reflected in the delegation of key ministers and many businessmen traveling alongside Erdogan in this week’s visits to Bahrain, Saudi Arabia and Qatar, as well as the variety of issues discussed.

As the timing of Turkey’s president visit reveals — Syria peace talks resumed in Kazakhstan on Thursday — the conflict in Syria is on top of the agenda. These talks, sponsored by Russia, Iran and Turkey, precede UN-sponsored negotiations in Geneva next week. Turkey, one of the chief supporters of the Syrian opposition, represents the interests of other backers of the Syrian opposition such as Saudi Arabia and Qatar.

But the magnitude of the Syrian crisis, and discussions over the possible establishment of safe zones, obfuscate what is arguably the No. 1 priority for the Turkish government in this tour of three GCC capitals: The Turkish economy.

An almost perfect storm has fallen on Turkey. The impact of and involvement in the war in Syria, terrorist attacks across the country, the revival of the Kurdish insurgency, and the botched military coup of July 2016 have built a great sense of instability. The failed coup was followed by a purge of hundreds of businessmen allegedly linked to Fethullah Gulen, the hugely influential Turkish preacher accused by the government of orchestrating it.

After the financial and fiscal crisis of 2001, the AKP successfully built on the reforms initiated by the previous government, namely controlling chronic inflation, fixing Turkey’s public finances, and reforming the banking system.

However, according to a number of worrying indicators, the progress achieved over the past 15 years could unravel. The Turkish lira is the worst performing currency against the US dollar of all major emerging markets. The current account deficit translates into a massive external debt, mostly in foreign currency. With the deterioration of the business environment, there has been a massive drop in foreign investment (a 42 percent fall in 2016 when compared to the previous year, according to official figures).

Arab Gulf states have been an important source of investment in Turkey, from its financial markets (including Islamic finance) and defense industry to real estate and tourism.

Dr. Manuel Almeida

In this context, Turkey’s relations with the GCC states, which have been increasingly institutionalized via mechanisms such as the Turkey-GCC High-Level Strategic Dialogue in 2008, only grow in importance.

The Arab Gulf states have been an important source of investment in Turkey, from its financial markets (including Islamic finance) and defense industry to real estate and tourism. Despite the belt-tightening across the GCC, they also represent a key export market for Turkey’s companies and with potential for growth.

Trade with Saudi Arabia, which imported an estimated $27 billion of Turkish products between 2007 and 2016, has received a further boost with the creation of the Saudi-Turkish Coordination Council last year. The body held its first meeting this month. Bahrain’s expanding housing plans and Qatar’s hosting of the FIFA World Cup in 2022 represent tangible opportunities for Turkish companies. The Turkish-Qatari special relationship was cemented with the announcement last year of the establishment of a permanent Turkish military base in Qatar.

Overall, the rising importance of Turkey-GCC strategic ties is undeniably positive for the prospects of Turkey’s economy. Yet Turkey’s government would do best by treating it as complementary to the links with European countries, which still account for the overwhelming majority of foreign direct investment in Turkey, and not as a potential substitute.

April’s constitutional referendum will bring a new test to Turkey-European ties. If approved, the proposed amendments sought-after by Erdogan will introduce an executive presidency, greatly diminish the role of Parliament and abolish the prime minister’s office. As a consequence, the prospect of ever colder relations with EU members is a real one. Deepening ties with the GCC states will provide some reassurance for Turkey’s president.

Dr. Manuel Almeida is a leading political analyst, providing research and consultancy services focusing on the Middle East. He is the former editor of the English online edition of Asharq Al-Awsat newspaper and holds a Ph.D. in International Relations from the London School of Economics and Political Science. He can be reached on Twitter: @_ManuelAlmeida.

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