Turkey Israel business like usual except for tourism


The diplomatic freeze between Turkey and Israel in the aftermath of the Israeli commando raid against a Turkish aid ship continues but may have minimal effect on business ties between the two nations. Turkey is Israel’s largest commercial partner in the region, with sales worth $2.5 billion last year

Thousands of Turks protest Israel during a demonstration in Ankara on June 6, 2010.
Five miles from the center of Tel Aviv, more than a dozen Turks wearing red shirts emblazoned with their national flag work to complete a 30-story residential tower.

Manager Nissim Gayus says it’s “business as usual,” six weeks after Israeli troops killed nine activists, including eight Turks and one American of Turkish origin, on an aid convoy bound for the Gaza Strip.

While the raid has strained a political alliance of more than half a century, commercial ties between the countries survive, according to Gayus, who works at the Ankara-based Yılmazlar Construction Group.

“The private sector just hasn’t been influenced at all,” Gayus said at Yılmazlar’s Ramat Gan office outside Tel Aviv. “We’re not feeling any damage in our projects.”

Turkey is Israel’s largest commercial partner in the region, with sales worth $2.5 billion last year. Israeli Trade Minister Binyamin Ben-Eliezer and Turkish Foreign Minister Ahmet Davutoğlu met in Brussels on June 30 to discuss future relations, signaling a shared interest in repairing damage caused by the commando raid on the flotilla.

The focus on keeping trade doors open, including the one leading to Turkey’s purchase of military aircrafts, highlights the resilience of a partnership that extends from defense technology to construction. This economic cooperation contrasts with a freeze at the diplomatic level.

Turkey was among the first majority-Muslim nations to recognize Israel after its creation in 1948. The two countries are the main allies of the United States in the Middle East and they share military technology.

Acquisition of Herons

Even though Turkey has canceled military exercises involving Israel after the killings, it is pushing ahead with an acquisition of 10 Heron unmanned surveillance planes made by Israel Aerospace Industries and Elbit Systems. A Turkish delegation visited in mid-June to examine the last four drones, and the drones will be brought to Turkey for final tests this month, according to Turkish and Israeli officials.

Metals, petrochemicals and textiles are also key components of trade. Iron and steel were Turkey’s main exports to Israel in 2009, making up about one-seventh of the $1.5 billion total. Oil refineries based in Haifa said in a June 2 filing that they expect Turkey sales to be seven percent to nine percent of this year’s total revenue, which analysts estimate at 8 billion shekels ($2.1 billion). This is a similar share to 2009 proportions.

Menashe Carmon, chairman of the Tel Aviv-based Israel-Turkey Business Council and owner of Overseas Export-Import Ltd., which buys yarn and fibers from Turkey, said his operations have been stable in the past six weeks.

“When it comes to imports and exports, joint ventures and mutual investments between Turkish and Israeli businesses, it’s business as usual,” he said.

What has changed is that security advisers are deterring Israelis from traveling to Turkey, Carmon said. After thousands of Turks took to the streets chanting anti-Israeli slogans to protest the aid ship killings, Israel’s Foreign Ministry issued a travel warning classifying Turkey as a “very high and concrete threat” for Israeli travelers.

Carmon said he has received complaints from metal importers who cannot send staff to Turkey to carry out compliance tests and from Israeli exporters who cannot send technicians to install or service machines.

Israeli companies, especially in the agricultural and water technology industry, which have provided equipment to local Turkish governments in the past, may find they lose out on contracts, said Doron Abrahami, Israel’s trade attaché in Istanbul. He said at least one Turkish municipality has told its Israeli supplier that future bids will not be welcome.

A planned meeting of top executives from the largest Turkish and Israeli companies was canceled last month after the flotilla raid, business daily Referans reported, citing Zeynep Silahtaroğlu Baykal of the Turkish Industrialists’ and Businessmen’s Association, or TÜSİAD, one of Turkey’s largest business groups.

Israeli tourists stop coming

Travel companies say Israelis are no longer taking the one-hour flight from Tel Aviv to Antalya, the popular Turkish resort on the Mediterranean.

“No one is coming from Israel,” and all charter flights since May 31 have been canceled, said Arkın Şenol, deputy head of Antalya-based Kalanit Tours. “We were planning for at least 50,000 passengers for June, July and August, and, so far, nothing.”

The loss for local tourism companies will be about $80 million, Şenol said.

“The Israelis felt very close to Turkey,” said Oktay Eryener, whose Polente Tour has brought Israelis to Turkey for 20 years and now cannot find customers. “Many had been coming here for years. They have ties, know people.” Eryener said he has had to lay off all but two of his 12 Hebrew-speaking Turks.

Israeli tour companies are also suffering. The slump in travel to Turkey has been “very harmful” for Tel Aviv-based travel agent Aviation Links, Vice-President Avi Raz said by telephone. The company’s shares have slumped 28 percent since the raid, while the benchmark TA-100 Index rose 1.1 percent.

Turkish businessman Ahmet Nazif Zorlu, whose energy company has contracts to build four gas-fired power plants in Israel, said in an interview with Bloomberg HT television last week that the venture is still on course, though its fate may ultimately hinge on politics.

“We’ll continue in line with the Turkish government’s decisions about Israel,” Zorlu said of the $1 billion plan. Shares of Zorlu Enerji have fallen 3.6 percent since May 31, compared with the 5.5 percent advance of the benchmark Istanbul Stock Exchange-100 index.

Public pressure

There are political as well as economic ramifications for Prime Minister Recep Tayyip Erdoğan, who must run for re-election next year in a country where almost two-thirds of the public say his response to the Gaza deaths was not tough enough, according to a June 3 survey of 1,000 people by Ankara-based Metropoll.

Anti-Israel rhetoric has won Erdoğan votes in the past, said Adil Gür, the head of the Istanbul-based pollster A&G. When the premier stormed out of a Davos meeting with Israeli President Shimon Peres in January last year, telling him, “You know very well how to kill,” it boosted his support in local elections two months later, Gür said.

For Israel-Turkey projects such as those of builder Yılmazlar, the key to sustaining business lies in easing the tensions between the two governments.

“As long as Turkey doesn’t escalate the political tension with Israel, then we don’t expect there to be any changes to the current status,” said Gayus, the company’s general consultant and representative in Israel.