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Despite Tension Israel and Turkey Continue their Economic relations

Israeli business executives here in Istanbul like to point out that
most of the angry Turks who protested Israel’s deadly raid on a Turkish-led flotilla to Gaza this past spring do not know that their cellphones, personal computers and plasma televisions were made using parts and technology from Tel Aviv.

For Menashe Carmon, chairman of the Israel Turkey Business Council, such ignorance is a blessing for Israelis and Turks. “Turks would find it very hard to boycott Israeli goods because you won’t find any in Turkish supermarkets,” Mr. Carmon said.

“But most of the software Turks use in everything from cell phones to medical equipment is made in Israel. So unless Turks want to stop using their computers, boycotting Israel would mean punishing themselves.”

After the raid, in which nine Turkish citizens were killed on May 31, Turkey demanded an apology that it has yet to receive. It barred Israeli military planes from Turkish airspace, while its Islamist-inspired prime minister said the world now perceived the Nazi swastika and the Star of David together, according to the Hurriyet Daily News, a Turkish newspaper critical of the government.

Israelis, meanwhile, stung by the raw contempt of their former ally in the region, vowed to keep away from Turkey.

But when it comes to the real economy, business pragmatism is trumping political tensions. “No Israeli companies are leaving Turkey,” said Mr. Carmon, an Israeli entrepreneur who was raised in Istanbul. “It is business as usual and if anything, investment is growing.”

In the short term, the flotilla raid has produced some inevitable economic fallout.

The widespread cancellations of holiday bookings by Israelis will cost Turkey some $400 million, analysts say. Turkey, meanwhile, said it would scrutinize all military cooperation, potentially depriving Israeli companies of billions of dollars in lucrative contracts.

Yet Israeli companies selling everything from computer software to water irrigation systems in Turkey insist that they have not been affected by recent events. In part, that is because they operate mostly in joint ventures with Turkish companies, making their Israeli identities invisible.

It is a sign of the times that not a single Israeli company doing business here was willing to be quoted by name for fear that they or their Turkish customers could be hounded.

Bilateral trade between the two countries officially amounted to about $3 billion last year. But Israeli and Turkish business leaders say the economic ties are actually much larger.

The extensive business connections are largely camouflaged, they say, because many Israeli businesses use their Turkish partner companies to sell to the Arab world while Turkish companies use their Israeli partners as a gateway to American markets.

Even on the defense front, Turkish officials say that close cooperation between Israel and a Turkish military at odds with the Islamist government in Ankara is continuing behind the scenes.

Israeli officials may be resigned to losing some immediate Turkish government contracts, but they remain confident that pragmatic interests will win out over ideological differences. “While the politicians are trying to profit from the conflict, the army has remained remarkably quiet,” said Mehmet Altan, a leading Turkish columnist.

“Both Israel and the Turkish military establishment want a secular Turkey, so they are fighting for the same thing.”

Within weeks of the flotilla raid, a Turkish military delegation arrived in Israel to learn how to operate the same pilotless aircraft often used by Israel to hunt Palestinian militants in the Gaza Strip.

The $190 million deal for the drones was not canceled, even as the Israeli instructors in Turkey were called home after the raid. Doron Abrahami, consul for economic affairs at the Israeli Consulate in Istanbul, noted that before the flotilla clash, Israel’s military industry had teamed up with a Turkish partner to help modernize a fleet of 170 Turkish tanks in a project valued at $700 million.

He said the Israeli and Turkish partners were now shopping around their expertise to other countries. “Business is business,” he said, showing off an invitation dated July 15, co-signed by economic agencies in Turkey and Israel just weeks after the Israeli raid, inviting Israeli and Turkish companies to bid for a jointly financed research and development project, one of more than 20 such efforts he said were under way.

In 1949, Turkey was one of the first countries to recognize Israel shortly after the country declared its existence in 1948. The two have forged strong military and trade ties, but diplomatic and political relations have deteriorated in recent years, as alarm has grown in the United States and Europe that Turkey is turning its back on the West and courting Israel’s enemies like Iran.

In January 2009, the Turkish prime minister, Recep Tayyip Erdogan, stormed out of the World Economic Forum in Davos, after clashing with the Israeli president, Shimon Peres.

In January of this year, Israel apologized after its deputy foreign minister insulted the Turkish ambassador by forcing him to sit on a lowered sofa. Yet for all of the recent episodes of mutual recrimination, Turkish and Israeli business people remain close.

Necat Yuksel is export manager at Naksan Plastik, a large Turkish plastic packaging producer in Gaziantep, in Turkey’s southeast, that imported some $40 million worth of plastic chemicals from Israel last year.

He said sales from Israel showed no signs of abating, even as the recent clash with Israel had exerted a damaging psychological effect on both countries. His Israeli customers are now wary of travelling to Turkey, he said, and his best Israeli client now refers to him as “Erdogan,” after Turkey’s prime minister.

Yet not a single contract had been canceled, according to this article in the New York Times. Nor has his company shelved its plans to establish a factory in Israel.

He proudly cited many advantages to doing business with Israel, including geographic proximity and a shared mentality. “All the problems are between the politicians,” Mr. Yuksel said. “Israelis, hot-tempered and stubborn, are just like us Turks.”

Mr. Yuksel, who has been visiting Israel for more than a decade, argued that Israeli executives were far more influenced by recent political events than Turks.

“For us it comes down to profits,” he said. “For the Israelis, it’s emotional.”

Yet most Turks are adamant that Israel needs Turkey far more than Turkey needs Israel. Sinan Ulgen, a leading economist in Istanbul, argued that Israel had far more to lose than Turkey from severed ties.

Sales to Israel made up about 1.5 percent of Turkey’s total exports of $102 billion last year, making it Turkey’s 17th biggest market, according to the State Statistics Agency in Ankara. Israel exported some $1.04 billion to Turkey last year, making Turkey its eighth largest export market.

At the political level, Mr. Ulgen noted that when ties were strong, Turkey provided an isolated and tiny Israel with a large Muslim ally in a perilous region. But Rifat Bali, a Turkish Jew who had written widely on Turkish-Israeli relations, countered that bad relations with Israel were riskier for Turkey by stifling Turkey’s aspirations to be a regional power by depriving Turkey of the ability to play a mediating role – a point also made, surprisingly enough, by Syrian President Bashar al-Assad, during a visit to Ankara.

He said Israel was one of the only countries willing to sell arms to Turkey with no strings attached. “Both Turkey and Israel,” Mr. Bali said, “need each other far more than either is willing to admit.”

David Caploe PhD
Chief Political Economist
Economy Watch

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Leave a comment
  • Anonymous on August 18 2010 said:
    Businessmen everywhere only obey one law, the profit motive. |They would sell their families, their religions, their countries and their lives for profit. Its only governments that make sure some of their money can benefit the country. Turkey needs Israel more than Israel needs Turkey? Perhaps. But then why are Israel and Greece getting pally against Turkey? Greece is weak and bankrupt, Israel is gradually sliding into an Iranian made box. Turkey and Iran are in the ascendant. Business men maker momney. That's what they know, thats all they know. Why ask them about anything else?

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