Erdogan seeks Arab capital in Gulf tour, but success is questionable

Erdogan seeks Arab capital in Gulf tour, but success is questionable
A+ A-
Many commentators in Turkey speculated that the country, facing a currency crisis, sought to attract capital through these engagements. During the negotiations, there was curiosity about the possibility of discussing the sale of public assets in Turkey.

By Can Burgaz

Following his election victory in May, Turkish President Recep Tayyip Erdogan has embarked on a tour of the Gulf states for business talks. Erdogan visited Jeddah for the Saudi-Turkish Business Forum on 17 July, Doha for the Qatari-Turkish Business Forum on 18 July, and Abu Dhabi for the UAE-Turkish Business Forum on 19 July.

The visits, attended by 200 business people, focused on the economy.

Many commentators in Turkey speculated that the country, facing a currency crisis, sought to attract capital through these engagements. During the negotiations, there was curiosity about the possibility of discussing the sale of public assets in Turkey.

Which countries has Erdogan visited?

Erdogan's first stop was Saudi Arabia, where he met with Crown Prince Mohammed bin Salman. The joint statement emphasized the importance of enhancing trade and investment cooperation, particularly in infrastructure, construction, engineering, defense, metallurgy, environment, heritage tourism, renewable energy, and other areas of common interest.

President Recep Tayyip Erdogan then visited Qatar. The statement highlighted the qualitative change in the relations between Turkey and Qatar since their establishment in 1973, which has evolved into a strategic partnership. The leaders underlined the continuous strengthening of cooperation between the two brotherly countries under the leadership of President Erdogan and Emir of Qatar Al Sani.

The final leg of President Erdogan's visit to the Gulf was the United Arab Emirates (UAE). During the visit, Erdogan met with UAE President Sheikh Mohammed Bin Zayed Al Nahyan, and a $50.7 billion deal was signed between Turkey and the UAE. Thirteen documents were signed and exchanged in various fields, and establishing a 'High-Level Strategic Council' to be chaired by the presidents of Turkey and the UAE was agreed upon.

Throughout his Gulf tour, Erdogan presented the electric vehicle TOGG, produced in Turkey, to the countries he visited.

President of the Foreign Economic Relations Board Olpak noted that they made significant progress with the business community in the Gulf countries during Erdogan's tour. He highlighted the keen interest of business people in the region and the potential for substantial cooperation and multi-billion dollar business partnerships.

The most notable outcome of the summit was the undisclosed $50.7 billion strategic agreement and memorandum of understanding signed with the United Arab Emirates. This raised Turkey's relations with the UAE to a strategic partnership.

In addition, Turkey reached an agreement to sell [drones]( to Saudi Arabia, with the relevant company, Baykar, signing an export and cooperation agreement for Bayraktar Akıncı AUAVs (Assault Unmanned Aerial Vehicles) with the Saudi Ministry of Defence. These drones will serve in the inventory of the Kingdom of Saudi Arabia's Air and Naval Forces Command.

The political significance of Erdogan's visits is also evident. Following the Arab Spring in 2011, Turkey's relations with the UAE and Saudi Arabia had been strained over Turkey's support for groups linked to the Muslim Brotherhood. The embargo imposed by Saudi Arabia on Turkey's ally Qatar further strained relations. The murder of Jamal Khashoggi in the consulate general in Istanbul in 2018 exacerbated tensions. In 2022, however, Erdogan decided to improve relations, leading to reciprocal visits. In March, Saudi Arabia deposited $5 billion in Turkey's central bank.

Was the Gulf tour successful?

Everyone agrees that President Erdogan went on the Gulf tour for funding. While sources close to the government described it as a successful trip, many economists say it yielded less than expected.

According to information obtained before the trip, Maruf Buzcugil "The production and export-oriented Arab capital that will enter the country will be directed primarily towards the goal of establishing new joint production facilities by partnering with companies that have potential but face capital shortages and difficulties in international competition due to the country's economic conditions. The new supply bridges to be created will open up more stable and larger markets in international trade."

In other words, it was claimed that long-term investments were being sought rather than one-off purchases.

However, Ozgur Karabat, a member of parliament from the main opposition CHP party, described President Recep Tayyip Erdogan's trip to the Gulf and the agreements reached as a "fiasco."

Ali Babacan, the leader of the DEVA party, who was Erdogan's economy minister for a long time but left to join the opposition, said: 'Look at Erdogan's Gulf tour. We would be happy with exports. Turkey should export more, especially our defense products. More investment should come to Turkey. But it is not appropriate for Turkey to go from door to door begging for loans. Instead, we should focus on selling our goods to other countries. We have not said, 'Give us money.' Our treasury has exhausted its foreign currency reserves in the central bank.

Economist Baris Soydan also mentioned that the agreement signed with the United Arab Emirates is a significant number, but its content is unknown. Therefore, he said it was too early to comment on the issue.

According to Cuneyt Akman, an economist who spoke to DW Turkish, the outcome of the Gulf tour is far from meeting Turkey's medium and long-term capital needs. Akman emphasized that even if the $50.7 billion agreements or the hot money inflow from sukuk and bonds, estimated at around $11 billion, are fully implemented, they will not fully normalize the Turkish economy.

Akman said: "Of course, it can create a favorable market atmosphere in the short term. But such commitments from the Gulf or Russia have not worked much. In a process where the current account deficit has reached $60 billion a year, it is not possible to close these deficits with money from different sources.

Another economist, Umit Akcay, added that "Gulf finance can't curb inflation. In recent years, a $15 billion agreement was signed with Qatar, but we have officially seen that only $1.5 billion has arrived. This move aims to overcome Turkey's balance of payments problem".