A river uprooted, gain of fishermen. This is the motto that Turkey has committed itself to with the invasion of Ukraine and, in particular, with the difficult situation that the Russian oligarchs are going through, with the doors of the West closed and with their investments crumbling in the homeland. Faced with this situation, Recep Tayyip Erdogan, president of the Ottoman country, has decided that his strategy is clear: give all the facilities and publicly call on these tycoons to lead the course of their fortunes to Istanbul.
On March 14, Italy seized one of the world’s largest superyachts, the SY A, valued at $690 million. Located in Trieste, the ship belonged to Andrey Melnichenko. Spain has done the same with the Valerie, a Sergey Chemezov docked in the port of Barcelona and valued at 140 million.
While that is happening to the west, Roman Abramovich, Chelsea’s Russian owner (also affected by sanctions), has directed his fleet of $1.2 billion heading to Turkey and, despite the fact that the ports where ships such as the Solaris or the Eclipse are located have been filled with protesters, Erdogan has guaranteed the financial security of his country for these oligarchs.
Turkish Foreign Minister Mevlut Cavusoglu said on Saturday that his country “welcomes” Russian tycoons sanctioned who decide to bet on their country either as tourists or as investors. “Of course we comply with the sanctions approved by the UN, but if any Russian citizen wants to come, that is not a problem.”
The minister added that “if the question is whether these oligarchs can do business in Turkey, of course if it is legal and not against international law, I will consider it. If it is against law is another story.” Erdogan himself went a step further and specified that “certain groups of capital could come with us”.
The Istanbul stock market soars with the invasion
In addition, the promise of Russian investment before the closure of the West has made the Istanbul stock market one of the great surprises of the year. Until Putin began the invasion of Ukraine, the country’s equities were down almost 4%, and since then, 20% shot up in just one month, rising 15% in the general calculation of the year.
The widespread optimism for an economic injection from Russia has a good part to do with it. The Russian oligarchs, at the beginning of the year, they lost 75,000 million dollars due to sanctions and war. They urgently need to find investments and assets where they can take refuge, away from the threats of Biden and the European Union, and outside the borders of the Russian Federation, where the risks are still very high.
In the local press, national funds such as Tera Investment, explained that the main reasons for the increase are “Turkey’s geopolitical positionthe country’s high dividends, expectations that Russian funds will ‘migrate’ to the Anatolian peninsula” and the fact that “the Ottoman market is still heavily discounted compared to similar economies”.
The great risk of helping the oligarchs
In any case, the ‘call effect’ from Erdogan to Russian wealth has risks. International organizations could understand that Turkey is acting as an accomplice of the country’s economic elite and that, as punishment, they extend sanctions on this nation. A very real risk that would hit hard a country very strongly exposed to the West, with numerous foreign investments.
The director of the Atlantic Council in Turkey, who was also an economist at the US Embassy in the country, Defne Arslan, assures CNBC that “this strategy could harm the country in the long term.” For his part, Emre Peker, director of the Eurasia Group political risk consultancy, stated that “Ankara is well aware that Turkey can become a target for sanctions (if it spills over into the arrival of Russian oligarchs) and you have to be very careful to avoid it.”
In any case, and despite the solid advance of the Turkish stock market, the country finds itself in a delicate balance between favoring its interests and keep the sympathies of his allies to the west. Erdogan, at a time of fragility in the economy of his country, believes that it is worth trying to make the most of a crisis that could end up with billions of euros crossing the Caucasus.
The Government retains the yacht ‘Crescent’ in Tarragona due to sanctions against Russia, the third in Spain
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