Eclipse, the private luxury yacht of Russian billionaire Roman Abramovich, anchors at the Marmaris cruise port in Muğla, Turkey, on March 23, 2022.
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The wealth of a Russian oligarch is looking for a new home, and Turkey has quickly established itself as a welcome guest.
Turkish Foreign Minister Mevlut Cavusoglu told CNBC on Saturday that he would welcome sanctioned Russian oligarchs into the country as tourists and investors as long as their business dealings respect international law.
It comes a day after President Recep Tayyip Erdogan said that “some capital groups” might “park their properties with us”, which was seen as a direct reference to the recent arrival in Turkey of several Russian-owned assets, luxury hotels, including two luxury hotels. hotels. yachts and a private jet owned by billionaire Roman Abramovich.
The comments sparked speculation that Turkey, a non-EU but NATO member, may actively encourage investment from blacklisted billionaires as it seeks to bolster its struggling economy. Wealthy Russians are already actively seeking investment there, according to Reuters.
But any potential benefit could be short-sighted for a country orchestrating a delicate balance between Russia and the West.
“Attracting Russian money could harm Turkey in the long run,” Defne Arslan, senior director of the Atlantic Council in Turkey and former economist at the US embassy in Ankara, told CNBC.
Find the right balance
Turkey is keen to draw a fine line in the ongoing war in Ukraine.
While sharply critical of the unprovoked invasion of Moscow, he refrained from imposing sanctions like those imposed by the US, EU, UK and others, saying he opposes them as a matter of principle.
Instead, he took on the role of a neutral mediator facilitating peace talks between Russia and Ukraine. Talks in Istanbul on Tuesday appeared to have raised hopes of a breakthrough after Moscow agreed to scale back its military offensive against Kyiv and Chernihiv and Ukrainian negotiators offered to accept neutral status in exchange for security guarantees.
Turkey’s position of nominal neutrality is widely known given its close economic and diplomatic ties with Russia, including in energy, defense, trade and tourism. As such, Turkey has not been pressured by Western allies to adhere to the sanctions and is unlikely to be punished for doing so.
This makes it a legitimate outpost for assets owned by Russians under sanctions. Indeed, an influx of foreign investment and luxury goods could be a boon to Turkey’s beleaguered economy, which entered crisis mode last September as unorthodox cuts in interest rates pushed up already soaring inflation.
However, Western tolerance is likely to wane if Turkey actively pursues the sanctioned wealth, said Emre Peker, director and Turkey specialist at political risk consultancy Eurasia Group.
“If they park their yacht, it’s okay,” Pecker said. “But Ankara will be well aware of the fact that Turkey will become a reason for sanctions, and will make sure that this does not happen. »
The Turkish Embassy in London did not respond to a CNBC request for comment.
Turkey can hardly afford to impose secondary sanctions, given the pressure that the war and the resulting Russian sanctions have already put on its economy.
Inflation reached a 20-year high of 54.4% last month as the pound sterling fell and commodity prices surged. Data that fully reflects the impact of the war has not yet been published.
“The Russian attack on Ukraine makes Turkey’s economic situation even more dangerous,” Peker said.
“The consequences are clear,” he continued. “Inflationary pressures are higher, which will destabilize the Turkish economy. The impact of the sanctions will reduce or halt tourism from Russia and Ukraine, which account for about a third of inbound tourism. And this will affect Turkish investments in Ukraine and Russia. »
Meanwhile, Erdogan is keen to maintain Turkey’s reputation as an independent mediator in the ongoing conflict, seeking to curry favor both at home and abroad ahead of the 2023 elections.
“Erdogan is desperate to qualify for next year’s elections,” Timothy Ash, senior sovereign emerging markets strategist at BlueBay Asset Management, told CNBC.
Starbucks advertisement on a highway near Istanbul, Tuesday 17 October 2017
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However, there are opportunities for Turkey to strengthen its economy and capitalize on the influx of wealth from Russia without drawing political and economic ire.
This includes attracting investment from some of the 450 Western brands that have already left Russia, Arslan of the Atlantic Council said.
“If all goes well, I think this could be a huge opportunity for Turkey to not only stay in line with Western allies, but also potentially attract investment from foreign companies,” she said, pointing to the similarities between Russia and Turkey’s geography and manufacturing lines. other factors.
Indeed, Erdogan said last week that “Turkish doors are open” to companies wishing to move their activities outside of Russia.
“Not only American companies are leaving Russia, but also many brands and groups around the world. Of course, our doors are open to those who come to our country,” he said.