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Turkey‘s role in the Mediterranean at the intersection of energy, economics and geopolitics.

Turkey’s economic and energy policies are linked to the country’s geopolitical ambitions in the Broader Mediterranean. A look at Ankara’s role in the region’s balance.

Turkey’s activism in the Broader Mediterranean can be read through several lenses: its intention to establish itself as the main energy hub between the Caspian Sea, the Eastern Mediterranean, the Gulf Countries and Central Europe; its ambition to be a beacon for the Sunni world, trying to enhance its political and bargaining weight; and, lastly, its use of foreign policy to distract domestic public opinion from the economic difficulties that the country is going through.

On 24 November 2021, Turkish President Tayyip Erdoğan received Abu Dhabi’s Crown Prince, Sheik Mohammed Bin Zayed al-Nahyan. After the resumption of diplomatic talks with Saudi Arabia, Turkey turned its attention to the UAE, which seemed to indicate a potential easing of existing tensions between them.

Nine years on from their last meeting, the cordial tone of the summit between two of the major players in the Near East, North Africa and the Horn of Africa peninsula seems to be justified by the tabling of cooperation agreements that will entail US$10 billion worth Emirati investments in Turkey, with a special focus on the construction of infrastructures, such as oil and gas pipelines and freight railroads. The agreements include: technological development of cyber arms, energy, trade, the environment and the construction of sea ports and maritime logistics, which will enable the inflow of direct investments as well as cooperation between the two countries’ stock exchanges and central banks. These agreements, which aim at turning Turkey and the United Arab Emirates into strategic pivots in the Near East, will have the objective to strengthen relations between Turkey and the Gulf Countries – let’s not forget the interests arising from Turkey’s military base in Qatar – which had become strained during the Libyan conflict.

Although the two countries have different regional strategies, collaborating appears to be a necessity for them from an economic perspective. Turkey’s rapprochement to the United Arab Emirates and other regional players highlights the unsustainability of its isolationism. This is also due to its current great economic difficulties, which began in 2018 and seem destined to get worse.

The structural elements that have led Turkey to change its foreign policy and seek an alliance with neighbouring countries with a view to overcoming its economic stalemate include a currency and debt crisis due to the plummeting value of the Turkish Lira, high inflation, increasing debt insolvency and the sizable duties on aluminium and steel imposed by US President Donald Trump since 2018.

The summit between Turkey and the UAE should be seen in this context. Turkey, because of its economic weakness and instability, deems it a priority to diversify foreign investors in the region and find a strong supporter in the UAE. But this is not all. During the suspension of diplomatic relations with the Emirates, Turkey turned to another relevant trade partner: Qatar. Erdoğan’s foreign policy aimed at providing Qatar with political support and military assistance as tensions with the other Gulf Countries peaked, while obtaining in exchange substantial financing for the construction of infrastructures and pipelines. However, at present, Qatar no longer seems to be able to ensure the same high financial standards, forcing Turkey to step back and focus increasingly on the UAE. On the other hand, the UAE’s interests seem to be also shifting toward increasing market diversification. As Covid-19 hit the global economy hard, the UAE was no exception, also due to its partial dependency on European and American tourist flows. In this context, the Emirates identified investing in Turkey – where the drastic drop in the value of the Lira could open market segments to ever-larger Emirati investments – as a growth opportunity. Additionally, the UAE needs to continue establishing diplomatic and economic relations with the countries in the region. After restarting talks with Iran to achieve a modus vivendi in the area, beyond the efforts made by the US Administration to rekindle the nuclear agreements, the UAE aims to develop a regional diplomacy in several directions, including towards Turkey and Iran. The joint effort of Emirati, Qatari and Saudi diplomacy appears to be aimed at proving to Iran that an overall improvement in the relations between Gulf Countries and the other Near East countries requires not only a solution to the nuclear issue, but also cooperation in settling regional conflicts. Furthermore, the UAE constitutes a strategic maritime transport logistics hub for Iran, whose total trade in goods is estimated at US$12 billion in 2021-2022.

This flurry of activity in the Gulf area and in the Near East finds its raison d’être in the foreign policy adopted by US President Joe Biden who, from the very beginning of his election campaign, supported the idea of recalibrating the US presence in the region, thereby leading to a de-escalation in hostilities and military threat. In President Biden’s agenda there is an evident effort to bring diplomacy back to a multilateral level, as opposed to the pursuit of ad hoc bilateral relations supported by his predecessor, Donald Trump. According to President Biden, “the United States is focused on an intense diplomatic effort to put an end to violence and does not intend to support actions capable of undermining efforts to defuse tensions. The Country’s internal cohesion also depends on the stability in the Middle East.”

At the same time, the manifest unwillingness of the French Presidency – currently holding the presidency of the European Council – to welcome Turkey into the European Union because of diverging views on human rights, the Kurdish question, Cyprus and Erdoğan’s aggressive politics in the Eastern Mediterranean, seems to preclude the possibility of a détente in relations between the EU and Turkey, thus making it unlikely that the country will join the Union in the near future.

In a context characterised by the resumption of diplomatic relations with the United States on one hand, and the divergence of opinions with the European Union, growing competition with the Gulf Countries and an ever-deepening economic crisis on the other, Turkey is attempting to modify its domestic and international image in every way possible.

In fact, the country is now trying to revert the isolationist policy in which it has been bogged down for years, by rekindling ties with Israeli Prime Minister Naftali Bennett and with the President of the State of Israel Isaac Herzog, as well as with Qatar and the Arab Quartet (Saudi Arabia, the UAE, Bahrain and Egypt), with the King of Jordan playing a mediating role. The gradual downscaling of the competition between the Qatar-Turkey Axis and the Arab Quartet highlights the fragility of Turkey’s foreign policy, which needs to readjust relations with its Arab competitors in order to ensure internal stability.

The 15.65 percent nosedive taken by the Turkish Lira against the US Dollar and the 13.86 percent plunge against the Euro in the last two months have increased dissent among the population. Inflation has grown considerably in the last semester, reaching a three-year peak, and economic analysts predict a further plunge in the value of the Lira in the month of February which “could be devastating for the Turkish economy”. In an attempt to stabilize internal prices, President Erdoğan took measures to lower domestic interest rates. However, over the past two months, the shortfalls of this financial adjustment have become apparent. According to the Turkish President, the weakness of the Lira is an endogenous factor necessary to convert Turkey into a full-fledged industrial power, thereby releasing the country from its dependency on short-term foreign capital inflows, which are essential when interest rates are very high.

However, the effect of this monetary and financial policy, which is reminiscent of Germany’s austerity principles, seems to be the opposite to what was expected. The price hike in commodities has increased the discomfort among voters. Energy prices have risen more than 30 percent, despite Turkey’s attempts to reduce financial costs by subsidising the construction of oil and gas pipelines. This brings to light the opportunities that are opening for foreign investors, also through the progressive devaluation of the local currency.

Within this context, the East Mediterranean Gas Forum appears to be a possible channel to find solutions not only to the EastMed gas pipeline project – which, once built, will transport natural gas from the off-shore gas fields off the Israeli and Cyprus coasts to Greece and, probably, Italy through a possible separate pipeline project called Poseidon – but also to the many problems affecting the area. Since the beginning, Ankara has been excluded from the EastMed project – which deliberately bypasses its territory – as well as from the 2020 agreement between Israel, Cyprus and Greece for its construction.

At the Forum, Turkey seemed to reach a compromise with Egypt on the two countries’ bilateral disputes. The details and scope of the agreement have not been disclosed yet, but on 27 November the Turkish president publicly announced that “from now on, there could be different developments in the relations between Ankara and Cairo. […] There is significant potential for cooperation between us and Gulf countries. Our economies are complementary to one another. We see new cooperation projects based on mutual benefit as an opportunity for joint investments.”

Aside from being a booming, 100-million-people market, Egypt can also serve as a gateway to African markets, and a potential partner in the diversification of gas supplies so as to reduce Turkey’s dependency on Russia. Bilateral negotiations between Turkey and Egypt are an important aspect of the more complex redefinition of maritime boundaries, which see Turkey’s political and bargaining weight increase in the strategic area of the Mediterranean and the Near East.

However, for a full understanding of the international scenario at hand, note should also be taken of Turkey’s growing role in the Horn of Africa, especially after its entry into the energy market of Sudan, Somalia and Ethiopia.

The geopolitical context that forms the backdrop to the diplomatic and economic relations between Turkey and Sudan is peculiar. After the Omar al-Bashir’s government was overthrown, members of the Muslim Brotherhood attempted to regain favour in the eyes of the local population and new political leadership. The Ikhwans, once representing one of the first anti-Ottoman political organisations, today appear to want to establish a country with a strong Muslim identity, which resonates with repeated statements by President Erdoğan. However, the political support recently obtained from the Turkish leader highlights the possible problems that could derive from it, such as disagreements with the economic élites and military leaders, who are traditionally hostile to the presence of Islamists in the government.

While Egypt would appear to support Sudan’s political line, mindful as it is of the unrest that the Muslim Brotherhood has caused and could still cause in Egypt, Turkey’s position is different. It immediately expressed its support for the establishment of a distinctly Muslim political force in Sudan’s government. This is because Erdoğan aims to emphasize the Muslim element in redefining the balance of power in the Near East and Africa, going beyond the Arab identity that has historically represented a barrier to Turkey’s penetration outside its traditional sphere of influence. The dialogue between Turkey and Sudan would therefore appear to be heading not only in a diplomatic and political direction, but also an economic one, with a manifest desire to cooperate in different sectors such as agriculture, railway building, mining, oil pipelines and electric power. This would put Turkey in a position to play a stabilising role in the area.

In a meeting with Mohamed “Hemedti” Mahdam Dagalo, Vice President of the Sudan’s National Sovereign Council, Turkish Vice President Fuat Oktay affirmed that his country would continue in its efforts to contribute to the prosperity of the region by deploying a Chinese-model win-win strategy. This economic partnership with Turkey is ever more necessary for Sudan in light of the transition that continues to fragment and weaken the country, as well as of Covid-19.

The road of economic cooperation with Turkey is also open for Somalia and Ethiopia, as stated in the Turkey-Africa Economic and Business Forum held in Istanbul on 22 October 2021. The debate at the summit revealed Ethiopia’s need to obtain greater support from Turkey to counterbalance the political weight of Egypt and Sudan in the dispute over the GERD – the Grand Ethiopian Renaissance Dam – and the waters of the Blue Nile. For Turkey, Ethiopia represents the main gateway to Africa, which is key to establishing a Turkish sphere of influence beyond its borders.

Furthermore, the normalization of relations between Egypt and Sudan could also depend on the extent to which Turkey will want to enter into economic and military partnerships with Ethiopia - especially after Turkey supplied the Ethiopian government with locally produced drones to counter the offensive of the Tigray Defence Forces.

Turkey’s collaboration with different African countries seems to highlight a willingness not only to expand its energy market, but also to take advantage, through a soft power approach, of their geographic positions to find new export markets for Turkish products.

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