Putin-Erdogan clash leaves Turkey's merchants holding the (unsold) bag

After Turkey downed a Russian bomber along the border with Syria, the clash between the two leaders has become personal. Russian sanctions are already biting.

Signs in Cyrillic script are everywhere in Istanbul’s bustling Laleli district, where dozens of companies showcase and export apparel and jewelry to Russian clients.

Today the brisk business of summer has subsided, but while a slowdown is natural this time of year, some merchants here fear the downturn could be protracted if Russia and Turkey continue on their collision course.

Relations between Moscow and Ankara soured in late November after a Turkish fighter jet shot down a Russian bomber near the Turkey-Syria border. Turkey says the Sukhoi bomber violated its air space, a claim Moscow denies. Russia, Turkey’s second largest trading partner, responded with a raft of economic sanctions and reinstated a need for visas to travel between the two countries.

“This is just politics, but if it goes on for a few months then it will become a problem because Russia is trying to close the door [to Turkey],” says Edgar Berk, a fluent Russian-speaker who works at a gold and diamonds shop in the heart of Laleli.

Red gold crosses dominated the glass display at the shop, which caters to a predominantly Russian clientèle. There were no customers in sight.

For Mr. Berk, who travels three times a year to Russia, the new sanctions mean no vacation this winter. Moscow’s decision to ban charter flights between the two countries and stop tour operators focused on Turkey – which hosted more than 5 million Russian tourists in 2014 – heralds an inevitable drop in sales.

“Eighty-four percent of our business is with Russians,” says Berk in dismay. “Turkey and Russia are best friends. They benefit from each other. The only way is to make amends.”

But for now, that doesn’t seem to be in the cards.

Clash between leaders is personal

The dispute has become deeply personal for Turkish President Recep Tayyip Erdogan and his Russian counterpart, Vladimir Putin, two strongmen who until now enjoyed warm ties and oversaw an era of increased economic cooperation between their nations countries despite being at odds over Syria.

Russia says Turkey downed its bomber to protect the Islamic State’s oil smuggling operations and that Mr. Erdogan and his family profit from the illicit trade.

Ankara dismisses such allegations as slander and refuses to apologize to Moscow. The United States says it has no evidence of such an arrangement.

“Erdogan would never tell lies,” says Nurettin Turan, an elderly sunglass vendor and staunch supporter of the Turkish president. “They crossed the border so they had it coming. Of course it is a worrying situation, but we are united and supported by NATO, which intimidates Russia. They will come to terms. This will pass.”

“It will never reach the stage of war,” concurs Adem, a cheerful salesman working at Fimka, a women's fashion store that targets the Russian market. “I am not worried at all.”

Could tensions escalate?

The wisdom of Turkey’s course of action, however, is the subject of debate and media satire here.

The weekly comic Uykusuz ran a cover showing Erdogan in his presidential palace informing a miniature Prime Minister Ahmet Davutoglu that Turkey is destined for World War III after building the third bridge and third airport, in reference to two grandiose and controversial construction projects championed by Erdogan and underway in Istanbul.

Tensions continued to mount over the weekend. Turkish media circulated images of a Russian serviceman holding a rocket launcher on board the landing ship Caesar Kunikov as it passed through the Bosphorus Straight – an act that Foreign Minister Mevlut Cavusoglu deemed a provocation.

While officials on both sides have expressed an interest in getting the relationship back on track, some worry that all the tough talk and muscle-flexing could set the stage for a more serious kind of confrontation.

“Isn’t it an act of war when you shoot down the war plane of a super power like Russia?” asks Ozan, a bearded young man who did part of his military service in Iraq and now runs a hip cafe overlooking the Grand Bazaar. “It’s a mistake that is endangering Turkey. The downing of the plane and the problems with Putin are affecting us a lot – commercially, tourism-wise. When you see the possibility of conflict it affects the whole country.”

Russia and Turkey are bound by a series of bilateral trade and infrastructure deals, including the construction of a nuclear power plant and a gas pipeline connecting the two countries. Russia is the largest destination for Turkish exports – particularly textiles and food – while Turkey imports 50 percent of its natural gas and 30 percent of its oil from Russia.

Looking for 'Plan B' on energy

Others worry that the dispute over the bomber could lead Russia to suspend energy exports to Turkey, a prospect that Erdogan has sought to brush off.

“Russia is Turkey’s biggest natural gas supplier, but it is not the only one,” Erdogan said Saturday, stressing “it is possible to find different suppliers.” The statement follows a visit to Qatar to seek new imports of liquefied natural gas, a clear bid to counter any shortfall in Russian gas supplies.

Prime Minister Davutoglu likewise visited Azerbaijan hoping to expedite the construction of a natural gas pipeline that supplies Turkey and Europe via the Caspian Sea.

While many were relieved to hear there is a “Plan B,” others realize that there is no quick fix that can help mitigate the damage of falling out of favor with Moscow.

“It is unnerving,” says Busra, who studies law at Istanbul University. “Most people comment senselessly and say defiant, macho things like: ‘let him shut down the gas.’ Two countries confront each other, and it is always us, the people, who suffer.”