Iran-Turkey Economic Ties: Prospects for Improvement

Iran and Turkey have long had friendly relationships, which date back to the Ottoman Empire period. This kind of relationship has been unique in the Middle East, where most of the regional countries are entangled in endless border disputes and have long been suspicious of one another. The fact that these two countries are not Arab makes their good relations more salient, despite their differences in language, culture, and religious denomination. They have not fought any wars with each other for more than 400 years and do not feel threatened in security and defense terms. In the past decade, relations between Iran and Turkey have developed, but certain mutual suspicions hinder the heightening of the level of their ties.

There are certain reasons for the appearance of such suspicions. First, since the era of Peter the Great, Russia has preferred the two countries not to have friendly relations. For instance, the former Soviet Union wanted Iran's oil pipeline to go through Russia rather than Turkey. Second, the Europeans considered Iran-Turkey geopolitical linkage as detrimental to their interests. Third, Americans have not wanted Turkey to play a crucial role in the Middle East, a stance that was claimed to be supported by the Arabs as well. Despite these obstacles, Turkey and Iran should seriously consider each other in their respective foreign policies because they could reinforce each other's security.[1]

General Features of Iran-Turkey Relations

The existing pattern in current Iran-Turkey relations, i.e. rivalry along with cooperation, is a consequence of the two nations' geopolitical location, which causes them to engage in rivalry at certain times and to cooperate at others. A variety of factors accounts for this state of affairs. First, both nations enjoy a desirable geopolitical position in the region.[2] Second, they both possess a long record of statehood. Third, Turkey and Iran pioneered the process of political reforms in the region more than one hundred years ago. Fourth, both countries possess a roughly 70 million-strong human force that is unrivaled in the Middle East and North Africa region, except for Egypt. Fifth, they both have the capacity to influence their surrounding regions. Sixth, the two countries belong to different civilizational spheres.

For various reasons, the two sides are obliged to cooperate with each other on a variety of issues and topics. First, they both face challenges in their surrounding areas. Second, transit routes of energy to Europe are of utmost importance for both nations. Third, the possible establishment of a Kurdish independent state would be detrimental to both nations' interests. Fourth, their common boundaries are some of the most stable in the region, dating back to 300 years ago. Fifth, the two countries are located in the area surrounding the Arab states, which hold deep-rooted historical misperceptions that fuel suspicions toward Turkey and Iran. Sixth, Iranians and Turks are extremely sensitive to their national sovereignty and have strong nationalist feelings among their peoples.

Obstacles in Enhanced Mutual Cooperation

There are certain factors that challenge the improvement of relations between Iran and Turkey. First of all, some analysts of regional politics believe elements of Iran’s decision-making apparatus harbor a distrust of Turkey. The main reason for such distrust can be attributed to the perception that Turkey is a close ally of the United States, a country with which Iran has had bitter relations during the past three decades, although in 2003 Turkey refused to allow the American forces to use its Incerlik military base to attack Iraq. Another factor hindering further relations between the two sides is the Iranian politicians’ perception that Israel holds strong influence over Turkey and that and that the Turkish-Israeli treaties were inherently anti-Iranian. These ties, however, are exaggerated, and the Turkish government’s criticism of Israeli atrocities against Palestinians demonstrates that Turkey is far from siding with Israel against Iran. A former Iranian ambassador to Ankara, Firouz Dolatabadi, suggested in an interview that what is said in Iran about the influence of the United States and Israel in Turkey is not consistent with reality. For this reason, he urged analysts of regional issues in Iran to amend their perceptions of Turkey.[3]

Another incorrect notion is that most of Turkey's political parties are Pan-Turkist and that, as such, they seek to intensify ethnocentrism in the region. This would threaten Iran's national security by politicizing Iran's ethnic communities. There are also linguistic and cultural differences between the two nations. Furthermore, there is a perception in Iran that the military plays the most crucial role in Turkey's political scene, whereas the domestic political environment is much more complex in Turkey than this. The result of these perceptions is that some of Iran’s political elites doubt the benefits of enhanced ties with Turkey. Some claim that the Armenian lobby is also active in affecting Turkey-Iran relations in an adverse way.

A number of experts on Turkey's foreign policy point to similar problems within the Turkish decision-making system that prevent the expansion of mutual relations. First and foremost, there is a fear among Turkish political elites of Iran's support for Islamic fundamentalism.[4] The truth is, however, that Iranians do not feel at ease with the radical Sunni radicalism, which in its ultimate form, can emerge as Al-Qaeda type organizations. Iran's bitter experience with the Taliban regime in Afghanistan and developments in Iraq have made Iranians worried about the possible rise of similar organizations in other Muslim countries with largely Sunni populations.

Another obstacle to the improvement of Turkish-Iranian relations is the Jewish lobby, which seems to be active in destroying these ties because of Iran’s anti-Israeli positions. Another problem is that there is lack of familiarity and recognition of Iran's domestic developments within Turkey's political circles, something that can be attributed to Iranian political circles with respect to Turkey's internal dynamism as well. A number of analysts suggest that Turkey's Foreign Ministry diplomats are traditionally more interested in expanding relations with the European Union rather than with their neighboring countries to the East. It is even claimed that this stance is rooted in Ataturk's foreign policy, which did not pay paramount attention to the Middle East.

Turkey also receives paradoxical signals from Iran about the elevation of current levels of relations, thus making Turkish policy-makers wary of strengthening ties. The result is the reinforcement of the anti-Iranian lobby in Turkey. However, recent developments in Iraq, the likelihood of the establishment of an independent Kurdish state in northern Iraq, the threat of terrorist activities in bordering areas, and US and European pressures on Iran over its nuclear program all have provided common grounds for Turkey and Iran to cooperate on areas of mutual concern. More importantly, Turkey never joined the American embargo and sanctions against Iran that were in place following the 1979 Islamic Revolution in Iran. It is very likely that Turkey will also refrain from joining any new sanctions against Iran. In general, the weakening of ideological preferences in both states' foreign policies has had the effect of bringing the two countries closer together, despite traditional barriers.

Iran-Turkey Trade

There is a general consensus in Iran that trade ties with Turkey will benefit Iran. It is ironic that while Iran and Turkey had very close relationships under Iran's Pahlavi regime, their economic ties were quite limited. For instance, Iran-Turkey trade amounted to 30 million US dollars before the 1979 Revolution in Iran, whereas Iran's trade with Israel surpassed one billion dollars.[5]

There was a century-long understanding in some circles of power within both countries that bilateral relations between the two nations WERE far from desirable. The competitive nature of bilateral relations along with suspicions that one party's development would weaken the other's affected the mindset of some political elites in both countries. However, both countries could and can blossom at the same time without posing any threat to the other.

Unfortunately, economic integration is extremely weak in the Middle East, and commercial exchanges are conducted at a rudimentary level. Turkey's trade with Iran constitutes only 5 percent of Turkey’s foreign trade exchanges. There is a potential for increasing this capacity, although political considerations often prevent the expansion of economic relations between the regional countries. For example, the great powers sometimes try to hinder the strengthening of economic ties among regional states, as evidenced by US efforts to prevent investment by some Turkish businessmen in Iran.

The Trade Performance of the Islamic Republic of Iran, a report released by the Trade Promotion Organization of Iran in December 2006, shows that Turkey is not among the top ten countries that are Iran's main exports and imports partners. The first three export partners of Iran are the United Arab Emirates, Iraq and China. Iran's top three import partners are the United Arab Emirates, Germany and China.

The good news is that Iran-Turkey trade exchanges have experienced a five-fold growth during the past four years, indicating the warm relations between the two nations. In 2002, the level of exchanges between the two countries reached 1.2 billion dollars and it was expected to soon hit five billion dollars. Now the total volume of mutual commercial relations surpasses 10 billion dollars, of which Iran's share of exports is six billion dollars.

Areas of Enhanced Economic Cooperation

Iran is the second largest exporter of oil and gas to Turkey. Turkey enjoys utmost importance as a transit route for Iran and Europe. Iran and Turkey can act as complimentary economies; Turkey can import a great deal of raw material from Iran and export industrial goods to the country as well. Iran and Turkey are important members of two regional cooperation organizations, the Economic Cooperation Organization (ECO) and the Developing Eight (D-8), comprising the eight most populous Muslim countries of the world. If Turkey joins the European Union, it can work as a bridge between the Union, the ECO and D-8, a step that will further enhance Turkey's status among its neighboring countries, including Iran. There are now certain debates taking place in Iran about the possible benefits that Turkey's accession to the European Union could bring to Iran and the region in general, because when that happens, Iran will become a neighbor of the European Union.

Turkey has poor energy resources, and it can become a corridor for transiting Iran's energy to Europe. Thus Turkey can invest in Iran's oil and petrochemical sectors as well as in its power plants. The Unit Company has already constructed a power plant in Zanjan, Iran, and it intends to build another one. Turkey purchases electricity from Iran, and by constructing power plants in Iran, where cheap oil and gas are found, it can meet its growing energy needs. Turkey, which imports around 15 billion dollars of petrochemical products, can also invest in Iran's petrochemical sector to secure its needs. This is because Iran has the capacity to attract 150 billion dollars of investment for its liquidated natural gas (LNG) sector. On the other hand, Turkey's steel industry is far more advanced than Iran's, so part of Iran's needs for steel is met by imports from Turkey.

Conclusion

Iran and Turkey's views of regional issues are very close together, and the two countries have similar concerns about many regional problems, such as the Iraq crisis and ethnic conflicts. Turkey and Iran are not considered national security threats for each other. Their history of bilateral relations shows that whenever Iran and Turkey have come closer together, they have become more successful because of their geopolitical linkage. The conclusion of security an agreement between Iran and Turkey, which would be a comprehensive instrument for removing the threats of terrorist activities to both countries, could pave the ground for the enhancement of reciprocal relations.

While there is always a degree of rivalry between Iran and Turkey in the region, it is possible to promote both cooperation and rivalry with a nation. Nonetheless, it is not logical to be only in conflict with neighboring countries because this leads to isolation in the regional and international stage. There is no doubt that free trade between Iran and Turkey can be beneficiary for both sides, contributing to the mutual, simultaneous flourishing of the two nations because their economies are complementary.