How Iran-Turkey Trade Has Been Upended by Trump and Covid-19
Donald Trump’s sanctions and the coronavirus have dramatically shifted a commercial relationship between Turkey and Iran that was underpinned by visa-free travel and centuries of trade and cultural ties.
The land crossing between the two countries has long been vital for Iran’s efforts to access foreign goods, particularly under sanctions that cut its economy off from much of the world. For decades, Turkey bought Iranian oil and gas, and Iran sent tourists and imported Turkish goods.
Then in 2018, Trump withdrew from the Obama-era nuclear deal, which was drafted to give economic relief to Iran in exchange for curbs on its enrichment program. By the following year, Turkey said it had stopped buying crude from Iran, its largest supplier. Gas imports also plunged as Turkey took advantage of lower costs while seeking to reduce dependence on Iran and Russia.
Now, bilateral trade between the two neighbors has dwindled while the amount of Iranian capital tied up in Turkey has soared.
- Since the collapse of the nuclear deal and the huge drop in Iran’s oil exports -- the country’s single largest source of foreign currency -- thousands of Iranians have transferred their assets into Turkish property. For the first time this year, after the coronavirus outbreak, Iranians overtook Iraqis as the top foreign buyers of homes in Turkey, holding the spot for eight consecutive months.
- Iran-to-Turkey gas flows are down year-on-year after an explosion blamed on the Kurdistan Workers’ Party took the pipeline offline for about three months. But even in August, the latest month for which data is available, flows were about 30% below the five-year average, according to Turkish energy regulator EPDK. Turkey’s push for alternative supplies including a new LNG terminal, pipelines with Russia and Azerbaijan and its gas find in the Black Sea, could squeeze Iran’s exports in upcoming contract renewal talks.
- Iran usually runs a wide trade surplus with Turkey, but since Trump withdrew from the nuclear deal in 2018, volumes have shrunk and Iran is on track to post a deficit this year for the first time since 2016, according to data from the Turkish Ministry of Trade. Total trade declined 38% from 2016 to 2019.
©2020 Bloomberg L.P.