Turkey Positions Itself As Conduit For US-Russian Trade Which Bypass Sanctions

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Washington warns businesses from using Turkey to circumvent sanctions on Russia.

Written by Ahmed Adel, Cairo-based geopolitics and political economy researcher

Recently, the Turkish pro-government Yeni Şafak newspaper published an article noting that many US companies are negotiating with Turkish businesses to find ways to circumvent anti-Russian sanctions. The author of the article said that American companies which withdrew from Russia are now looking for ways to secretly resume trade with Moscow via Turkey. 

An increasing number of American companies want to evade economic sanctions against Russia and partner with Turkish companies for joint ventures. Entrepreneurs, whom Yeni Şafak communicated with, noted that the number of such proposals from American companies has increased in recent months. Topping the list of products American companies are looking to import from Russia are petrochemicals, fuels, precious metals and stones, grains, iron and steel, fertilisers, inorganic chemicals, and alcoholic beverages.

The economic observer of Yeni Safak, Ibrahim Acar, emphasised that the majority of American businesses, out of a total of about 5,000 working in Russia, have announced their withdrawal from the country following the military operation in Ukraine.

“However, some American companies continue to work in Russia. And companies that withdraw from Russia are forced to abandon this large market. Since US companies cannot quickly cover this shortfall with revenue coming from other markets, they are looking for detours to solve this problem,” Acar said.

In turn, economist Bartu Soral noted that US and EU companies that supply raw materials or intermediate products from Russia have been left in a difficult position due to the sanctions.

“There is no substitute for raw materials from Russia. These companies are forced to find a way around it because they do not want to suffer heavy losses. In this situation Turkey uses a very clever strategy. Ankara has not repeated the mistakes of the EU and maintains good relations with Russia,” noted Bartu Soral.

“European countries are now paying for this mistake with inflation, economic recession, energy crisis and political instability. The EU, first of all Germany, is facing a difficult winter. Economic problems will worsen, many top officials will resign. The EU made the big mistake of handing over control of its security to the US military. Now the EU cannot make any decisions on its own,” he added.

According to the Turkish economist, the private sector is looking for ways to circumvent Washington’s anti-Russian sanctions. In fact, the imposition of the embargo and the letter of warning sent to the Turkish Association of Industrialists and Entrepreneurs with threats and extortion is an expression of American political strategy.

“The private sector and the US government have different views on this issue. Companies are looking for different ways to continue buying raw materials and intermediate products from Russia. They can do this through Turkey. Instead of suffering a loss of profit or bankruptcy, the private sector could violate the embargo despite being aware of the threats of sanctions by US authorities. There have been similar cases before,” Soral said.

This comes as Turkey’s top business association has confirmed it received a letter from the US Treasury warning of possible sanctions if it continues doing business with Russia. Washington has already expressed that it is growing increasingly alarmed that the Russian government and businesses are using Turkey to evade Western-imposed sanctions.

Official data shows that the value of Turkish exports to Russia between May and July grew by nearly 50% from last year’s figure. Turkey’s imports of Russian oil are increasing and the two sides have agreed to transition to ruble payments for the natural gas exported by state-owned giant Gazprom.

It is recalled that US Deputy Secretary of the Treasury Wally Adeyemo paid a rare visit to Ankara and Istanbul in June to express Washington’s worries that Russian oligarchs and big businesses were using Turkish entities to avoid Western sanctions.

Meanwhile, the Turkish energy ministry said last month that Turkey and Russia had reached an agreement in principle to convert some of the payments for Russian natural gas into rubles in a move to avoid payments in US dollars, a currency that Moscow has described as “toxic.” This move also helps Turkey protect its dwindling hard-currency reserves.

This has evidently angered Washington, prompting Adeyemo to write in a letter to Turkish businesses: “Any individuals or entities providing material support to US-designated persons are themselves at risk of US sanctions.”

“Turkish banks cannot expect to establish corresponding relationships with sanctioned Russian banks and retain their corresponding relationships with major global banks as well as access to the US dollar and other major currencies,” the warning letter added.

Although Turkish officials have not formally responded to Adeyemo’s letter, Turkey has previously argued that it cannot join Western sanctions because of the heavy dependence it has on Russian oil and natural gas imports.

“Our economy is such that imposing sanctions on Russia would harm Turkey the most,” Erdogan’s foreign policy adviser Ibrahim Kalin said in June. “We have taken a clear approach. Right now, the Westerners have accepted this.”

Now it appears that not even US companies can ignore the Russian market and will use Turkey as a conduit for trade. The question now is whether Washington will clamp down on such actions or alternatively allow American companies to fail due to the anti-Russia sanctions.

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