Güncel Yazılar

Disintegration of Diplomatic Relations And Economic Relations Between Turkey and Israel

Introduction

Year by year, it has been discussed what the main actors of international relations are. It was said that the states are the main actors. Then, governmental and non-governmental organizations and even individuals were accepted as actors of international system. Nevertheless, today entrepreneurs, big companies and investors are added near soldiers and diplomats as new actors who play a great role in determining international relations by both affect the global world and affect from globalization. In that point, business world became a field that moves inside and outside with its own dynamics rather than only political movements in determining the affairs internationally. Thus, while diplomatic relations, in a side, maintain with a waving structure such as peace process, high satisfaction or conflict and fighting among states, business world or economic relations with trade and investments, on the other side, has always been in the stage of international affairs in affecting the process in relations between states.

In this paper, it is covered if political relations have an influence on economic relations; investments and trade. That is, it is discussed whether there is an integration or a parallel structure between political and economical relations. If not, are they disintegrated from each other. Nevertheless, it is too complicated to generalize that there is a big influence of diplomacy on trade or they are totally disintegrated from each other. Therefore, in this paper, mostly the diplomatic relations and economic relations and their disintegrated structure between Turkey and Israel is studied. As it is seen present, Turkey – Israel relations have a waving structure. Turkish foreign policy toward Israel is changing day by day according to the agency of the Middle East and US, which are notably important for Turkish Foreign Policy. When it is overlooked with chronologic list of Israel – Turkey relations, it is possible to claim that there is high volume of trade during good relations between two countries in the forundation of Israel. However, after some political crises such as the participation of Bagdat Pact of Turkey in 1950s against Israel, the occupation of Suez Channel by Israel in 1956, sabotage and burning of el-Aksa Mosque by Israel, two oil crises in 1970s, the decision of OAPEC (Organization of Arabic Petroleum Exporting Countries) on applying embargo toward the countries which support Israel, recognition of Palestine Liberation Organization by Turkey and let this organization open an agency in Ankara by disregarding Israel, the decleration of Israel on determining Jerusalem their capital and the censure of Turkey. All of these, and more of these, are considered as political crises terms between Turkey and Israel. When we look at the process of these crises, it is easy to claim that economic relations are parallel with diplomatic relations. That is, there is no high volume of trade and high investments mutually in these terms. Thus, it is possible to say that while diplomatic relations with Israel maintains well, economic relations are high in the same level. However, tradevolume decreases whenever there is reduction in diplomacy between Turkey and Israel. Briefly, diplomatic relations and the volume of trade have a parallel structure and even are interlaced without disintegration between 1950s and 1980s. Nevertheless, recently, when we look at the present trade numbers, it is seen that although diplomatic relations of Turkey and Israel have bad mark, their mutual volume of trade seem too high. That is, there is no integration between diplomacy and trade between two countries. In contrast, the relations are mostly maintained by economic relations. That is, it is possible to claim that Turkey – Israel economic relations are not influenced by weak diplomatic relations. In contrast, two countries continue to have great number of trade volume without affected by diplomacy.

In this paper, it is mainly focused on Israel and Turkey economic and diplomatic relations, how they affect each other, and if new actor are effective in determining relations with Israel by disregarding the political crises. Therefore, it is not to claim that political relations are formed by economic relations with the great influence of globalization today. However, it is obviously seen that economic relations alone has a crucial place than diplomatic relations, especially between the relations of Turkey and Israel. Hence, it is discussed why there is high trade volume with Israel despite political crises and what the process is and estimated relations in the future.

Diplomatic Relations

The diplomatic relations between Turkey and Israel starts obviously after Turkey totally recognized Israel as a state in 1949. Mainly three basic elements are effective in determination of relations between two states. First of them can be considered as close approach of Turkey to the US and the Europe especially after 1947. Secondly, the high muslim population of turkey and being the follower of Ottoman Empire and finally the essentialities of understanding of nation-states.[1]

First of all, the main policy of Turkey was formed by its close approach to the US and Europe because of Marsahll aid and Truman Doctrine. What is more, the courage of the US played an imporatant role of being a member of NATO for Turkey in 1952. Thus, Turkey determine to which systems it ought to be close and  formed its foreign policy. In these years, it is obviously seen that Turkey start to act depending upon and in favour of the policies of US and Europe. In this framework, the perspective of the US and Europe toward Israel forms also the overview of Turkish policy toward Israel. Although Israel is a new country, it has a strong structure when it comes to international arena. The main reason of this strong structure causes from the strong activities of Jewish people and lobi movements all around the world, particularly in  US and Europe. (Mearsheimer, Walt2009,s.137). While the reason of existance of Israel depends on Europe, its maintaince of existance comes from the support of the US. Therefore, if Turkey want to have good relations and take the courage of the US and Europe, it should keep well the diplomatic relations with Israel. That is, it is easy to say that Turkey determines its policy toward Israel according to the approach of big powers of the world.

Secondly, in spite of the fact that Turkey is not the follower state of Ottoman Empire, its foreign policy is affected by Ottaman relations, culture, historical experiments and attempt to the other countries. That side of Ottoman Empire provide Turkey to establish better and closer relations with Muslim countries in the Middle East. Thus, the policy of governments during the Republic of Turkey is formed mostly as populist in both foreing and domestic policy. This approach of Turkey restricts the relations with a Jewish country, Israel.

After the battle in 1967, Israel conqured Gazza and Westsheria. This act of Israel came across with the adverse approach of Turkey to Israel. Because of Palestine policy of Israel in 1970s, Turkey-Israel diplomatic relations lived the worst term and it continued with the conquest of Israel the most of region in 1980s. Camp David Agreement which is signed in order to have a solutions in releations did not be a solution. In 1991, the relations became the level of ambassadors and many agreements that signed in 1966 in various issues such as military, technological, trade and tourism are negotiated again to be better the relations. Thus, corporation and trade partener negotiations started in that term. Nevertheless, the Davos negotiations in 2011 brought a new problem in the relations. Especially the policy of ‘one minute’ of Recep Tayyip Erdoğan, the Prime Minister of Turkey, put the close negotiations on military back again. In addition, while Turkey sees the foreign policy of Israel toward Palestine as genocide, Israil comprehends this attitude of Turkey like that Turkey humuliate Israel.  Thus, the relations continued being sensitive. (Keinan, 2009)

Economic Relations

After recognition of Israel by Turkey in 1949, economic relations started besides diplomatic relations in 1950. Israel, as a jewish state in the Middle East, was not accepted by Arabic countries during its foundation because of strict foreign policy of Israel toward Palestine and Muslims in the region. Hence they boycotted Israel with no export and import. Nonetheless, Israel was a new state and needed commercial products, raw material and briefly foreign trade. Thus, it began seeking to have economic corporations and trade partners. Turkey, in this sense, leaded the economic relations near political relations after the recognition of Israel in 1950. In that terms, Turkey became a great supplier for Israel in terms of proximity, close geographical statute, and rich sources on agricultural products and raw materials. In addition to food, construction sector or building trade presented crucial opportunities in development of economic relations. To give an example, the highway constructions that connect the airport to the city center in İstanbul was built by Salel Boneh, an Israeli company. Moreover, another Israel company built the houses of the member of parliament in Ankara. Israel also gave successful offers for the Incirlik base in Turkey. Because of these good steps for economic relations, Israel was invited to Izmir Intenational Industry Exposition in 1950 and Trade and Payment Agreement was signed in the same year in order to put trade on safe resourses. As it is seen, after recognition, good political relations reflects the economic relations, and Turkey-Israel trade partnership was rooted well.

In 1950s, economic relations continue to depend on Turkish foreign policy toward Israel. In these years, Turkish foreign policy was mostly determined by the US and Europe by the great influence of Marshall Plan and Truman Doctrine. Turkey was taking monetary aid from the US, therefore, keeping good diplomatic relations with Israel was important for Turkey not to lose the support of the US.[2] That is, close relationship with Israel was a part of Turkish foreign policy toward the US and Europe. Nevertheless, with the participation of Turkey in  Bagdat Pact with the Middle East countries in following years by disregarding Israel, Turkey – Israel diplomatic relations were interrupted. This weak diplomacy reflected economic relations, as well.  The volume of trade decreased seriously and the investments came to the end point. In these years Turkey avoided founding relations with Israel both diplomatically and economically.

The other political crises were lived when Israel occupied the Suez Channel in 1956 and sabotaged and burned al-Aksa Mosque. What is more, two oil crisis made a strong effect to come to end of the economic relations between two countries. It is easy to see that economic relations became more related with and depended on regional policy since trade volume was notably low in that period.

In 1979 Turkey allow Palestine Liberation Organization to open an agency in Ankara. What is more, Turkey supported the right of Palestine in UN. This movement of Turkey was seen as unrespectful by Isrel.

In 1981 the primary trade partners of Turkey were Libya, Iraq, Iran and South Arabia. While the ration of Isrel could not exceed 0,4%, the ration of the Middle East countries reached 40,3% within the total volume of trade of Turkey. In addition, in that year, Turkey, under the pressure of Arabic League and the Middle East countries prohibited Israel to participate in İzmir International Industry Exposition in 1981.

As it is seen, there is uninterrupted structure between diplomatic and economic relations from 1950s to 1980s. After recognition, in addition to well diplomatic relations, economic relations also were established well. Nevertheless, political crises between two countries, the influence and pressure of the Middle East, the changing foreign policy and changing mutual diplomatic interests affected economic relations, trade and mutual investments. In that term, the volume of trade between Israel and Turkey decreased in the same ration with diplomacy.

However, in these years, the Prime Minister of the term, Turgut Özal, believed that the relations with Israel could also play a negative role in the relations of Turkey with the US. Good relations with Israel could both help to put a balance in the relations with the Middle East and open an opportunity window in the relations of the US.[3]

As a result of diplomatic recruitment or political reformation, relations started to gain accleration. Many mutual visitings started between Turkey and Israel. Particularly after signing the Oslo Treaty in1993, Turkey and Israel economic relations aimed to regional peace. Minister of Economy and Planning of Israel visited Turkey with 70 businessman and these official visitings continue in the following years. Thus, trade was started to seen as a strategical tool that forms the new Middle East policy and the general foreign policy of Turkey toward Israel.

In order to develop economic relations, Turkish-Israel Business Council was established in 1993. Its main aim is to create much more mutual business opportunites both in Turkey and ISrael and also to courage businessman to make investments. The Israel-Turkey Business Council provides support to the business communities in Israel and Turkey. The Council operates with the aim of facilitating bilateral trade and investments between the two countries. With the foundation of Turkish-Israel Coulcil many trade activities are ordered in mainly Innovation, high technology, medical equipmants, agricultural products, foods and in the other sectors. Particularly in the field of banking and finance, the representators of this sector come together to improve and strongthen the economic relations between two countries by investments. Furthermore, both Turkish and Israel companies started to visit Middle Asia countries in order to improve commercial corporation thanks to this council.

Trade Agreements signed between Turkey and Israel

In these years intensively trade agreements were signed between Israel and Turkey. The most important agreement is Free Trade Agreement. Free Trade Agreement, which was signed between Turkey and Israel in order to be able to provide EU harmonization about custom and trade in 1996 and came into force in 1997, strongthen private sector volume in mutual economic relations. Having signed this agreement, the trade volume between Israel and Turkey increased 211,4%. While total trade ration of Israil in Turkey increase 0,67% in 1996, it has maintained to raise 1,85% in 2001. During the first five years of Free Trade Agreement, the mutual export of turkey rised 178,2%. Especially, export of chemical products increased 199%, export of textile product rises 2012,9% and export of transportation product increases 695%.

The other agreements that were signed between Turkey and Israel in terms of developing economic relations are followed[4]:

  • Commercial, Economic, Industrial, Technical and Scientific Corporation Agreement 14 March 1996
  • Custom Agreement- 1996
  • Double-Taxation Prevention Treaty-1997
  • Bilateral Investment Treaty –1998
  • Standartization and Harmonization Agreement-2007
  • General Corporation Agreement between TSI (Turkish Standard Institute)  and ISI (Israili Standard Institute) -2007

In addition to agreements, Turkey – Israel joint economic comissions meetings were ordered within the periods of every 4 years.

  • The 1st meeting of Turkey – Israel joint economic commission 8 February 2000
  • The 2nd meeting of Turkey – Israel joint economic commission 15 June 2004
  • The 3rd meeting of Turkey – Israel joint economic commission 7 March 2007

The Israeli – Turkish Business Council gave speed to develop economic relations between two countries with the effect of these agreements. The mutual export rises 172,8% during the first five years of these agreements.The volume of trade, as it is seen, generally demonstrates an increase year by year. While total volume of trade was 1,3 billion dolar in 2001, today it has reached 3,5 billion dolar. When we look at the exact numbers, it is said that export to Israel is 579,3 million dollar and import from Israel is 397,3 million dollar today.

Today, Turkey is the 8th biggest trade partner of Israel in the region. According to the Israeli – Turkish Business Council, there are over 900 Israel companies having business with Turks. Most of these companies have common business enterprise with Turkish companies by hiding or keeping back their names. The main reasons of high trade attempting can be seen as the attitude of both Israel and Turkey to develop their economies. First of all, Israeli companies wanted to develop business relations with Arab world over Turkey. On the other side, Turkey had a tendency to use Israel partnership and corporation as a gap to enter the US market. Thanks to the trade with Israel, Turkey could benefit from foreign trade that aims to decrease the cost of exporting goods from the third countries. Israel, furthermore, has a small national market and particularly its competitive capacity on construction and heavy industry products are low. Also, since Israel signed Free Trade Agreement with both EU and NAFTA countries, this agreement acts as a gap to enable Turkey getting into US markets. That is, US origin rules are used in Turkey thanks to the Free Trade Agreement, because with this agreement Turkey became more harmonized with the trade rules of the US and Europe. Thus, at least 35% products that are originated from Israel can be exported with free of tax. Thus, it is possible to mention both mutual interests and mutual national revenue are high thanks to the agreements and trade.

The official trade numbers with Israel both import and export with total trade amount of Turkey is demonstrated in the following table. As it is seen, there is no huge number of trade volume depending on the reduction of diplomatic relations in these years.

Turkey Import-Export Numbers between 1969-1980($)

Years

Export to Israel

Total Export Import from Israel Total Import
1969 4.534.581 536.833.567 1.732.312 801.236.328
1970 2.707.823 588.476.256 1.631.218 947.604.418
1971 6.455.198 676.601.589 1.764.690 1.170.840.475
1972 10.927.196 884.969.100 2.829.300 1.562.549.821
1973 12.329.230 1.317.083.403 2.977.003 2.086.215.921
1974 5.448.209 1.532.181.766 8.045.623 3.777.501.259
1975 3.643.399 1.401.075.185 14.672.786 4.738.558.086
1976 5.129.661 1.960.214.496 11.350.567 5.128.647.053
1977 6.444.093 1.753.026.027 22.800.263 5.796.277.813
1978 6.609.685 2.288.162.689 62.187.444 4.599.024.565
1979 6.455.301 2.261.195.302 45.227.887 5.069.431.611
1980 7.546.155 2.910.121.619 31.909.606 7.909.364.105

Political Crises and Economy

As it is seen above Turkey – Israel economic relations, on the other side, are relatively stronger recently. However, diplomatic relations have always had a waving structure. While the economic and diplomatic relations maintain in the same line until 1990s, today it is obvious that economic partnership between Israel and Turkey is over then diplomacy. When we look at the current political crises and trade numbers, we see that there is no decrease in trade numbers and mutual investments despite political problems.[5]

One of the most important examples of these crises is the occupation of Gaza and West Bank by Israel and the continuing attitude of Israel toward Palestine public. Turkey took a place near Palestine by recognizing the public as a state and supporting their rights in the United Nation.[6] Moreover, Turkey allowed Palestine Liberation Organization to open an agency in Ankara.[7] Therefore, there is a conflict between Turkey – Israel relations in terms of Palestine issue. After the occupation of Gaza and West Bank by Israel, approximately 1300 Palestian people died because of the bombardment of Israel in the region. In that case, Turkey was totally across the attitude of Israel. Therefore, diplomatic relations were deteriorated after the 2008 and 2009 Gaza War. However, when we look at the economic trade numbers of the term, we can see that there is no great decrease. In contrast, the investments and trade maintain in almost the same line.

One Minute case of the Prime Minister of Turkey, Recep Tayyip Erdoğan, in Davos Economic Forum in 2009, is another issue to consider. The forum, which was ordered in Switzerland, became a stage in which the leaders of Turkey, Erdoğan and Israel, Simon Peres, have a polemic in front of the whole publics. Their argument was resulted with Erdogan’s walk out on the forum. That was so important step in relations between Turkey and Israel diplomatically. Because, after this argument, it was considered that the relations would not be gotten better easily.

The deterioted relations continue with the adverse effect of Blue Marmara Ship (Gaza Freedom Flotilla) case in 2010.  On 2 September 2011, Turkey downgraded diplomatic ties with Israel and suspended military co-operation after the UN released its report of the Mavi Marmara raid. A statement from the Israeli prime minister’s office said, “Israel hopes to find a way to overcome the dispute and will continue to work towards this goal”. Turkey demanded an Israeli apology and compensation over the 31 May 2010 incident aboard the Mavi Marmara in which eight Turkish nationals and an American man of Turkish descent died when the vessel was stormed by Israeli commandos. The Israeli government refused to give one. Israeli officials stated that they hoped to restore ties but reiterated that they would not apologize. These processes affect the relations worse. After this sense, it is easy to claim that the relations between Israel and Turkey became to end.  U.S. President Barack Obama, during his visit to Israel said that the U.S. “attached great importance to the restoration of positive relations between Israel and Turkey in order to advance regional peace and security. However, diplomatic relations did not come to the same level after this case. The Turkish Foreign Ministry called on the international community and the United Nations to take the necessary initiatives to stop Israel’s military operation in Gaza. Yet, this invitation was not accepted by Israel and so the tension increased again between Turkey and Israel. Moreover, Turkish Foreign Minister Ahmet Davutoğlu evaluated the attack of Israel as “crimes of humanity.” Turkish Prime Minister Recep Tayyip Erdogan called Israel as a “terrorist state”. Nevertheless, again, there is not a huge decrease in trade numbers. The trade partnership was not be affected by these political crises and the investments continue like how they were before.

Because of the Gaza Flotilla case, both the publics and the investors were sad but most of them said that another solutions could be found. However, that was all. Despite this political crises and calling as terrorist state or crime of humanity, the investments continue in the similar level. Especially Israel, big companies, assumed a pose in continuing the trade partnership with Turkey in spite of the political tensions. In this matter, according to the rapport of an Israeli newspaper named Maariv Dan Katarivas, the President of Foreign Trade of Industry Community in Israel, stated that the reason of stability in trade numbers both in export and import between Turkey and Israel was depending on the disintegration of economic relations and political crises.

What is more, Israel lived the best year in terms of trade in 2009, so they did not want to allow their economy to be affected by high political tension, because national economic interests were more important for Israel.

According to the CEO of Export and Corporation Institute of Israel, Avi Hefetz, the trade between Turkey and Israel could not be interrupted because of the political crises. The The amount of Turkish goods were so high in the country in this time, so they considered that they had to maintain the economic relations in the same level.

Similarly, according to the head of Turkish – Israel Work Council, Israel that was the only modern country in the Middle East did not want to lose trade partnership of Turkey. Therefore, the trade numbers ought not to be changed highly.[8]

In the view of the head of The Community of Production of Israel, there could e some problems and misunderstandings between the governments, but business world was totally different. Trade should not be affected by these kinds of political issues.

Briefly, as diplomatic relations took a turn for the worse following the flotilla attack, Turkish and Israeli businessmen are enjoying a golden age of trade as official figures indicate that commercial bonds are stronger than ever. Bilateral trade and investments have not been affected by the political crisis. The free market wins thanks to the free trade agreement and economic growth with also the support of the governments. The threats of cancelling large infrastructure projects and other joint ventures as some politicians claim have not gone beyond words: as a matter of fact most of the projects involve private companies, furthermore boycotting of member nations is against OECD rules. When it comes to imports and exports, joint ventures and mutual investments between Turkish and Israeli businesses, it’s business as usual.

As it is seen, there is no a huge decrease in trade numbers despite the political crises and increasing tension. In contrast, the investors continue their investments in the similar level. It is seen much better in the following tables:

Turkey Import-Export Numbers Between 1981-1995 ($)

Years

Export to Israel

Total Export

Import from Israel

Total Import

1981 8.897.866 2.910.121.619 31.909.606 7.909.364.105
1982 7.657.214 4.702.934.406 14.861.511 8.933.373.864
1983 10.501.646 5.745.973.370 26.169.666 8.842.665.488
1984 8.516.621 5.727.833.673 31.737.432 9.235.002.089
1985 12.443.986 7.133.603.594 32.420.194 10.757.032.35
1986 22.255.665 7.958.009.699 33.373.500 11.343.376.34
1987 21.683.505 7.456.725.601 33.723.021 11.104.771.28
1988 40.819.754 10.190.049.41 39.684.308 14.157.806.90
1989 30.798.816 11.662.024.11 39.698.008 14.335.397.80
1990 46.504.167 11.624.691.72 60.568.853 15.792.142.91
1991 78.670.292 12.959.287.61 62.515.652 22.302.125.58
1992 89.851.380 13.593.462.02 78.045.946 21.047.013.87
1993 80.232.198 14.714.628.82 97.075.541 22.871.055.11
1994 178.077.883 15.345.066.89 121.792.906 29.428.369.53
1995 239.767.109 18.105.872.07 125.890.785 23.270.019.02

The strengthening of the private sector component of the bilateral economic relations after the free trade agreement is reflected to the following table. The number of trade volume is highly different than the years before.

Turkey Import-Export Numbers Between 1996-2011 ($)

Years Export to Israel Total Export Import from Israel  Total Import
1996 254.780.693 23.224.464.973 192.627.422 43.626.642.493
1997 391.513.896 26.261.071.548 233.681.124 48.558.720.673
1998 479.506.911 26.973.951.738 282.827.452 45.921.391.902
1999 585.238.616 26.587.224.962 298.257.111 40.671.272.031
2000 650.142.901 27.774.906.045 505.482.677 54.502.820.503
2001 805.218.561 31.334.216.356 529.489.371 41.399.082.953
2002 861.434.736 36.059.089.029 544.467.514 51.553.797.328
2003 1.082.998.166 47.252.836.302 459.488.300 69.339.692.058
2004 1.315.292.356 63.167.152.820 714.143.767 97.539.765.968
2005 1.466.913.916 73.476.408.143 804.691.519 116.774.150.907
2006 1.529.158.098 85.534.675.518 782.149.470 139.576.174.148
2007 1.658.195.864 107.271.749.904 1.081.743.961 170.062.714.501
2008 1.935.215.789 132.027.195.626 1.447.919.834 201.963.574.109
2009 1.528.459.016 102.142.612.603 1.074.726.958 140.928.421.211
2010 2.083.986.766 113.883.219.184 1.359.624.700 185.544.331.852
2011

As it is understood from the tables, despite the corruption of diplomatic relations caused from political crises between two countries, the raising trade volume did not lose its value. According to the official rates and numbers, the commercial ties are really strong. That is raising political tension could not affect the economic relations and mutual investments thanks to the Free Trade Agreement, mutual economic growth of two countries, mutual commercial interests and increasing national revenue. Although some politicians claim that mutual investments and great projects would be cancelled because of strong arguments between two countries and deterioted diplomatic relations, there was not such a case. In contrast, Turkey and Israel maintained their economic relations in the same level.

Recently, Israeli-Turkish trade rose 26% to $2 billion in first half of 2011 from $1.59 billion in the first half of 2010. According to the Israeli Chamber of Commerce, Israeli exports to Turkey rose 39% to $950 million, and imports from Turkey rose 16% to $1.05 billion. Turkey is Israel’s sixth-largest export destination. However, Israel does not keep a huge size of Turkish foreign trade amount. It has only 1% trade volume in the 100 billion dollars of total volume of trade of Turkey. Israel had 1,5% of ration in the trade of 2010 and became the 17th export destination of Turkey. Nevertheless, although trade with Israel is not so important in terms of numbers, it constitutes a great qualify for Turkey to be enable in playing in the market of US.[9]

Mutual Trade

Basicly what Turkey exports to Israel…

Iron, steel, automotive products, oil and oil products, electrical materials, chemicals, building materials, construction products, tobacco, ready wear products, textile metal, plastic and transportation products are main export products of Turkey to Israel. In addition, nowadays, there is an increase in exporting of semi-precious stones to Israel.[10]

Exportation of Israel relatively decreases 4% this year when it is compared with the numbers of last year.

What Turkey imports from Israel

Israel exports to Turkey reached an all-time high in the first quarter of 2013. The total amount of Israeli exports to Turkey, not including diamonds, reached $560 million in the first three months of 2013, It is 44% higher than a year earlier. The largest sector of Israeli exports to Turkey is in chemicals and processed petroleum products. Those two areas accounted for 75% of all Israeli exports to Turkey during the period, and exports in those two areas were up 67% from the first quarter of 2012. Exports in other areas were up 22% from a year before, and included printing equipment, robotics, agricultural and irrigation equipment, and food.

Innovation capacity of Israel economy is also notably important. Many Israel companies are good at in the field of R&D (Research and Development). Recently, it needs business partners in product development and new technology applying. Because of proximity, close geographical statute, and rich resources, Turkey is like a national market for Israel. Israel supplies many technological opportunities from computer software to medical equipment and informational technologies. Mobile phones, personal computers and plazma TVs we use today are produced with the tools coming from Israel.

A major increase in the first quarter of 2013 over a year previous was in the export of electronics, which includes machinery, electric equipment, and alternative energy systems. When it is compared to the first quarter of 2012, it is seen that Exports in those areas rose 158% because a total of $19 million of electronics exported to Turkey in the first quarter of that year.

What is more, Israel most notably supplies the equipments in the industry of agriculture and watering technology. In 2011, the export on Kibbut of Israel to Turkey increased in the ratio of 12% despite the political crises of the term. Thus, Israel’s export to Turkey keeps 28 million dollars. This increase started in 2009 and raised 25% in 2010.

According to Ramsy Gabai, head of the Israel Export Institute, the increase in Israeli exports to Turkey had more to do with Turkey’s needs for high quality products made in Israel, than in improved political relations between the two countries. However, Israel would be doing even more business with Turkey in the coming months with the improved diplomatic atmosphere.

Mutual Investments

Israel investments are mostly on the east and south east of Turkey. Hapoalim Bank, the largest bank in Israel and Bank Positive among the Israeli companies particularly have a huge amount of investment in these regions of Turkey.

Hapoalim Bank acquired the majority stake in BankPozitif. Currently, the bank is a Turkish-Israeli partnership with Bank Hapoalim 70% and C Group 30% stakes in the bank. BankPozitif is active in corporate and consumer banking areas in providing services to large corporates and medium size companies. According to the head of Pank Positive, Hasan Akçakayalıoğlu, they do not try to serve all types of companies, all individuals with an offering of all types of products. They mostly concentrate their effort to those areas that they can specialize. They are also not worried about a physical coverage accross Turkey because they operate in the three major cities of Turkey which represent about 70% of banking assets and liabilities. BankPositive is the only bank in Turkey which has a truly centralized operations structure. All its operations are centralized in one center and its own branches are paperless. Most of its sales is carried out through alternative or unconventional channels. This requires a sophisticated information technology system, effective and efficient workflows. As a result, the level of its service is the highest in Turkey and the bank serves almost all of the leading conglomerates and companies in the field they focus. The BankPositive mostly looks for those areas in which they can have a differentiated offering, an effective service level towards the client and an efficient business model for them. Turkey is also a country with a lot of unique strengths. Some of these are the young and talented people, the location of the market, the beauty of the land, the diversification of its sectors, the ability to have a dialog and connections with all countries and the list goes on. Turkey should build on these strengths easily. In addition, Turkey should continue the fiscal, social and legal reforms efforts to advance and provide a better environment for local and foreign businesses to develop. According to Akçakayalıoğlu, the banks, especially in Europe, are still in a deleveraging phase. They are still having challenges to keep their assets not to deteriorate further and they will be trying to adapt the new strict rules being implemented by the regulators. The situation of the Turkish banks is much different. Turkish banks do not have an asset problem and the assets are undisputably clean. The Turkish banks have very strong capitalization. It is more than 19%. In this sense, they are less leveraged. When bank ratings in almost all countries have been being lowered by the rating agencies in the last two years, the ratings of Turkish banks have been increased twice during the same period. Briefly, the banking sector of Turkey is a strength, not a weakness as it is in many European countries. Therefore, the financial sector has the highest share in foreign direct investments of Turkey. The global economic conditions will continue to be tough for the next few years with Turkey.

Teva, which is known as the biggest generic medicine producer of the world, completed the acquisition of Turkey’s Med Ilac through a transaction estimated at tens of millions of dollars. Thus, an Israeli company became the heart of medicine sector in Turkey.

The big sectors of Israel are seen in the graph. Israel is a country that mostly good at supplying medical equipments and health service. Therefore, the selling of Med Ilac in Turkey is a great step for Israel to take a crucial place in the sector of medicine in Turkey. Thus, trade partnership grew one more step between two countries.

According to the Minister of Energy of Turkey, Taner Yıldız, Turkey needs huge amount of investments especially in the south of Turkey in terms of energy. Turkey maintains its partnership on energy mostly with the Southern Cyprus and Israel.

More recently, in addition, a memorandum of understanding is signed by an Israeli company Better Place with Renault-Nissan in order to provide the necessary conditions for the launch of electric vehicle. Production and manufacturing has started named Fluence Z.E., the Renault/Nissan-made electric cars. Better Place has finalized a deal with Renault for the Israeli and Danish markets and agreed to purchase 115,000 Renault Fluence Z.E. Electric Sedans after having built an electric battery recharging network across both countries.

Zorlu Holding, an electricity producer in Turkey, has investments exceeding 1 billion dollars in Israel. Zorlu Energy and its partner Edeltech Ltd. of Israel signed a 273 million dollars loan accord despite strained relations between Turkey and Israel. Turkish and Israeli business ventures continue full steam ahead as witnessed by Zorlu Enerji’s 277 million dollars natural gas investments in Israel. The natural gas-fired plants are completed in the second half of 2014. The companies will meet 20% of the investment from their equity. The Ashdod and Ramat natural gas facilities Zorlu Enerji holds a 42.15 % stake in the natural gas facilities and the remaining 57.87% stake is owned by Edeltech Ltd. Thus, Zorlu Enerji received 88 million dollars for its Ashdod natural gas facility and 189 million dollars for its Ramat Negev natural gas facility from Bank Leumi le-Israel and other lenders.

In spite of the fact that the volume of trade between Israel and Turkey could not reach the given level after the process of high political tension, the trade numbers are not low as it is expected. In 2013, the investements of Zorlu Holding continue in the same ratio in the field of energy. Also, a great natural gas project is the new trade issue between two countries. Israel found a big natural gas reserve under the sea and nowadays it intends to sell it to Europe over Turkey. Zorlu Holding plays a great role in trading of this natural gas reserve. Turkey and Israel have a probability to become trade partnership on the trading of natural gas pipeline.[11] Thus, the investments increase by disregarding political crises. On this project, while Zorlu Holding has 25% shareholding, three Israeli companies have %75 ration of investment. This partnership plays a great role for both Turkey and Israel in terms of economic relations and increasing national revenue.

Nevertheless, the head of Zorlu Holding, Ahmet Nazif Zorlu, sets forth an important step for Israel in order to complete the project. According to him, political relations should become well near raising economic relations. Therefore, after the crises of Blue Marmara Ship case, Israel has to apologise from Turkey in front of the world public opinion. It seems a condition to maintain the investments in the same level.[12]

The natural gas pipeline project keeps a notably great investment. The pipeline is alone only 600 kilo meters and has costs about 2 million dollars. According to the Israeli datum, there is 425 cubic meters natural gas reserves in the region. In the probability of becoming real of these investments particularly by Zorlu Holding, Turkey can benefit from this natural gas pipeline in the huge amount. It is estimated that the pipeline carries in the volume of 8-10 billion cubic meters in every year. Is is intended that the pipeline is completed in 2016 after the whole procedures are finished for mutual trade and investments.

In that point, it is seen that economic relations do not totally disregard the political process between the countries. The investors follow the diplomatic relations closely. However, although these kinds of politic crises and increasing tension cause to put conditions and slow up the import and export, trade and investments are not interrupted or stopped completely. The main reasons of maintaining in trade and investments between two countries can be explained by mutual increasing interests and national revenue.[13]

Tourism

The main sector mostly affected from political crises is tourism. Turkey was an important tourism destination for Israelis. Before Gaza case, every year approximately 600.000 Israeli tourists come to Turkey for vacation. However, because of political crises, there was a huge reduction in tourism sector between Turkey and Israel. According to Israeli tourism officials, before the 2008- 2009 Gaza war, 560,000 Israelis vacationed in Turkey In 2008. In October 2010 Israel’s Tourism Minister Stas Misezhnikov encouraged Israelis to boycott Turkey as a vacation spot in response to Turkey’s stance on Gaza. Because of this, the number of Israeli tourists in Turkey dropped to 300,000 in 2009 and to 110,000 in 2010; it declined further to about 62,000 between January and August 2011. On the other side, similarly, according to Turkey’s Ministry of Culture and Tourism, Israelis’ share of Turkey’s total tourism declined from 3% to 0.05%. The number of Arab tourists in Turkey, by contrast, increased to about 1.4 million visitors in the first part of 2011, a jump from about 912,000 in the whole of 2009.

It is easily seen that tourism much more reflects the conducts and process of political relations. While political crises break out, the tourism numbers decrease in the similar ration. During the case of Gaza occupation, Turkey took a place near Muslims, and thus, the number of Arab tourists increased in Turkey while there is decrease amount of Israeli tourists in the same year.

However, tourism also does not stop itself. Still, tourism to Antalya rose by more than 20% from September 2010 to September 2011, and the number of Israeli visitors to Istanbul rose 13%, still well below previous peaks.

As a result, tourism is a sector affected mostly from the political crises. The main proof is the decrease in the numbers of tourist coming from Israel to Turkey during the high political tension. However, after Gaza and Davos crises, tourism started to increase again and today the numbers are almost reaching the same level.

Conclusion

In spite of the fact that economic relations had a parallel structure with diplomatic relations with Israel until 1990s, two countries understood that mutual trade is more beneficial in terms of rising national revenue and mutual interest after trade agreements. While Israel companies try to develop business relations with Arab countries, it wants to use Turkey as trade partner. The main reasons of that are seen as the concept of proximity, close geographical statue, rich sources and balancing foreign policy of Turkey in the Middle East. On the other hand, Turkey uses Israeli corporation as a gateway toward the US market. In other words, Turkey – Israel economic relations and high investments act as a gap to enable Turkey getting into US markets. Thus, most of products can be sold with free of tax to the US and Turkey can decrease the cost of exporting goods from the third countries.

Today, Turkey is the biggest 8th export partner of Israel. The investments, particularly on energy is notably high. Over 900 Israeli companies have business with Turkey in the various sector fields. The volume of trade is not low between the countries despite its political relations maintain well recently and also mutual investments continue to increase.

As it seen, economic relations with Israel are not influences deeply by low diplomatic relations and political crises such as Gaza occupation or attack to Blue Marmara Aid Ship. However, in this paper it is merely focused on whether reducing diplomatic relations have an effect on mutual trade and investments between Turkey and Israel. Hence, it is not to claim that generally economic relations, alone, has a more important place than diplomatic relations. It is not a generalization for all economic and diplomatic relations all over the world. However, when it is looked at the relation between Turkey and Israil, it is seen that economic relations maintain its dynamics with the influence of great companies and huge investments without being affected by political crises. Shortly, it is possible to say that today the actors of international relations are changing with the great effect of globalization and entrepreneurs become much more important actors of international affairs in determining the relations between states.

 Selmin Seda Coşkun, Bahçeşehir Üniversitesi, Global Affairs Yüksek Lisans Öğrencisi


[1] Arı, Tayyar; The Middle East (Politics, War and Diplomacy), Alfa Yayınları, İstanbul, 2004, İşbankası – Kültür Yayınları, İstanbul, 1989.
[2] Armaoğlu, Fahir; 20th Century Diplomatic History, İş Bankası Kültür Yayınları, İstanbul, 1989.
[3] Sandıklı,  Atilla.  Turkey’s  Strategy  in  the  Changing  World. İstanbul: BILGESAM Publications, 2009.
[4] Hudgins, Edward, “Regional and Multilateral Trade Agreements”, Cato Journal, Vol.15, Issue 2/3, Fall95/Win96
[5] Alboğa,  Aydan.  “The  Turkish-Israeli  Relationship  in  the  Post-Cold  War Era.” Master Thesis. Bogazici University, 2002.
[6] Mahmut Bali, Aykan , “The Palestinian Question in Turkish Foreign Policy from the 1950s to the 1990s”, International Journal of Middle East Studies ,Sayı:25, Şubat 1993, s. 91-110.
[7] Aras, Bülent. “Turkey and the Palestinian Question Since Al-Aqsa Intifada.” Alternatives: Turkish Journal of International Relations Vol 1 No 3 (2002): 49-63.
[8] “Turkey-Israel Business Council”, URL: http://www.israel-turkey.org/ , accessed in 3.05.2013
[9] Erhoş, Reşit Berker. “Turkish-Israeli Relations: Evaluated As A Strategic Cooperation Model.” Master Thesis. Bogazici University, 2005.
[10] Lal, Sanjaya, “Turkish Performance in Exporting Manufactures: A Comparative Structural Analysis”, QEH Working Paper Series No. 47, 2000.
[11] “Working On Natural Gas Pipeline Between Turkey and Israel”, URL: http://www.ahaber.com.tr/Ekonomi/2013/04/11/israilturkiye-dogalgaz-hattina-calisiyoruz accessed in 21.04.2013.
[12] “Israel PM Apologies For Gaza Flotilla Deaths” URL: http://www.bbc.co.uk/news/world-middle-east-21902273 accessed in 21.04.2013.
[13] Sina Kısacık, “Is it possible to make better the relations between Turkey and ISrael?”, URL: http://politikaakademisi.org/?p=3308 accessed in 21.04.2013.
Work Citeds:
-Alboğa,  Aydan.  “The  Turkish-Israeli  Relationship  in  the  Post-Cold  War Era.” Master Thesis. Bogazici University, 2002.
-Aras, Bülent. “Turkish Foreign Policy and Jerusalem: Toward A Societal Construction of Foreign Policy.” Arab Studies Quarterly Vol 22 No 4 (2000): 31-58.

-Aras, Bülent. “Turkey and the Palestinian Question Since Al-Aqsa Intifada.” Alternatives: Turkish Journal of International Relations Vol 1 No 3 (2002): 49-63.
-Arı, Tayyar; The Middle East (Politics, War and Diplomacy), Alfa Yayınları, İstanbul, 2004, İşbankası- Kültür Yayınları, İstanbul, 1989.
-Armaoğlu, Fahir; 20th Century Diplomatic History, İş Bankası Kültür Yayınları, İstanbul, 1989.
-Çağrı Erhan-Ömer Kürkçüoğlu; “The Regional Movements of Israel and Turkey”, Turkish Foreign Policy, Editor: Baskın Oran, Volume II
-Erhoş, Reşit Berker. “Turkish-Israeli Relations: Evaluated As A Strategic Cooperation Model.” Master Thesis. Bogazici University, 2005.
-Hundgins, Edward, “Regional and Multilateral Trade Agreements”, Cato Journal, Vol.15, Issue 2/3, Fall95/Win96
-Lal, Sanjaya, “Turkish Performance in Exporting Manufactures: A Comparative Structural Analysis”, QEH Working Paper Series No. 47, 2000.
-Mahmut Bali, Aykan , “The Palestinian Question in Turkish Foreign Policy from the 1950s to the 1990s”, International Journal of Middle East Studies ,Sayı:25, Şubat 1993, s. 91-110.
-Özel, Soli. “Turkey-Israel Relations: Where to Next?” On Turkey Series. German Marshal Fund of the United States: 2010.http://www.gmfus.org/publications/article.cfm?parent_type=P&id=866.
-Sandıklı,  Atilla.  Turkey’s  Strategy  in  the  Changing  World. İstanbul: BILGESAM Publications, 2009.
-Sina Kısacık, “Is it possible to make better the relations between Turkey and ISrael?”, URL: http://politikaakademisi.org/?p=3308 accessed in 21.04.2013.
-“Israel PM Apologies For Gaza Flotilla Deaths” URL: http://www.bbc.co.uk/news/world-middle-east-21902273 accessed in 21.04.2013.
-“Turkey-Israel Business Council”, URL: http://www.israel-turkey.org/ , accessed in 3.05.2013.
-“Working On Natural Gas Pipeline Between Turkey and Israel”, URL: http://www.ahaber.com.tr/Ekonomi/2013/04/11/israilturkiye-dogalgaz-hattina-calisiyoruz accessed in 21.04.2013.
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