Saudi Arabia’s Crown Prince Mohammed bin Salman welcomes President Tayyip Erdogan in Jeddah, Saudi Arabia, July 17, 2023
Turkish President Recep Tayyip Erdogan has embarked on a three-day tour of the Gulf as the country is facing economic woes. With the global uncertainties and tensions arising in the Middle East, Türkiye has decided to make this visit to Saudi Arabia to pursue economic diplomacy and highlight Ankara’s support for the Muslim Brotherhood in the region.
Turkish President Erdogan traveled and landed first in Saudi Arabia on July 17, 2023, to seek trade and investment opportunities for Türkiye’s floundering economy. After Erdogan landed in the Red Sea city of Jeddah, he went to meet King Salman bin Abdul Aziz Al Saud and Crown Prince Mohammed Bin Salman, the country’s de facto ruler. He was accompanied by an entourage of 200 businesspeople. Currently, Erdogan is focusing on economic diplomacy from the Gulf region into Türkiye. Turkish companies have signed various agreements with Saudi counterparts in engineering consulting, construction, and real estate development, indicating the potential for increased collaboration. Turkish-Saudi investments, particularly in areas like urban development, smart cities, and real estate, were discussed during this visit. Türkiye is also expected to sign important agreements in energy, infrastructure, defense, and the economy. It is noteworthy that bilateral trade between Türkiye and Saudi Arabia amounted to $6.5 billion last year and reached $3.4 billion in the first half of this year.
The visit came as Turks were hit with sales and fuel tax hikes. Türkiye is seeking to restore fiscal discipline and bring inflation down. The official annual inflation rate stood at 38% last month, down from a high of 85% in October. However, international sources maintain that the actual rate was around 108% in June. Türkiye’s current account deficit reached record levels this year, amounting to $37.7 billion in the first five months, and Erdogan is hoping the oil- and gas-rich Gulf states will help plug the gap. The Turkish lira weakened to a record low of 26.6% against the dollar as foreign investors began to focus on the central bank’s policy-setting, where it is again expected to hike rates. The lira lost as much as 0.9% of its value against the US currency. Last month, the Turkish central bank delivered a large interest rate hike, signaling a shift toward more conventional economic policies following criticism that Erdogan’s low-rate approach had made a cost-of-living crisis worse. Erdogan’s unorthodox policies, which have included keeping interest rates low, led to an acceleration in inflation and driven away many Western investors.
From a bilateral perspective, Erdogan’s visit to Saudi Arabia has two main purposes. Firstly, Türkiye wants to seek investments by increasing the existing bilateral trade. As Türkiye is passing through a period of economic turmoil. So, its urgent need to attract foreign direct investment and boost its international currency reserves is closely tied to this visit. Secondly, Türkiye has aimed to increase tourism and attract tourists from Saudi Arabia. Exploring new economic partnerships in areas of tourism is an important determinant factor of these new economic policy approaches of Türkiye. Both states are seeking new deals for military and defense equipment procurement, as the Saudi government wants to diversify suppliers beyond the US. Saudi Arabia wants to bolster its defense and manufacturing capabilities. The interest in the drone industry is partly based on the need to defend oil facilities in a region constantly in strife. Also, this cooperation in the defense sector helps Türkiye to carve both economic and strategic benefits from its homegrown, advanced, and cost-effective drone industry. Türkiye, as a NATO member, provides a safe space for Gulf countries to cooperate in defense and technology transfer due to its close relationship with the United States and the West. Erdogan’s visit also highlighted Türkiye’s military and technological advancement, as a deal with Saudi Arabia to buy Turkish drones was signed. The deal was seen as a way for Türkiye to diversify its arms exports and for Saudi Arabia to enhance its defense capabilities. Also, Aramco (Saudi Arabian Oil Group) met with 80 Turkish contractors to discuss $50 billion worth of potential projects in Saudi Arabia. Saudi Arabia, guided by the Vision 2030 strategy, is pursuing check-book diplomacy with Türkiye to include more swap lines with the Turkish Central Bank.
For Türkiye, the Abraham Accords, the change in the US administration, the economic impact of the COVID-19 pandemic, the war in Ukraine, and the earthquakes in southeastern Türkiye, have contributed to the normalization of relations with regional actors. Since Erdogan launched a diplomatic re-engagement with previously estranged regional powers, funding from the Gulf has helped relieve pressure on the economy. Also, days after Erdogan won re-election last month, Erdogan has turned to investors in the Gulf in search of external resources before the country faces several debt repayments. Following that, the UAE and Türkiye signed a trade deal worth $40 billion over the next five years. Before that, Saudi Arabia deposited $5 billion into Türkiye’s Central Bank in March 2022. From a regional perspective, a few factors are behind Türkiye’s calculus in resetting relations with Saudi Arabia. Firstly, Türkiye wants to mitigate Riyadh’s role in strengthening the anti-Türkiye alliance in the eastern Mediterranean states. Secondly, the crumbling Turkish economy may flourish with Gulf investments of about $10 billion. This will serve as a lifeline for Erdogan’s declining popularity. In addition, Ankara and Riyadh find common ground in perceiving Iran’s regional ambitions as detrimental to their national interests.
The visit reflects Türkiye’s win-win strategy in its foreign policy. Erdogan’s visit to the Gulf after the critical elections held in Türkiye itself reflects the importance of the Gulf states in the Turkish foreign policy agenda. Türkiye looks to ease budget strains, chronic inflation, and a weakening currency through this visit. Over the past years, Gulf nations have started to acknowledge Türkiye’s position as a bridge between the West and Middle East, balancing its relations with different actors, ranging from the Middle East to Central Asia. Saudi Arabia is also emphasizing relations with Türkiye in relation to energy cooperation, including renewables and non-renewables. Also, it can benefit from Türkiye’s experience in renewable energy, noting its impressive growth in solar and wind energy sources. Recently, Türkiye has emerged as an attractive destination for investment from Saudi Arabia as it embarks on ambitious journeys towards post-oil economies and net-zero emissions. Saudi Arabia’s commitment to bring their carbon emissions to net zero by 2060 is fostering this cooperation.
In concluding remarks, it can be added that Erdogan’s visit to Saudi Arabia in 2023 was a significant event in the region. Erdogan sought to boost Türkiye’s economic and security interests in the Gulf as he faced a currency crisis and inflation at home. He also signed a deal with Saudi Arabia to buy Turkish drones, which are considered among the best in the world. Overall, Erdogan has been successful in showing Türkiye’s willingness and commitment to cooperate with Saudi Arabia on regional issues, as it marked a further improvement in relations between the two countries.
About the author:
Aishwarya Sanjukta Roy Proma is a Research Associate at BRAC Institute of Governance and Development (BIGD). She is a research analyst in security studies. She obtained her Master's and Bachelor's in International Relations from the University of Dhaka, Bangladesh. She can be reached at ash77662@gmail.com.
