August 2011, No. 60

Trade & Business

Iran's Economic Relations with Turkey Rapidly Progressing

Bilateral trade has been increasing by an annual average of about one billion dollars in the past ten years which attests to high economic potentials of Iran and Turkey.

Ŭmit Yardim, Ambassador of Turkey to Tehran

"Iranian and Turkish people belong to the same geography and culture." These were part of the Turkish President Abdullah Gűl's remarks in 2008 following a visit to the United States to confer with his former American counterpart, George Bush.

That short sentence was the gist of profound relations between Iran and Turkey which have been further strengthened by neighborhood.

During the past decade, political, economic, trade, and security relations between Iran and Turkey have entered a new phase and many factors have been influential in this regard:

•  Turkey's foreign policy approach to expansion of relations with Iran and other neighboring countries; the government of Recep Tayyip Erdogan has been trying to strengthen ties with neighboring countries since 2003. Following "zero tension with neighbors" initiative in Turkey's foreign and regional diplomacy has led to new conditions.

•  Cooperation grounds and economic infrastructures have been instrumental in increasing cooperation between Iran and Turkey. Contracts for construction of pipeline and transfer of the Iranian gas to Turkey, contract for construction of new gas trunk line to take Iran's gas to Europe via Turkey, activities of both countries' private sectors, and increase in trade volume from about one billion dollars in 2001 to about 10 billion dollars in 2011;

•  The end of distrust between Iran and Turkey (following a long period in which laic and secular parties subservient to the United States and Israel ruled Turkey);

•  New regional conditions following the war in Iraq in addition to security concerns and political considerations resulting from the situation in Iraq; status and strategic situation of Iran and Turkey and its impact on regional attitudes of both countries in addition to common political stances of Tehran and Ankara on certain regional and international issues;

•  Requisites of neighborhood and their impact on bilateral trade and economic relations in parallel to efforts aimed at increasing customs cooperation, development of investment and trade, and trade activities by both countries' private sectors; one of the main objectives of Abdullah Gül and the high ranking trade delegation accompanying him to Tehran was to facilitate trade relations and cooperation.

Iran and Turkey have experienced growing, stable ties in the past years. Bilateral trade has been increasing by an annual average of about one billion dollars in the past ten years which attests to high economic potentials of Iran and Turkey.

Exchange of economic delegations between the two countries and frequent meetings between high ranking officials of Iran and Turkey have been aimed at identifying potential strengths and grounds for further cooperation, trade and investment.

The outlook of Iran's relations with Turkey is considered quite positive in view of available grounds and suitable infrastructures.

Negotiations on a new customs protocol to facilitate bilateral trade and ease the activities of private sectors of both countries have been on the agendas of Tehran and Ankara.

The interest of Iranian and Turkish investors and businesspeople in realizing the two countries' goal will pave the way for increasing trade volume from the current figure of 10 billion dollars to 30 billion dollars in coming years.

Although Turkey has been under international pressures from the West to avoid investment in Iran's economic and energy sectors, negotiations on participation of Turkey in development projects of the Iranian gas fields are going on.

Iran needs to get part of its produced gas to Europe via Turkey to meet the needs of the European markets.

Plans to do this became more serious when European countries faced problems over importing gas from Russia and decided to find alternative sources.

Mehmet Serkan Burali, Commercial Counsellor

Iran has been bent on sending about 20 billion cubic meters of gas to Europe through Turkey to gain a secure foothold in the European markets.

Last year, Iran and Turkey were engaged in negotiations on the latter country's participation in investing 3.5 billion dollars in the Iranian South Pars gas field.

Iran's relations with Turkey are rapidly progressing compared to a decade ago.

The political will of both countries has led to expansion of bilateral relations regardless of regional and international influences.

On the other hand, Turkish politicians have decided to act more independently in their regional policies, especially toward Iran.

Expansion of relations with Iran despite US pressures on Ankara to change its mind about relations with Tehran and involvement of Turkey in solving Iran's nuclear issue by voicing its clear support for peaceful solution of that problem were major steps that have been influential in building confidence between Tehran and Ankara and have worked to boost security cooperation and supervision over common borders.

The outlook of Iran's relations with Turkey is considered quite positive in view of available grounds and suitable infrastructures.

However, to provide opportunities for the two countries' private sectors, joint economic and trade committees should work hard to identify areas for joint investment and remove customs barriers.

Every country gives priority in its own national interests when making foreign policy decisions and Turkey is no exception to that rule.

Mr. Űmit Yardim, Turkey's ambassador to Tehran maintains that Iran and Turkey should further expand economic relations. He maintains that mutual potentials have not been fully taken advantage of. The ambassador argues that the two countries have a population of about 150 million and if they made the most of all development facilities, its economic results will undoubtedly benefit that large population. Tehran and Turkey have agreed to increase trade volume to 30 billion dollars and to work toward removal of such barriers as customs regulations.

Cahit Iscen, Cultural Counsellor

The Turkish ambassador noted that about 15 million people live along common border and if customs barriers were lifted, border dwellers would benefit from expansion of economic exchanges. Turkey's ambassador to Tehran also declared his country's readiness to invest in Iran's oil, gas, tourism, textiles, and construction sectors.

In a meeting between editor in chief of Iran International and Turkey's ambassador, the two sides agreed that a special issue of Iran International should be dedicated to expanding economic relations until Iran and Turkey reach their goal of increasing trade volume to 30 billion dollars a year.

The special edition, which will be out in December 2011, is to cover all companies from Iran and Turkey that are cooperating in various fields.

Mr. Mehmet Serkan Burali, economic attachė of Turkish embassy in Tehran welcomed expansion of economic relations between the two nations and noted, "We advise the Iranians to speed up privatizations and pave the way for more competition."

He maintains that if the Iranian government paved the way for development of economic relations on the basis of free market regulations, the volume of bilateral trade can be increased to above 30 billion dollars in the near future.

Burali has stated that publishing a special edition on Iran-Turkey relations will be an effective step toward expansion of relations.