In April, 2024, Turkey announced a trade ban on Israel, citing the Israel’s refusal to allow Turkish planes to airdrop aid into Gaza as the primary impetus. The Turkish Ministry of Trade outlined 54 categories of goods, which includes items such as iron, marble, steel, cement, aluminium, bricks, fertilizer, construction equipment, and aviation fuel that will be subjected to the export ban. Later on May 2, Turkey announced a complete halt to all trade transactions with Israel following the trade restrictions imposed earlier. The ban, Turkey declared, would remain in place until Israel declared a ceasefire and allowed the “uninterrupted and sufficient flow” of humanitarian aid. This move comes against the backdrop of a protracted and bloody conflict in Gaza, where over 36,096 Palestinians have been reportedly killed over a seven-month period. Furthermore, Erdogan has also appealed all the OIC member states to impose the trade ban on Israel in line with the organization’s recommendation.
Israeli Foreign Minister accused Erdogan of sacrificing Turkey’s economic interests to support Hamas, labelling the decision as an act of hostility that would prompt Israeli retaliation, including potential sanctions and a search for alternative trading partners. This rhetoric underscores the deepening rift between the two nations, with Israel vowing to diminish its economic reliance on Turkey. The decision marks a significant escalation in its diplomatic stance, driven by a complex interplay of domestic politics, humanitarian concerns, and geopolitical calculations.
Political Dynamics within Turkey
The reaction to Turkey’s trade ban has been polarized both domestically and internationally. Domestically, President Recep Tayyip Erdogan’s decision can be seen as a response to mounting criticism from within Turkey regarding the government’s commercial ties to Israel amid the Gaza conflict. Erdogan’s Justice and Development Party (AKP) suffered significant losses in local elections, partly attributed to perceived inadequacies in addressing the Gaza crisis. By imposing the trade ban, Erdogan appears to be aligning more closely with conservative and Islamist factions within Turkey, potentially shoring up support from those disenchanted with his previous policies.
Moreover, Erdogan’s decision to impose the trade ban must be viewed within the broader context of Turkish politics. The AKP’s electoral losses have highlighted growing discontent with Erdogan’s leadership, particularly regarding economic mismanagement and perceived corruption. By taking a strong stance against Israel, Erdogan may be attempting to reassert his leadership and appeal to nationalist and Islamist segments of the Turkish electorate, catering to the sentiments of his supporters who view Israel’s policies toward Palestinians unfavourably.
However, this strategy carries risks. Economic disruptions resulting from the trade ban could further alienate voters, particularly those employed in export-oriented industries. Moreover, the heightened tensions with Israel and potential fallout with Western allies could undermine Turkey’s broader economic and diplomatic interests.
Economic Implications
The economic ramifications of the trade ban are profound and multifaceted. Trade between Turkey and Israel was valued at $6.8 billion in 2023, indicating substantial economic interdependence. The trade ban will notably impact Israel’s construction sector, reliant on Turkish metals and materials, which has already suffered due to the conflict. Additionally, Israel may face upward pressure on food inflation as it imports over 10% of its fresh fruit and 15% of its vegetables from Turkey. These factors suggest Israel’s central bank will likely adopt a cautious approach to interest rate cuts, potentially delivering just one more 25bp cut by year-end.
Conversely, Turkish exporters face the loss of a lucrative market. Businesses in Turkey, particularly those in sectors like iron, steel, and chemicals, are poised to suffer from the reduced market access. This disruption could exacerbate Turkey’s existing economic challenges, including high inflation and unemployment rates.
Interestingly, according to the Capital Economics, Turkey’s decision to freeze all goods trade with Israel is expected to have limited macroeconomic impact on both the states. For Turkey, trade with Israel is minor, representing 2.0% of its goods exports (0.5% of GDP) and less than 0.5% of its imports. However, for Israel, Turkey was its sixth-largest trading partner in 2023, with imports amounting to $5 billion (5% of total imports), equal to 1.0% of Israel’s GDP.
Geopolitical Consequences
Beyond the economic sphere, the trade ban has significant geopolitical implications. Turkey’s stance is seen by some analysts as a bold assertion of its role as a defender of Palestinian rights, potentially enhancing its influence in the Muslim world. However, this comes at the cost of straining relations with Western allies, particularly the United States. The call by Israeli officials for U.S. Congress to impose sanctions on Turkey reflects the potential for this issue to escalate into a broader diplomatic conflict.
The U.S. has significant strategic interests with Israel, including defense cooperation and intelligence sharing. Simultaneously, Turkey is a vital NATO ally and plays a crucial role in regional security, particularly concerning Syria and counterterrorism operations. The U.S. will seek to navigate this delicate balance without alienating either party.
Furthermore, the ban may have long-term consequences for Turkey’s regional strategy. By aligning closely with Hamas and adopting a confrontational stance towards Israel, Turkey risks alienating other regional players who are either neutral or supportive of Israel. This could isolate Turkey diplomatically and complicate its foreign policy objectives in the region. Turkey has also diverged from its Western allies by abstaining from labelling Hamas as a terrorist organization and permitting its members to reside within the country.
Humanitarian Considerations
A critical aspect of the debate revolves around the humanitarian impact of the trade ban. While Turkey justifies its actions as necessary to compel Israel to allow humanitarian aid into Gaza, critics argue that the ban may inadvertently worsen conditions for Palestinians. By disrupting trade routes and economic activities, the embargo could lead to shortages of essential goods not only in Israel but also in Palestinian territories that rely on Israeli intermediaries for certain supplies.
Additionally, the ban’s effectiveness in achieving its stated humanitarian goals is debatable. History shows that economic sanctions and trade embargoes often fail to bring about desired political changes and instead inflict suffering on ordinary citizens. In this context, the trade ban may need to be reassessed to ensure it does not exacerbate the very humanitarian crisis it aims to alleviate.
Strategic and Long-term Effects
In the long term, both Turkey and Israel will likely reassess their economic dependencies and trade strategies. For Israel, the trade ban could accelerate efforts to diversify its suppliers and reduce reliance on Turkish goods. This shift might involve increasing domestic production or sourcing from other countries, a move that could have lasting impacts on regional trade dynamics.
For Turkey, the trade ban reflects a broader strategic pivot towards asserting itself as a regional power championing Palestinian rights. However, sustaining this stance without significant economic repercussions will be challenging. Erdogan’s government must balance its political objectives with the economic realities facing Turkish businesses and consumers.
There are chances that the U.S. and pro-Israeli lobby may influence other economic partners to cut off ties with Turkey in order to isolate it. In such a case, most probably, Turkey will look towards the eastern bloc. The expansion of BRICS is seen as an opportunity for states to form a new world order where states can make independent foreign policy decisions. In this scenario, Russia and China will have a golden opportunity to include Turkey in the BRICS, as it will be more strengthened to counter the western bloc.
So far, Turkey did not offer specific details on the implementation of its ban, complicating the assessment of the precise impact of the curbs. The economic and geopolitical repercussions of this decision are likely to unfold in the coming months, potentially reshaping Turkey’s relations with Israel and its broader international alliances. While the ban on trade with Israel may serve Erdogan’s immediate political needs, it poses significant risks to Turkey’s economic stability and its international standing. The interplay between domestic politics and international diplomacy in this context underscores the complexity of modern geopolitical conflicts and the intricate balancing act required by nations navigating such turbulent waters.