Historical Context and Evolution of Turkey-Israel Relations
To understand the gravity of this development, it is essential to trace the historical contours of Turkey-Israel relations. The two countries have shared a fluctuating diplomatic relationship characterized by periods of close cooperation and times of strain. Despite political tensions, particularly during times of conflict involving Gaza, economic relations have largely remained robust. Since the mid-1990s, Turkey and Israel have benefited from a series of free trade agreements, facilitating a substantial flow of goods between the two nations and fostering economic interdependence.
However, the current imposition of trade restrictions signifies a stark deviation from this trend. Gallia Lindenstrauss, a senior researcher at the Institute for National Security Studies (INSS), highlights the abrupt shift in Turkey’s stance, noting that such actions introduce a high degree of uncertainty into the business environment, which is detrimental to sustained economic engagement.
Analysis of the Export Ban’s Immediate Impact
The immediate repercussions of the export ban are profoundly adverse for Israel’s construction sector. The industry, already reeling from the impacts of ongoing military conflicts that have exacerbated labor shortages and delayed projects, now faces a severe disruption in the supply of critical materials. With Turkey being a major source of these materials, Israeli builders must now navigate the challenges of finding alternative suppliers, likely at higher costs due to increased transportation expenses and the urgency of the needs.
Shay Pauzner, deputy director general of the Israel Builders Association, articulates the concerns of the industry, indicating that the search for alternative sources will not only be a logistical challenge but will also lead to increased costs of construction. This will invariably be passed on to consumers and could stall various infrastructure projects crucial for the nation’s development.
Broader Geopolitical Implications and International Responses
The export ban does not exist in a vacuum but is indicative of broader geopolitical dynamics. The ongoing war in Gaza has attracted international scrutiny and criticism, influencing global diplomatic and trade relations. Lindenstrauss raises concerns about the potential for a ripple effect, where other nations might emulate Turkey’s stance, leading to a more extensive economic isolation of Israel.
Moreover, the criticism regarding Israel’s handling of the conflict in Gaza has drawn sharp responses from various quarters, including Turkey, which has accused Israel of obstructing humanitarian aid. These accusations and the consequent trade sanctions underscore a deteriorating bilateral relationship that could have wider ramifications for regional stability and international diplomatic alignments.
Overview of Israel-Turkey Trade Relations
In 2023, the trade between Israel and Turkey saw a significant decrease. Turkey’s exports to Israel amounted to approximately $5.42 billion, down from $7 billion in 2022. Meanwhile, Israel’s exports to Turkey declined to $1.5 billion from $2.5 billion in the previous year. This decline is part of a broader trend that affected several of Israel’s trading relationships, not just with Turkey but also with other nations like Malaysia, Albania, Taiwan, France, the UK, and Canada.
Composition of Trade
Israel primarily imports from Turkey in categories critical for its construction industry. Over 50% of the imports fall within the quarrying, machinery, and metal sectors. Additionally, food products constitute about 8% of the imports from Turkey, underscoring the diverse nature of the goods traded between the two nations.
Alternative Markets and the Potential for Escalation
The recent restrictions have forced Israeli importers to look for alternative markets. According to Elad Barshan, CEO of the SlickChain digital supply chain platform, while alternatives exist, they come with challenges related to price and availability. Trading with East Asia involves longer supply times, potentially extending up to 60 days. European markets, while geographically closer, offer goods at significantly higher prices compared to those from Turkey.
Barshan also expressed skepticism about the potential for further escalation of trade restrictions by Turkey. Given the economic situation in Turkey, characterized by high interest rates and a need for foreign currency, industry leaders are likely to resist any government attempts to intensify economic measures against Israel.
Impact on the Turkish Economy
Despite the political tensions and the implementation of export restrictions to Israel, the overall impact on the Turkish economy appears to be limited. In 2023, Turkey’s exports reached a record high of $255.8 billion, despite a high trade deficit of $106 billion. This indicates that while the export ban to Israel is significant, it is not detrimental to Turkey’s broader economic performance.
Ongoing Maritime Trade
Interestingly, maritime trade between the two countries has continued despite the political rhetoric. Official figures from Turkey’s Ministry of Transport indicate that since the onset of the conflict on October 7, 701 Turkish ships have sailed to Israel, maintaining an average of eight ships per day. This suggests that economic interactions, particularly in maritime trade, persist even amidst heightened political tensions.
Potential Replacement Markets for Turkey
As Turkey looks to diversify its export destinations, the UAE, Russia, and Saudi Arabia have emerged as significant markets. In 2023, Turkey’s exports to these countries saw considerable increases, indicating a strategic pivot to other regional players which could potentially compensate for the reduced trade with Israel.
Israel and Turkey are competitors in several key export areas, particularly in the defense industry and in regional logistics and trade routes. Here’s a closer look at these sectors:
Defense Industry
The defense industry represents a significant area of competition between Israel and Turkey, both of which have achieved notable success in defense exports.
Israel: In 2022, Israel’s defense exports reached a record high of $12.5 billion. Prominent Israeli defense companies such as Elbit Systems, Israel Aerospace Industries (IAI), and Rafael Advanced Defense Systems have made substantial inroads in global markets. Elbit Systems was ranked 21st, IAI 29th, and Rafael 34th in Defense News’ list of the 100 largest defense companies in the world. Israel’s strength in the defense sector is augmented by its advanced technology in areas such as drones, missile defense systems, and cyber warfare capabilities.
Turkey: Turkey also set a record in defense exports with $4.4 billion last year. Turkish defense companies have been climbing in the global rankings, reflecting the country’s growing prowess in manufacturing a range of defense products, including unmanned aerial vehicles (UAVs), armored vehicles, and naval ships. Turkey had four companies listed in Defense News’ rankings, highlighting its ambition to become a major player in the global defense industry.
Regional Control of Goods and Transport Corridors
Another area of competition involves the strategic control over regional transport and logistics corridors, which are crucial for trade and military mobility.
Turkey: Historically, Turkey has positioned itself as a regional hub for trade and logistics, leveraging its geographic location straddling Europe and Asia. The Turkish government was notably upset when US President Joe Biden announced a plan for a logistics corridor that would connect Greece to India through Israel, Jordan, Saudi Arabia, and the UAE, effectively bypassing Turkey.
In response, Ankara sought to promote its own transport corridor linking Turkey with Iraq, aiming further to connect to the Persian Gulf and Indian Ocean. However, recent geopolitical developments and changes in Turkey’s export strategy, including the removal of Iraq from its list of export targets, have stalled these ambitions.
Israeli Tourism to Turkey
Tourism is another significant area where the economic interactions between Israel and Turkey manifest. Although not directly competitive, the volume of Israeli tourists visiting Turkey impacts economic relations.
Tourism Statistics: In November 2022, 68,000 Israelis visited Turkey, showcasing the country’s popularity among Israeli tourists due to its proximity, cultural attractions, and affordability. However, by November 2023, the number dramatically dropped to just 1,800. This sharp decline can be attributed to deteriorating bilateral relations and perhaps security concerns that may deter Israeli tourists. Despite this, the total number of Israeli visitors to Turkey from January to November 2023 remained high, with 762,000 tourists, slightly down from 780,000 in the same period in 2022.
These dynamics underline the complex and multifaceted nature of the competition between Israel and Turkey. Both countries continue to vie for superiority in strategic industries and regional influence, impacting their economic and political relations.
Analyzing Turkey-Israel Trade Dynamics through TurkStat Data
The data from the Turkish Statistical Institute (TurkStat) provides valuable insight into the dynamics of trade between Turkey and Israel. According to this data, Turkish exports to Israel saw a significant increase in February 2024, rising to $395.40 million from $318.77 million in January of the same year. This fluctuation in trade figures highlights the volatile nature of economic relations between the two countries, which can be influenced by various factors including political relations, economic policies, and global market conditions.
Image : 1 Year – Analysis of Trade Trends
Image : 5 Years – Analysis of Trade Trends
Analysis of Trade Trends
Historical Perspective: From 2014 to 2024, the monthly average of Turkish exports to Israel was approximately $357.43 million. This decade-long perspective shows that trade between the two countries has been substantial, underscoring the economic interdependence that exists despite political fluctuations.
Peak and Trough: The all-time high for monthly exports from Turkey to Israel was recorded in April 2022, when it reached $718.82 million. This peak period may have been influenced by specific economic agreements, high demand for certain goods, or other market dynamics. Conversely, the record low occurred in April 2021, with exports falling to $156.05 million, possibly due to the impacts of global economic conditions or significant political tensions.
Factors Influencing Trade
- Political Relations:
- The bilateral relations between Turkey and Israel have experienced ups and downs over the years, often reflecting in the trade volumes. Periods of tension tend to lead to decreases in trade, while diplomatic improvements often facilitate an increase in economic interactions.
- Economic Policies:
- Economic policies in both countries, including tariffs, trade agreements, and regulations, play a crucial role in shaping the trade landscape. For instance, changes in trade policies or the introduction of new regulations can either boost or hinder the flow of goods.
- Global Economic Environment:
- The global economic climate also affects bilateral trade. Economic downturns, fluctuations in global markets, or international sanctions can lead to decreases in trade volumes, as seen in the record low of April 2021.
- Sector-Specific Dynamics:
- The demand for specific goods, such as defense materials, construction supplies, or technological products, can vary significantly, influencing the overall trade figures between the two nations.
The trade relationship between Turkey and Israel is complex and influenced by a multitude of factors ranging from geopolitical tensions to global economic trends. The recent data from TurkStat not only provides a snapshot of this relationship but also invites deeper analysis into the factors that drive these economic exchanges. Understanding these dynamics is crucial for policymakers, businesses, and analysts who monitor and engage in the economic interactions between these two strategically positioned nations.
Legal and Economic Ramifications
The legal implications of Turkey’s export ban are also significant. The move violates existing free trade agreements between the two nations, potentially leading to legal disputes and challenges in international trade forums. Economically, while the ban primarily affects Israeli importers and consumers, it also poses risks to Turkish exporters who have relied on Israel as a key market for their products.
Long-Term Considerations and Strategic Adjustments
Looking ahead, the export ban might catalyze a strategic rethinking in Israel regarding its domestic production capabilities. As noted by Dafna Kaplansky, head of foreign trade at the Manufacturers Association of Israel, the current crisis highlights the critical need for Israel to reduce its dependence on imports, particularly from geopolitically sensitive sources. Enhancing local manufacturing capabilities could not only mitigate the risks of similar disruptions in the future but also bolster economic resilience.
In conclusion, Turkey’s export ban to Israel is a multifaceted issue with deep economic, legal, and geopolitical implications. As the situation evolves, it will be crucial for policymakers, business leaders, and international actors to navigate these complexities thoughtfully and strategically. The decisions made in response to this crisis will likely shape the regional economic landscape and influence international trade policies for years to come.
TABLE 1 – Turkey Exports to Israel
| Turkey Exports to Israel | Value | Year |
| Iron and steel | $1.19B | 2022 |
| Vehicles other than railway, tramway | $562.98M | 2022 |
| Plastics | $516.24M | 2022 |
| Electrical, electronic equipment | $384.59M | 2022 |
| Articles of iron or steel | $377.22M | 2022 |
| Machinery, nuclear reactors, boilers | $365.08M | 2022 |
| Pearls, precious stones, metals, coins | $313.07M | 2022 |
| Articles of apparel, not knit or crocheted | $306.26M | 2022 |
| Salt, sulphur, earth, stone, plaster, lime and cement | $282.45M | 2022 |
| Furniture, lighting signs, prefabricated buildings | $229.99M | 2022 |
| Paper and paperboard, articles of pulp, paper and board | $210.07M | 2022 |
| Aluminum | $186.19M | 2022 |
| Articles of apparel, knit or crocheted | $159.71M | 2022 |
| Stone, plaster, cement, asbestos, mica or similar materials | $152.06M | 2022 |
| Glass and glassware | $138.50M | 2022 |
| Copper | $138.20M | 2022 |
| Ceramic products | $137.84M | 2022 |
| Cereal, flour, starch, milk preparations and products | $78.00M | 2022 |
| Edible vegetables and certain roots and tubers | $75.33M | 2022 |
| Animal, vegetable fats and oils, cleavage products | $71.23M | 2022 |
| Other made textile articles, sets, worn clothing | $67.92M | 2022 |
| Carpets and other textile floor coverings | $61.24M | 2022 |
| Miscellanneous manufactured articles | $58.93M | 2022 |
| Soaps, lubricants, waxes, candles, modelling pastes | $56.22M | 2022 |
| Inorganic chemicals, precious metal compound, isotope | $49.15M | 2022 |
| Mineral fuels, oils, distillation products | $49.12M | 2022 |
| Edible fruits, nuts, peel of citrus fruit, melons | $44.22M | 2022 |
| Wood and articles of wood, wood charcoal | $43.67M | 2022 |
| Miscellaneous chemical products | $43.51M | 2022 |
| Rubbers | $41.06M | 2022 |
| Footwear, gaiters and the like, | $39.18M | 2022 |
| Vegetable, fruit, nut food preparations | $38.42M | 2022 |
| Fish, crustaceans, molluscs, aquatics invertebrates | $37.83M | 2022 |
| Essential oils, perfumes, cosmetics, toileteries | $35.68M | 2022 |
| Cocoa and cocoa preparations | $34.23M | 2022 |
| Sugars and sugar confectionery | $31.55M | 2022 |
| Knitted or crocheted fabric | $31.55M | 2022 |
| Miscellaneous edible preparations | $31.24M | 2022 |
| Beverages, spirits and vinegar | $27.18M | 2022 |
| Tanning, dyeing extracts, tannins, derivatives, pigments | $24.05M | 2022 |
| Manmade staple fibers | $22.93M | 2022 |
| Wadding, felt, nonwovens, yarns, twine, cordage | $22.81M | 2022 |
| Miscellaneous articles of base metal | $21.78M | 2022 |
| Organic chemicals | $19.57M | 2022 |
| Milling products, malt, starches, inlin, wheat gluten | $19.30M | 2022 |
| Tobacco and manufactures tobacco substitutes | $18.46M | 2022 |
| Manmade filaments | $16.06M | 2022 |
| Cereals | $15.37M | 2022 |
| Optical, photo, technical, medical apparatus | $13.59M | 2022 |
| Dairy products, eggs, honey, edible products | $13.06M | 2022 |
| Articles of leather, animal gut, harness, travel good | $12.54M | 2022 |
| Fertilizers | $11.95M | 2022 |
| Residues, wastes of food industry, animal fodder | $11.68M | 2022 |
| Meat, fish and seafood preparations | $9.55M | 2022 |
| Cotton | $9.47M | 2022 |
| Oil seed, oleagic fruits, grain, seed, fruits | $8.00M | 2022 |
| Toys, games, sports requisites | $7.37M | 2022 |
| Printed books, newspapers, pictures | $6.78M | 2022 |
| Albuminoids, modified starches, glues, enzymes | $6.47M | 2022 |
| Ores slag and ash | $5.87M | 2022 |
| Tools, implements, cutlery of base metal | $5.40M | 2022 |
| Coffee, tea, mate and spices | $4.68M | 2022 |
| Special woven or tufted fabric, lace, tapestry | $4.65M | 2022 |
| Pharmaceutical products | $4.17M | 2022 |
| Raw hides and skins (other than furskins) and leather | $3.19M | 2022 |
| Impregnated, coated or laminated textile fabric | $3.10M | 2022 |
| Railway, tramway locomotives, rolling stock, equipment | $1.94M | 2022 |
| Headgear and | $1.27M | 2022 |
| Explosives, pyrotechnics, matches, pyrophorics | $1.18M | 2022 |
| Bird skin, feathers, artificial flowers, human hair | $852.94K | 2022 |
| Zinc | $844.49K | 2022 |
| Ships, boats, and other floating structures | $800.02K | 2022 |
| Arms and ammunition, parts and accessories | $582.38K | 2022 |
| Aircraft, spacecraft | $489.09K | 2022 |
| Commodities not specified according to kind | $472.84K | 2022 |
| Clocks and watches | $417.56K | 2022 |
| Umbrellas, walking-sticks, seat-sticks, whips | $378.70K | 2022 |
| Musical instruments, parts and accessories | $333.10K | 2022 |
| Vegetable textile fibers not specified elsewhere, paper yarn, woven fabric | $302.14K | 2022 |
| Lead | $225.33K | 2022 |
| Live trees, plants, bulbs, roots, cut flowers | $192.04K | 2022 |
| Base metals not specified elsewhere, cermets. | $189.38K | 2022 |
| Cork and articles of cork | $110.03K | 2022 |
| Lac, gums, resins | $95.86K | 2022 |
| Meat and edible meat offal | $92.12K | 2022 |
| Furskins and artificial fur, manufactures | $84.98K | 2022 |
| Manufacturers of plaiting material, basketwork | $83.42K | 2022 |
| Nickel | $83.11K | 2022 |
| Vegetable plaiting materials, vegetable products | $80.35K | 2022 |
| Works of art, collectors’ pieces and antiques | $75.05K | 2022 |
| Wool, animal hair, horsehair yarn and fabric | $72.9K | 2022 |
| Products of animal origin | $43.71K | 2022 |
| Photographic or cinematographic goods | $13.42K | 2022 |
| Live animals | $13.28K | 2022 |
| Tin | $8.70K | 2022 |
| Silk | $5.36K | 2022 |
| Pulp of wood, fibrous cellulosic material, waste | $3.69K | 2022 |
TURKEY INDICATORS
| Turkey | Last | Previous | Highest | Lowest | Unit |
| Balance of Trade | -7520.00 | -6770.85 | 187.98 | -14289.73 | USD Million |
| Current Account | -2556.00 | -2126.00 | 4104.00 | -10423.00 | USD Million |
| Current Account to GDP | -5.40 | -0.90 | 1.90 | -9.00 | percent of GDP |
| Imports | 30100.00 | 27852.81 | 34115.37 | 15.00 | USD Million |
| Exports | 22580.00 | 21081.96 | 23547.90 | 7.10 | USD Million |
| External Debt | 499886.00 | 481321.00 | 499886.00 | 43911.00 | USD Million |
| Terms of Trade | 86.08 | 84.75 | 147.63 | 72.34 | points |
| Capital Flows | -4388.00 | -4010.00 | 7846.00 | -17427.00 | USD Million |
| Foreign Direct Investment | 399.00 | 804.00 | 6571.00 | 46.00 | USD Million |
| Remittances | 10.00 | 7.00 | 574.00 | 7.00 | USD Million |
| Tourist Arrivals | 2294579.00 | 2047158.00 | 7148044.00 | 24238.00 | |
| Tourism Revenues | 12273.00 | 20230.00 | 20230.00 | 294.00 | USD Million |
| Gold Reserves | 540.19 | 478.97 | 583.30 | 116.04 | Tonnes |
| Natural Gas Imports | 204441.00 | 249731.00 | 256824.00 | 76260.00 | Terajoule |
| Crude Oil Production | 89.00 | 85.00 | 89.00 | 38.00 | BBL/D/1K |
| Weapons Sales | 398.00 | 438.00 | 438.00 | 0.00 | SIPRI TIV Million |
| Terrorism Index | 4.17 | 5.60 | 8.18 | 4.17 | Points |
ISRAEL INDICATORS
| ISRAEL | Last | Previous | Highest | Lowest | ||
| Currency | 3.77 | 3.73 | 5.01 | 2.92 | apr-24 | |
| Stock Market | 1953 | 1986 | 2158 | 361 | points | apr-24 |
| GDP Growth Rate | -5.62 | 0.45 | 9.21 | -8.17 | percent | Dec/23 |
| GDP Annual Growth Rate | -4 | 3.4 | 16.34 | -7.86 | percent | Dec/23 |
| GDP Growth Annualized | -20.7 | 1.4 | 40.4 | -30.7 | percent | Dec/23 |
| Unemployment Rate | 3.3 | 3.2 | 11.4 | 2.8 | percent | feb-24 |
| Inflation Rate | 2.5 | 2.6 | 486 | -2.7 | percent | feb-24 |
| Interest Rate | 4.5 | 4.5 | 17 | 0.1 | percent | apr-24 |
| Balance of Trade | -2822 | -1799 | 114 | -5178 | USD Million | feb-24 |
| Current Account | 10541 | 4652 | 10541 | -1750 | USD Million | Dec/23 |
| Current Account to GDP | 5 | 3.9 | 5.4 | -8.4 | percent of GDP | Dec/23 |
| Government Debt to GDP | 60.7 | 67.9 | 284 | 58.8 | percent of GDP | Dec/22 |
| Government Budget | -4.2 | 0.6 | 2.7 | -16.1 | percent of GDP | Dec/23 |
| Business Confidence | 16 | 14.05 | 44.6 | -39.48 | points | mar-24 |
| Consumer Confidence | -25.2 | -27.62 | 15.09 | -38.47 | points | mar-24 |
| Corporate Tax Rate | 23 | 23 | 36 | 23 | percent | Dec/23 |
| Personal Income Tax Rate | 50 | 50 | 50 | 45 | percent | Dec/23 |
