[News Analysis] Businesses across four sectors fear deep repercussions of Turkey-Russia crisis

Accusatory statements between leaders and arguments over apologies have deepened the rift.

The signature of Russian President Vladimir Putin on a decree that is to go into effect immediately will stop chartered planes from traveling from Russia to Turkey and impose a ban on a yet-to-be-determined list of imports. This will see the Turkish economy lose billons of dollars and will affect the tourism, construction, transportation, textile, food and energy sectors.

Turkish contractors who started working in Russia prior to the collapse of the Soviet Union have completed projects valuing $60 billion or above (at this point). The money and experience that Turkish construction companies have gained in Russia have ensured its strong position in the international market.

After Jan. 1, 2016, the Turkish workers who will be banned from going to Russia to work for Turkish construction firms will leave the those Turkish companies in a tough position. It includes engineers, skilled laborers and journeymen, and their absence will make completing major projects in Russia difficult. Most of the companies are building projects on state tenders, however, from this point forward, Turkish contractors will face difficulties in receiving such tenders. The companies will suffer a blow from Russia’s decision and will see their business in Turkey and other countries weakened as a result.

The second major problem is the textile sector. Turkey learned exporting from customers coming from Russia to purchase large amounts of textiles. Textile producers, who began by importing wholesale to the Russian markets, currently operate around 1,000 stores in Russia, supplying directly to customers. The sector’s essential problem is transportation and logistics. The limits and customs issues that Turkish trucks are to face will result in a doubling of costs and will reduce the competition of the Turkish sector on the market. Turkey’s annual textile and ready-made clothing exports stand at around $1 billion. However, together with the “suitcase trade” and exports conducted via third-party countries, the figure is much higher. Losses will occur across a larger geography including Russia, Kazakhstan, Belarus and other former Soviet states.

The tourism industry will be the third sector to suffer from losses. In 2014, a record 4.3 million tourists from Russia visited Turkey, yet this number is expected to fall to 3.5 million by the end of this year. Russian tourists bring $4-5 billion a year to the Turkish tourism sector, but with the sanctions, chartered plane ticket and package tour sales have come to a halt. In 2016, if only 1-2 million Russians visit Turkey, the sector will face bankruptcy.

The fourth sector in question, and the one that will be affected the fastest, is the food sector. Turkey imports about $1.5 billion in food to Russia.

The 3,000 companies that have invested $12-14 billion in Russia are at their wit’s end. The future of Russia’s $10 billion worth of investments in Turkey and the $20 billion Akkuyu nuclear plant that Moscow is building in the province of Mersin have been called into question. No one can guarantee that Russia will not impose even harsher measures.

Russia, which has adopted an import substitute model, can easily compensate for Turkish goods with local and other markets. It doesn’t look like Putin and President Recep Tayyip Erdogan will contact each other in the short term for a solution to the crisis. In order to sit at the table with Russia, Turkey needs to utilize all of its civil and diplomatic means with Kazakhstan and other third-party countries, as Russia’s decisions have been made quickly and are not likely to change easily.