Escalating tensions with once-key ally Turkey, coupled with a growing social protest movement on the domestic front, has started to display signs of a widening rift within the Israeli establishment. Key figures, including the highly influential head of the Israeli Central Bank, have started reminding officials of the material cost of the administration’s obstinacy toward Turkey, warning of huge losses in trade at a time when Israel is in dire need of such income.
“Turkey will be a big market in this region. It will be a major exporter,” Anatolia news agency quoted Stanley Fischer, governor of the Bank of Israel, as saying at a conference held in Tel Aviv on Monday. “The consequence of not having trade relations with Turkey will be expensive for us, because [Turkey] is the most important of the economies in the wider region, including the Gulf countries.”
Diplomatic ties between Turkey and Israel have been in a downward spiral for the past few years, but until today, the sphere of commerce did not feel repercussions. The bilateral trade volume hit $3.1 billion in 2010, jumping by 26 percent from $2.5 billion in 2009, even after Prime Minister Recep Tayyip Erdoğan’s January 2009 outburst against Israeli President Shimon Peres in Davos, Switzerland. Israel’s exports to Turkey accounted for around $1.35 billion of this figure, making Turkey the sixth most important trade partner for Tel Aviv.
Fischer’s comments will surely resonate throughout the Israeli political spectrum, as he is among the rare public figures who have not lost credibility despite the economic and political difficulties that Israel has been facing for some time. Acting ahead of the curve during the 2008 global financial crisis, Fischer is credited with helping Israel become one of the few economies in the world that did not contract. The Israeli economy grew by 4 percent in 2008, 0.2 percent in 2009 and 3.4 percent in 2010, even as other economies in the region, including Turkey, faced massive contractions. In his bid earlier this year to lead the International Monetary Fund, Fischer even received support from the Palestinian administration.
Top businessmen lament lost opportunities
The central banker, ranked among the world’s brightest economists, was not alone in voicing concerns. Menashe Carmon, the chairman of the Tel Aviv-based Israel-Turkey Business Council, joined him as he spoke to the Hürriyet Daily News on Monday. “Our desire is that there would be no drastic steps taken by either side,” said Carmon. “A calm and more logical atmosphere is needed for business ties to remain [strong].” He added that the level that bilateral trade has reached is “too valuable to lose” for either country.
“The crisis with Ankara could cause heavy damage to our industry,” said Uriel Lynn, head of the Federation of Israeli Chambers of Commerce, according to Yedioth Ahronoth. “If the Turkish authorities decide to sever their trade relations with Israel, we will lose an excellent and important trade partner,” the newspaper quoted Lynn as saying.
Rona Yırcalı, board chairman of Turkey’s Foreign Economic Relations Board, agreed that after Foreign Minister Ahmet Davutoğlu’s statement on Friday, this time, the situation is more severe. “This time the situation is really serious,” Yırcalı said. “Things are getting worse and we will have to wait and see the results in business.”
Turkey’s imports from Israel jumped by nearly 40 percent in the first half of 2011, from $648 million to $950 million. Its exports to Israel rose by 16 percent in the same period, from $907 million to $1.05 billion. k HDN
Gökhan Kurtaran from Istanbul contributed to this report