Economic ties to gain momentum as Turkish, Russian leaders meet in St Petersburg

President Recep Tayyip Erdoğan and Russian President Vladimir Putin's meeting is expected to highlight economic cooperation between the two countries. The first official meeting between Turkish and Russian leaders after the fighter jet crisis in November 2015 will be held in the Russian city of St. Petersburg today.

It is expected that the trade volume target of $100 billion, which was set before the fighter jet crisis, will be revived along with new energy projects, tourism activities, trade of food and industrial goods, investments and many other economic issues to be addressed during the meeting.

According to information from the Turkish Statistical Institute (TurkStat) and Russian Federal State Statistics Service (Rosstat), Russia ranked second in Turkish exports and third in the country's imports last year. The bilateral foreign trade volume, which stood at $38 billion in 2008, declined to $23.3 billion in 2015 as a result of the recession of Russian economy following the fall in oil prices.

After the fighter jet crisis, the trade volume between Turkey and Russia further declined. Turkey's exports to Russia in the first six months of 2016 fell to $737 million, marking a 60.5 percent slump compared to the same period last year.

Food embargo

As well as the automotive industry, chemicals, ready-to-wear products, electronic instruments and mining products; Turkey's exports of consumable goods fell significantly because of Russia's sanctions, which were Moscow's revenge for downing a Russian warplane that violated its airspace on Nov. 24 last year.

On Jan. 1 Russia put a ban on the import of tomatoes, oranges, apples, cabbages, salt, broccoli, tangerines, cucumbers, pears, apricots, peaches, plums, grapes, strawberries, onions, cloves, turkey and chicken from Turkey.

The normalization of relations between Turkey and Russia gained momentum in June, a move that indicated the restoration trade ties after Erdoğan sent a letter to Putin to celebrate Russia's National Day, which marks the country's post-Soviet constitution, and Putin thanking Erdoğan along with the attendance of the Russian ambassador at an iftar dinner at the Presidential Palace in Ankara. Erdoğan's letter of condolences and regret set a precedent for an end to the crisis between the two countries. Shortly after the letter was sent, a 45-minute phone call with Erdoğan was enough for Putin to call off sanctions against Turkey.

On July 26, deputy Prime Minister Mehmet Şimşek and Economy Minister Nihat Zeybekci held talks with Russian authorities in Moscow and announced that negotiations on the removal of embargo on Turkish goods had begun.

Tourism and visa obligations

Restrictions on tourism and unilateral visa obligations for Turkish nationals are other important issues expected to be addressed in the meeting. Due to the prohibition of charter flights and package tour sales to Turkey, the Turkish tourism sector's losses reached $840 million in the first half of the year. At the same time, the number of Russian tourists visiting Turkey in the first half of 2016 plummeted to 184,000 with an 87 percent downfall compared to the same period last year.

On July 1, Putin signed a decree on the removal of the prohibition of charter flights and package tour sales to Turkey and the Russian government announced that works were initiated to this end.

One day after Putin's statement, package tour sales to Turkey started again, with Turkish holiday spots regaining their position as one of the most popular tourist destinations for Russian tourists.

A couple of weeks ago, Russian deputy Prime Minister Arkady Dvorkovich said the visa restrictions between Turkey and Russia might be lifted if a certain security level was ensured. Following Erdoğan's visit, works in these areas are expected to gain momentum and move toward pre-crisis levels again.

Cooperation on energy

Cooperative efforts in energy, especially natural gas trade, the Turkish Stream natural gas pipeline project and the Akkuyu Nuclear Power Plant project stand out as some of the most critical issues between Turkey and Russia.

According to data from the Energy Market Regulatory Authority (EPDK), Turkey imported 27 billion cubic meters of natural gas from Russia in 2015. The Turkish Stream pipeline project is expected to play a crucial role in energy imports. If the project is completed, Turkey aims to purchase 15.7 billion cubic meters of Russian natural gas per year through the pipeline which will be constructed through the Black Sea. Moreover, a second pipeline that is planned to be constructed will carry Russian natural gas to southeastern Europe through Turkey.

Russian Energy Minister Alexander Novak announced that negotiations with Turkey on the Turkish Stream project have been reinitiated.

The Akkuyu Nuclear Power Plant project, which will be a first of its kind in Turkey, is being actualized by Russia with a budget of nearly $25 billion.