Inside Turkey’s balancing act in Crimea

Inside Turkey’s balancing act in Crimea

Turkey has been balancing Russia and Ukraine over the status of Crimea. The Kerch Strait Bridge may give it more room to maneuver and trade with the peninsula and avoid political fallout.

Russia’s annexation of Crimea, off and on trade tensions with Russia, and Russia’s intervention in Syria have put Turkey in a vice in its continuous struggle to use the East as leverage to extract concessions from the West. The game is growing more complicated.

A friend in need

Russia is an important energy security partner and market for Turkey, Crimea is a former Ottoman possession with a suffering Turkic population of Tatars, and Russian oil diplomacy with Iraqi Kurdistan and military agreements with Syrian Kurds impinges on Ankara’s opposition to Kurdish autonomy. But Turkey has pivoted towards Ukraine to balance against Russia as the Ankara-Moscow relationship ping pongs from trade sanction to trade sanction and policy shifts regarding Syria or pleasing domestic audiences.

Even with Putin’s declaration that ties between Russia and Turkey have fully recovered, talk about deepening trade and lifting sanctions has not provided timelines for which sanctions would be lifted when. Much of the rhetoric is aimed at preserving cooperation at the Astana talks to implement safe zones in Syria without involving the United States at the negotiating table.

The most recent deals came after months of buoying restatements of positive relations between Kyiv and Ankara: a Turkish delegation visited the Crimea in November and Turkish authorities promptly scrambled to clarify that the visit was both unofficial and did not signal a shift in Turkey’s Crimea policy. Ever since, Turkish officials have adamantly maintained that they do not recognize the annexation of Ukrainian territory. According to Turkish officials, no one representing the government was present.

Crimea remains a useful bargaining chip for Turkey in its attempts to engage Russia on its own terms. Russia reportedly offered Turkish businessmen up to $12.5 billion in loans — money that had in fact already been set aside from the Federal budget for Crimea — in a propaganda push to create the impression that Crimea attracts foreign investors. Nothing has happened since, despite occasional stories from state-owned media outlets. The tactics mirror the obfuscation of FDI figures in the Russian Far East and over-enthusiastic reportage of agreements reached with China, South Korea, and Japan to create the impression of a positive business climate.

Playing both sides in Crimea

In March, Turkey and Ukraine agreed to allow visa-free free travel and have established a basis for working out issues of double-taxation and mutual investment. Both countries set a target for annual trade turnover of $20 billion by 2020, a nearly six-fold increase from their $3.7 billion in trade last year. In the run-up to the agreement, Turkish officials stressed their commitment to Ukraine’s territorial integrity and banned the transit of Turkish ships to Crimean ports immediately afterwards as a further show of support.

Since then, Ukrainian Vice Prime Minister Stepan Kubiv has gone on record that a free trade deal will be reached next year and key defense deals have been negotiated. Ukraine wants to develop its naval capabilities with Turkish help, the two countries have agreed to jointly work on satellite development, and Turkey is looking to import engines, radar technology, and technology for both ballistic and cruise missile production. That last point is particularly poignant given Russia’s developing power projection in the Black Sea region.

President Erdogan declined to decide on the possible Turkish acquisition of Russia’s S-400 missile system during his recent visit to Sochi. The price has not been settled and, aside from Turkey’s interest in demonstrating its independence to NATO, the Ukraine deals are more important for developing domestic military industries. However, Turkey would still like to trade with the peninsula. Unfortunately, legal and logistical challenges crimp any hopes of improving the lot of Crimea’s Tatar population.

A map of Crimea. Yevpatoria is in in the west of the peninsula.

Ports of no call

Ukraine’s refusal to recognize Russia’s annexation of Crimea has given Ukraine a legal means of hindering Russian attempts to expand trade for the region. The Security Service of Ukraine first barred vessels that visited Crimean ports from entering Ukrainian ones and extended the ban last February to bar all individual crewmembers of those vessels from entering Ukraine for three years. While there are inevitably vessels that ignore these edicts, any vessel caught doing so can seriously damage relations with Ukraine for other governments. The case of the port of Yevpatoria exemplifies the challenge for Russia as it manages its relations with Turkey.

Soon after the annexation, Yevpatoria was to be closed to make more efficient use of other infrastructure. The United States sanctioned all trade of goods and services as well as investment with Crimea, another burden beyond the sudden ambiguity of who had legal authority over the administration of peninsula’s ports. These sanctions led China to scrap pre-annexation plans to construct a deepwater port in Yevpatoria as part of its One Belt, One Road plan in order to preserve trade and political relations with the US and EU. Similarly, Yevpatoria was an important logistical center for imports of construction materials, consumer goods, and food because of its proximity to Ukraine’s non-peninsular ports. Now it’s becoming an underused passenger terminal. In 2016, Yevpatoria received only one vessel from Turkey. So far this year, not one Turkish ship has visited the port.

The Kerch Strait Bridge under construction

Building burnt bridges

The oft-maligned attempt to build a road and rail bridge linking Russia’s Krasnodar region near the port of Taman with the Crimean port of Kerch should circumvent some of the logistical constraints illegal annexation has posed. The project has been mired in controversy: tenders were awarded to political allies, workers have been abused, their payment has been withheld, and the project’s feasibility assessment was opaque at best. But all the same, the bridge will be a vital lifeline to restoring Crimea’s connection to the world. (The rail bridge remains an open question as even Arkady Rotenberg – who nabbed all the contracts to construct the road bridge – has been unwilling to provide the tender for its construction.)

In 2013, Crimea’s foreign trade was valued at $2.2 billion. Last year, it was $155 million. Per admittedly optimistic estimates, the road bridge should have an operating capacity of 40,000 vehicles a day. By physically linking Crimea with the Russian mainland, the bridge will allow foreign trade to legally evade the blockades at the border on the road network on the narrow isthmus connecting Crimea to Ukraine.

The bridge can also play a subtle role by giving both Russia and Turkey greater room to maneuver in their political dealings in the Black Sea region. It should be complete by the end of next year, time in which Russian-Turkish relations will likely yet again veer from better to worse. But once complete, Turkish businesses will have an outlet to trade with Crimea without violating legal prohibitions put in place by Ankara, Kyiv, and the international community for Crimea’s ports.

The Russian port of Novorossisk is only 100 kilometers from the bridge and the port of Taman’, slated for expansion, lies right next to the bridge. Crimean authorities, led by head of the republic Sergei Aksyonov, have courted Turkish businesses for several years now. Direct Turkish investment into Crimea is not realistic for the near to medium term, but Turkish companies may be able to invest or deepen business partnerships in Krasnodar as a stepping stone.

If Crimea becomes an offshore investment and tax haven within Russia as proposed by Aksyonov, Turkish businessmen may be able to better pursue any interests on the peninsula with more means to hide their duplicity from Ukraine. Legal changes in Crimea are unlikely, but must be watched carefully as the Kremlin searches for more means of reducing the role of western financial sanctions on investment prospects. Turkish investment in Ukraine is growing and will likely only grow faster with the deals reached in March. Turkey is already upping its grain imports from Ukraine to reduce its reliance on Russia and talk of a trade deal with the Eurasian Economic Union remains unlikely.

All the same, the Kerch Strait Bridge will not just help Russia’s aims in securing the peninsula but offer newer trade and investment opportunities for Turkey as it continues to play every imaginable side: Russia, Ukraine, Crimea, and the West.

Categories: Economics

About Author

Nicholas Trickett

Nicholas Trickett currently works as a think tanker in Washington D.C. He has focused and written on Post-Soviet foreign policy and energy politics, with an emphasis on Russia's Pivot to Asia, Russia's East Asian energy relations, and evolving projects in the Eurasian space such as the Silk Road or the North-South Transport Corridor. He is interested in further pursuing the development of kleptocratic networks in Eurasia and the effect the One Belt, One Road initiative is having on the political economy of Central Asia, the Caucasus, and Russia. He received an M.A. in Eurasian studies through the European University at St. Petersburg with a focus on energy security and Russian foreign policy.