Turkey's foreign trade with Israel keeps growing as its trade with Arab countries shrinks

From Foreign Affairs:

Hardly a week goes by without some barb or insult traded between Turkey and Israel. Turkish President Recep Tayyip Erdogan publicly slights Israel on an almost daily basis to drum up domestic political support, for example asserting that Israel’s treatment of Gaza surpasses the brutality of the Nazi regime. Things weren’t always this way. The 1990s and most of the 2000s saw warm diplomatic and political ties between Israel and Turkey. But these days there seems to be a diplomatic standstill.

Even so, despite harsh rhetoric and a suspension of top-level diplomatic engagement, Israeli-Turkish trade has grown by 19 percent since 2009, while Turkey’s overall foreign trade for the same period grew by 11 percent. Since few nations with strong trade ties escalate conflicts to the point of going to war with each other, Israeli-Turkish economic ties may signal the prospects of improved bilateral relations. With the economic and political outlook remaining bleak throughout the Middle East, the two nations have more reasons than ever to resolve their political differences—or to at least separate them from economic relations.

Better ties with Israel are especially appealing to Turkey now that it has burned its bridges with the Arab world. Ankara’s failed “zero problems with neighbors” policy has resulted in Turkey having no ambassadors in Cairo, Damascus, or Tripoli. It only appointed an ambassador in Baghdad after former Iraqi Prime Minister Nouri al-Maliki was replaced by Haider al-Abadi in September 2014. Syria suspended its free trade agreement with Turkey in December 2011, when Bashar al-Assad became Ankara’s main enemy. Since then, trade between Syria and Turkey has dropped to half a billion USD in 2014, from almost two billion USD in 2011.

In Egypt, Turkey’s refusal to recognize Abdel Fattah al-Sisi as the President of Egypt has hurt Ankara’s economic interests as well. For instance, Turkish exports to Egypt have shrunk by 10 percent between 2012 and 2014. Furthermore, Egypt did not renew the roll-on/roll-off ferryboat agreement, a trade route that circumvents expensive passage through the Suez Canal, after it expired this April, hampering the transportation of goods between the Turkish ports and Alexandria. This move cuts off Turkish goods from arriving at lucrative markets in Saudi Arabia and the Gulf countries. This agreement also allowed Turkish companies to circumvent Syrian territory controlled by the Islamic State (also called ISIS) while also bypassing the Suez Canal and therefore reducing transportation costs.

Turkish relations in Libya, too, are in a dire state. Libyan Prime Minister Abdullah al-Thani has accused Turkey of arming the ISIS auxiliaries in Libya, driving Turkish companies and expats out of the country. On top of this, Ankara’s recognition of the Islamist-controlled National General Congress over the democratically elected al-Thani government has cast a shadow over Turkish business interests in large parts of the nation.