Russia Targets Turkish Tourism, and to the Satisfaction of Both Sides, Gas and Oil Remain Unscathed

Many around the world held their breath again at the news that Turkey shot down a Russian military aircraft, fearing yet another incident that could have global consequences, from the economy to military power.

Such tension between the world’s largest nuclear power, Russia, and a member of the world’s largest military alliance, Turkey as part of NATO, does not happen often, but financial markets reacted only briefly. Gold rose slightly, and the price of oil ‘shook’ for a moment, comments Ole Hansen, Chief Strategy Officer for Commodities at Saxo Bank.

– Gold investors are focused on the negative impact that a potential interest rate hike in the U.S. next month will cause, and the price of gold has increased due to a combination of factors – verbal interventions from Saudi Arabia, geopolitical risks due to Syria, and hedge funds’ decisions to increase their ‘short’ positions in futures, which has set new records in recent weeks. The price of Brent crude oil has slightly increased compared to WTI crude oil, but the difference remains between two to four dollars per barrel. Oil investors are also clearly still monitoring indicators that are not directly related to geopolitical daily events – comments Ole Hansen.

And while as a consequence of that tragic event for the two Russian pilots, only a verbal open conflict between the two states, or opposing global powers that clearly do not want an open conflict, is currently ongoing, the greatest impact seems to be on the economic relations between Turkey and Russia. For Turkey, Moscow is an extremely important economic partner with trade between the two countries amounting to about 21 billion dollars. Since 2013, Russia has been Turkey’s sixth most important export market, while in the import category, Russia ranks third for Turkey. Just two weeks ago, the Russian president praised Ankara’s independent position regarding Western sanctions to a Turkish news agency, in relation to the joint TurkStream gas pipeline project, Saxo Bank reminds. Russian Gazprom supplies about 27 billion cubic meters of Russian natural gas, or nearly 70 percent of Turkey’s total gas consumption.

At the same time, immediately after the Germans, Russians are the most frequent guests in Turkey, and the national Russian tourism agency immediately advised tour operators on Tuesday to stop offers for visits to Turkey. At the same time, controls for food imports into Russia are also being announced, which is also an important Turkish export sector to Russia. Such intentions apparently do not yet intend to be implemented for the energy market, according to Saxo Bank, based on claims from Turkish government ministers. Positive for Turkey as nearly 65 percent of all energy sources are imported from Russia, and it is not surprising that Russia has also skipped threats in this area as that sector is already under pressure from low oil prices and Western sanctions, explains Michael McKenna, an analyst at Saxo Bank, and emphasizes that the Turkish financial market has also not felt any major tremor, with minor negative changes on the stock exchange and a decline of the lira against the dollar. It seems that the entire incident will remain at those announced blockades in mutual economic relations, although tensions around Syria and the position of President Bashar al-Assad have actually been in the background of the events surrounding the downing of the Russian aircraft, no matter how much everything has been portrayed as a fight against the so-called Islamic State, concludes the analyst from Saxo Bank.