BOFIT Weekly Review 2015/49
Russia bans travel to Turkey and restricts imports
In reaction to Turkey’s shooting down of a Russian military jet on November 24, Russia’s foreign minister immediately declared a terrorist threat in Turkey and called on all Russians to avoid travel there. Russia’s state tourism agency recommended that Russian travel agencies stop arranging trips to Turkey and promised sanctions if companies continue to offer trips. Thereafter, President Putin and the cabinet issued orders affirming a ban on arranging tours and an immediate cessation of charter flights to Turkey. The explicit purpose is to protect national security and Russian citizens from criminal and other illegal activity. Increased security inspections were ordered for schedule airline flights. Russia suspended part of its bilateral agreement as regards visa-free travel of Turkish citizens to Russia from 1 January 2016.
Turkey is a top destination for Russian tourists. In 2014, Russians logged some 4.4 million private trips to Turkey, while CBR figures show they spent €5 billion (13–14 % of total Russian spending on tourism abroad) in Turkey on goods and services. Due to the Russian recession, the figures for the first half of 2015 were clearly down from 1H14, but still amounted to 1.4 million trips and purchases in Turkey for €1.7 billion. About 36 million foreign tourists visited Turkey in 2014. Russian government circles indicated that compensation to travel agencies was unlikely.
Measures aimed at goods imports were also tightened before Russia laid down the afore-mentioned orders. Russia’s consumer protection agency and the agricultural inspection agency announced that they were stepping up inspections of Turkish products. Several importers also reported there were intensified customs inspections and Turkish lorries were backed up at Russian borders. The president’s ban on imports of Turkish imports from 1 January 2016 mainly applies to some poultry products, and selected fruits and vegetables. Overall, Russia imported over €1 billion worth of fruits and vegetables from Turkey in 2014 and over €500 million in the first half of this year as Turkey has made up for part of the produce lost by Russia under its countersanctions against EU food and farm imports.
Based on the experiences with the countersanctions launched in late summer 2014, the government ordered certain ministries to track prices of the newly banned products in the domestic market. Some economists, however, estimate the import ban will raise consumer prices 2–3 %.
Next week, the cabinet will take up application of the president’s order to ban imports of Turkish services, i.e. which services and firms will be affected, as well as delivery and labour contracts. The impact of the final decision could be large as Turkish construction companies are quite active in Russia. The CBR reports that Turkey received about €2 billion last year from construction services in Russia, and this year at least 60,000 Turks were working at construction sites in Russia. Further on the services front, the president ordered authorities to intensify security inspections of Turkish ships in Russian harbours and Turkish lorries. The cabinet decided to cut sharply the quota of permits granted to Turkish road freight firms next year.
For the time being, money markets have remained rather calm about Russia-Turkey tensions.