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Turks and Israelis lose trade ban amid war with Hamas

Turks and Israelis lose trade ban amid war with Hamas

 


Following Turkey's decision to suspend trade with Israel, Turkish businesses are bracing for a financial hit and Israeli companies are seeking alternative sources for their imported products.

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Bulent Gultekin, former governor of the Turkish central bank, said The media line that the ban would be disruptive for companies specializing in sectors that trade with Israel.

For more stories from The Media Line, visit themedialine.org.

“This is an important matter for them, and they will suffer the consequences,” he said.

Turkey's Commerce Ministry announced the ban Friday, saying the country would not resume trade with Israel until Israel allows “uninterrupted” aid to Gaza.

In the past, trade between the two countries has continued even during diplomatic crises.

The Turkish-flagged container ship Bernard A of Arkas Holding sails through the Bosphorus, en route to the Black Sea, in Istanbul, Turkey, July 24, 2018. (credit: REUTERS/MURAD SEZER)

According to the Economic Complexity Observatory, Turkish trade with Israel reached $7 billion in 2022, up from $288 million in 1995. Agricultural products, such as cars, steel, clothing and electronics , are among the main products exported by Turkey to Israel.

Exporting companies are looking for alternatives

Reuters reported Friday that some exporting companies were looking for other ways to get their products to Israel. One chocolate company told Reuters the ban would cause “significant material loss.”

Gultekin, a finance professor at the University of Pennsylvania's Wharton School of Business who often visits Turkey, said the low price of Turkish exports is part of their appeal to Israel. Shipping items from Turkey to Israel is cheaper than shipping items from more distant countries like China.

After Bloomberg first reported the decision on Thursday, citing unnamed Turkish sources, Israeli Foreign Minister Israel Katz posted on the social media platform ports for Israeli imports and exports.

Several decades ago, Turkey and Israel signed a free trade agreement that took effect in 1997, eliminating tariff and non-tariff barriers.

Yigal Maor, a professor of maritime and port economics at the University of Haifa, told The Media Line that the Israeli government plans to file complaints with international financial organizations like the World Trade Organization over the ban.

“[It] It appears that many international procedures and agreements have been broken with this instruction,” he said.

In addition to raising prices for consumers, Maor said, Turkey's decision to suspend trade with Israel will damage Israeli companies' long-term confidence in the Turkish market, with effects that will last beyond of the end of the current war with Gaza.

Before the war in Gaza, Turkey and Israel experienced a rapprochement centered on economic relations. Ankara was particularly interested in developing ties in the energy sector.

Turkish President Recep Tayyip Erdoan's criticism of Israel has intensified as the war between Hamas and Israel has dragged on. Yet trade continued despite massive anti-Israel protests in Türkiye.

Erdogan's ban is partly because last month's national local elections shifted the balance of power within the Turkish government. The New Welfare Party, a hard-line Islamist party, received more than 6 percent of the vote, leading to fewer votes for Erdoan's Justice and Development Party and massive gains for secular opposition.

The New Welfare Party allied itself with Erdoan's party in last year's presidential and legislative elections, but in local elections it turned against it, criticizing continued trade between the Turkey and Israel.

“It was very difficult for Erdoan, so he was embarrassed by this dissident Islamist political party,” Gultekin said.

The blow to Turkish exporters comes after several years of economic difficulties in the country, including a free fall in the currency and a massive rise in the cost of consumer goods. Türkiye's official inflation rate reached 68.5% in March.

Nonetheless, the struggling economy received a boost last week when rating agency S&P raised Turkey's credit rating from B to B+.

Gultekin said the new rating was likely due to a change in government, with new officials steering the economy toward more orthodox policies, including raising interest rates to combat inflation.

“There is an improvement. … But there’s still a long way to go to feel comfortable,” Gultekin said.

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