In a surprise move by Riyadh, Saudi Arabia’s government has imposed a total ban on importing goods and a freeze on bilateral trade exchanges with Turkey. Although the real reason behind this Saudi step is totally clear, it also reflects a high degree of dissatisfaction with a major regional trade partner and is bound to have some serious economic as well as political ramifications on Turkey’s ailing economy and on President Recep Erdogan‘s internal posture.

Saudi Arabia and Turkey have often described their economic ties and trade exchanges as being strong and steadfast, as reflected by the magnitude of their $8 billion USD annual trade relationship. This is bolstered by huge bilateral investments and the sheer numbers of Saudi tourists who flock to Turkish resorts every year, as well as the large Turkish workforce operating on some key Saudi projects. Leaders of both nations often exchange visits and a number of economic and trade agreements were signed during King Salman of Saudi Arabia’s visit to Turkey in April 2016, and Erdogan’s visit to Riyadh in July 2017.

What Happened Since 2017 That Led to the Saudi Ban?

A number of incidents took place over the past few years that have influenced relations between Turkey and Saudi Arabia, both politically as well as economically. Most notable of those incidents were the failed coup attempt against Erdogan in 2016 – Ankara accused some Arab Gulf regimes, mainly the United Arab Emirates and Saudi Arabia, of supporting the coup attempt.

Then came the brutal assassination of Saudi journalist turned dissident and Washington Post columnist Jamal Khashoggi at the Saudi General Consulate in Istanbul on October 2, 2018 by agents of the Saudi government.

Ankara’s siding with and crucial support of Saudi Arabia and the UAE’s arch enemy and key Arab rival and GCC (Gulf Cooperation Council) member, Qatar, under a stifling embargo from its “sisterly” nations since June 2017, has added fuel to the raging fire of regional rivalry between Turkey on the one hand, and Saudi Arabia and the UAE on the other.

Both Riyadh and Ankara have cherished the role of leading the so-called “moderate” Islamic world for decades; a rivalry that has reached new and unprecedented levels under Erdogan and Saudi Crown Prince MBS’s firm grip on power in recent years. Both nations are deeply involved in a number of ongoing regional crises, conflicts and wars, from Syria, Iraq, Lebanon, Libya to Yemen and beyond.

How Significant is Trade Between Turkey and Saudi Arabia?

At its golden era in 2012, the trade balance between Ankara and Riyadh stood at $8 billion USD per year, however it started to decrease over the following years. Before the Saudi ban, it was believed to stand at $6 billion a year; still an indication of the large bilateral trade between the two countries. Saudi imports from Turkey totaled $3.5 billion, while its exports to Ankara stood at $2.5 billion, bringing the overall trade balance between them over the past eight years to over $50 billion. Turkey and Saudi Arabia have often expressed their aspiration to bring their bilateral trade size over the next few years to $10 billion a year, however that was before everything was brought to a sudden halt by Riyadh’s latest move.

While only 11 Saudi companies existed on Turkish soil in 2011, recent studies estimated that some 1,000 Saudi companies operate in Turkey where they have invested some $6 billion in an array of solo projects as well as some joint ventures. The sharp rise in Saudi as well as Gulf nations’ investments in Turkey came only after Ankara had amended its laws in 2012 allowing foreign investors to own their own projects in Turkey. (As Syria’s ambassador to Turkey, I was part of the intense negotiations between Arab ambassadors and Turkish authorities on this issue at the time).

Key Sectors of Saudi Investment in Turkey

One quarter of Saudi companies in Turkey, 249 in all, focus their investment in the thriving real estate sector where they have invested over $11 billion so far. Saudi Arabia retreated last year from the 12th to 17th place on the list of foreign capital investors in Turkey. It was not all Ankara’s fault; the decline was a result of Saudi Arabia’s own economic hardships exacerbated by the colossal cost of its war efforts in Yemen, for the fifth year running, and elsewhere.

Tourism is another sector where Saudis have invested heavily in Turkey over the past eight years, with over 650,000 Saudi tourists flocking into Turkey last year alone. However, the number of Saudi tourists who visited Turkey in 2018 was 35% higher than that of last year, despite the fact that many Saudis seem to have fallen in love with Turkey and have chosen to settle there, mainly in Istanbul, Trabzon, Antalya, Bursa and elsewhere.

On the other side, some 100.000 Turks work and live in Saudi Arabia which is the sixth most common destination for Turkish expats. They are spread over variety of projects, ventures, and activities including construction, restaurants, fashion, hotels and medical care. How much will they be affected by the recent Saudi ban and its ramifications remains to be seen. The only definite outcome so far, is that Saudi-Turkish ties appear to be taking an economic nosedive that is bound to affect bilateral and regional politics at least for the foreseeable future.

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