Ever since Russia’s unforeseen invasion of Ukraine and intervention in Syria, Vladimir Putin has been characterized as full of surprises. And at times he certainly is. But Putin is also quite predictable. When a neighbor cozies up to NATO, resists Russian military and energy domination, or displeases Putin in other ways, he responds with unparalleled consistency by denying that country access to the Russian economy.
His most recent target is Turkey. In response to Ankara’s downing of a Russian Su-24 fighter somewhere in the vicinity of its border with Syria, Putin has used his standard toolbox to punish Turkey. In December, the Federal Security Service (FSB) raided four Turkish banks allegedly on the suspicion of money laundering, and twenty Russian banks for their connection to Turkish businessmen. The FSB did not confiscate any equipment or files, which suggests it failed to discover incriminating evidence.
Although the authorities in Moscow sought to portray the searches as a legitimate investigation, they are in reality part of the de facto and de jure sanctions imposed on Turkey over its downing of Russia’s military aircraft. The raids were preceded by more formal penalties. Putin banned charter flights to Turkey and ended visa-free travel between the two countries.
His decree included a prohibition on the import of certain Turkish commodities. Russian tour operators were ordered to discontinue packages to Turkey, where nearly four and a half million Russians vacationed last year. Putin also barred the extension of labor contracts for Turkish nationals who work in Russia. His latest measure was an injunction against Turkish construction and tourism companies.
Putin aims to hurt Ankara by cutting off access to the Russian market for Turkish citizens and businesses. He has used these tactics time and again. The most obvious instance is Ukraine: To dissuade Kiev from its gravitation toward Europe and the EU Association Agreement in the summer of 2013, Putin began to apply serious pressure on the Yanukovych regime by abruptly enacting customs checks at the border, which blocked or delayed a large portion of Ukraine’s exports to Russia and cost Ukrainian companies hundreds of millions of dollars.
His efforts to punish Ukraine economically and derail its reforms have intensified since the overthrow of Viktor Yanukovych. On the energy front, Russia has regularly cut off natural gas supplies and is striving to construct gas transport infrastructure that will bypass Ukraine. In 2006 and 2009, Putin pursued a similar policy of gas disruption toward Ukraine, and in the process left a Europe far less prepared than it is today without sufficient heat in the dead of winter.
From Putin’s perspective, Ukraine has diverged from his strategic agenda much too often since the 2004 Orange Revolution and especially since Yanukovych’s overthrow. He has concluded that the only way to reduce such intransigence in the future is to increase Russia’s leverage over Ukraine, particularly in energy. This is why Putin is determined to build an alternative natural gas pipeline that circumvents Ukraine. The three projects that Russia has introduced in recent years—first South Stream, then Turkish Stream, and now Nord Stream II—are functionally unnecessary and of questionable commercial viability, yet in order to increase his influence over Kiev Putin is firmly committed to the realization of at least one of them.
The Kremlin’s vision for a South Stream pipeline running from southern Russia underneath the Black Sea to Bulgaria and on to Central Europe was squashed when Sofia effectively withdrew. The European Commission (EC) said the pipeline was inconsistent with its energy rules and placed substantial pressure on Bulgaria to revise the project’s terms, which Moscow rejected because it would be required to provide access to South Stream for companies other than its natural gas monopoly Gazprom. Although the pipeline would have successfully bypassed Ukraine, the cost of undermining rather than strengthening Europe’s dependence on Russian gas outweighed the benefit.
After South Stream collapsed, Putin announced Turkish Stream, which was a scaled-down version of South Stream that avoided Bulgaria and instead relied on Turkey as Moscow’s principal partner in the project. But Putin suspended the pipeline after Ankara shot down Russia’s fighter near its border with Syria and refused to comply with his demand for an apology.
Now Putin has moved his attention north, where he intends to build a second direct pipeline to Germany called Nord Stream II. In addition to Ukraine, the pipeline will also evade Poland and the Baltic countries, thereby increasing Moscow’s leverage by reducing their ability to shut down Russian gas transit to lucrative European markets in response to Russian hostility. Whether it is South Stream, Turkish Stream, Nord Stream II, or a potential alternative project, the Kremlin is determined to circumvent Ukraine by constructing one of these options regardless of commercial necessity and perhaps even cost.
Beyond energy coercion, the Kremlin recently applied new tariffs on Ukrainian exports to Russia and banned the import of food from Ukraine in response to Kiev’s free-trade agreement with the EU and decision to align its Russia sanctions with those of the EU. To avoid these measures, Moscow told Kiev to revise its Deep and Comprehensive Free Trade Agreement with the EU and accommodate Russian economic interests, which the EC and Ukraine both rejected. According to Ukrainian Deputy Foreign Minister Lana Zerkal, the Kremlin had “impossible demands,” including an unfettered right to view the EU’s customs database and sensitive commercial information. Putin made an offer he knew neither the Ukrainians nor the Europeans could accept, then used their refusal to justify further curtailment of Kiev’s access to the Russian market.
But before Ukraine there was Georgia. After the Rose Revolution, Russia drastically increased Georgia’s payment for natural gas and blamed gas and electricity cuts on supposed acts of terrorism. In 2006, several months after cutting off gas supplies to Ukraine, Moscow abruptly doubled the price of natural gas for Tbilisi to $235 per thousand cubic meters (tcm), whereas neighboring Armenia paid only $110.
Earlier that year, Putin prohibited the sale of Georgian wine on the Russian market for alleged health reasons. At the time, Georgia’s wine industry sent 90 percent of its exports to Russia, which represented nearly 10 percent of the country’s total exports. Russia’s Chief Sanitary Officer, Gennady Onishchenko, who once said the average human should sleep no more than 25 minutes a day, claimed that Georgian wines contained heavy metals and pesticides but failed to provide any evidence.
Much like in Ukraine several years later, the Kremlin introduced customs checks on its border with Georgia. It also closed the only overland crossing between the two countries, nominally for reconstruction purposes, and effectively halted Georgian exports to Russia. Moscow police then shut down casinos, hotels, and restaurants in operations in which “the majority of institutions inspected [were] run by Georgian citizens,” as they openly acknowledged.
Since 2006, thousands of Georgian migrants, including legal residents, have been expelled from Russia. The campaign included both formal deportations and informal harassment by groups instructed or at the very least inspired by the Kremlin. In 2014, the European Court of Human Rights ruled that these measures were “a coordinated policy of arresting, detaining, and expelling Georgian nationals.”
Around the same time, Putin halted meat, fruit, and vegetable imports from Poland after Warsaw vetoed an EU-Russia partnership agreement. Moscow wanted to chastise Poland for electing a government led by the Law and Justice Party (PiS), which challenged Russia on both historical questions and contemporary policy grounds. The Baltic countries and Moldova have faced similar measures from Moscow. For over a decade, Russia has periodically imposed numerous economic restrictions on Lithuania, Latvia, and Estonia, from arbitrary customs checks that slow or even stop trade to outright embargos on dairy products. All Moldovan wine has been banned except for products from the country’s pro-Russian Gagauzia region.
Since Putin came to power, even nominal Russian allies like Belarus, Armenia, and Tajikistan have not been spared by his policy of penalizing disobedient countries by revoking their access to the Russian economy. In Central Asia, his strongest points of leverage are the region’s extremely weak economies and their dependence on cash remittances from migrants who work in Russia. These remittances in Tajikistan, for example, amount to 40–50 percent of GDP. Roughly 700,000 Tajiks work in Russia, which represents 10 percent of Tajikistan’s total population. In 2011, Moscow deported hundreds of Tajik migrants after Dushanbe jailed two Russian pilots on smuggling charges.
Belarus is nominally Russia’s closest ally. The two are part of a common “union state,” but one could be forgiven at times for thinking they were bitter rivals. In 2004, after Minsk refused to sell its gas transport network to Gazprom at a discount, the Kremlin increased the price of gas for Belarus and eventually stopped delivery. Three years later Moscow turned off the gas tap for Belarus after Minsk imposed a new tariff on Russian oil transit. And three years after that, the Kremlin ended the sale of gas yet again in order to pressure Belarus to join Putin’s prestige project for post-Soviet reintegration—the Customs Union, which has now become the Eurasian Union. Moscow also banned Belarusian dairy products when Minsk dared refuse to sell its milk producers to Russian buyers.
The problem for Putin, however, is that this approach suffers from diminishing returns. Once cut off or disrupted for entirely political reasons, exporters in a targeted country become more mindful of the pitfalls of engaging with Russia’s economy. They learn from their mistakes. These industries develop an incentive to diversify export markets and raise the quality of their products as a result. Likewise, exporters in other countries also become leery of the Russian market and less likely to seek or expand business there.
Georgia illustrates this well. Since Russia’s first ban on Georgian wine imports, the country’s wine industry has developed numerous markets in Western Europe and the United States. The shelves at many high-end grocery stores in the United States are now stocked with several Georgian wines, which was not the case a few years ago. Tbilisi’s purchase of Russian gas has been reduced to zero (although Georgia does receive 10 percent of the natural gas that Russia sells to Armenia as a transit fee.)
In Ukraine, 35 percent of total exports go to the EU today compared with less than 25 percent in 2012, while trade with Russia has fallen sharply. Only 12 percent of Ukrainian exports went to Russia last year compared to 30 percent in the Yanukovych era. Until relatively recently, all of Ukraine’s natural gas imports came from Russia, but last year almost 60 percent arrived from Europe and only 40 percent were Russian. In response to Gazprom price hikes, Kiev has slashed its total gas imports from 50 billion cubic meters (bcm) annually to 20 bcm, as it continues to reduce overall energy consumption and Ukrainian enterprises transition to coal.
Putin’s tactics have boomeranged. His efforts to punish these countries may have harmed them in the short term, but beyond that such policies hurt Russia and often benefit those targeted by Moscow.
Turkey will not be an exception. The Kremlin says that 200,000 Turkish migrants currently work in Russia. That number will diminish as a direct consequence of both formal labor restrictions and the fear that most Turks will feel about residing or seeking employment in Russia. Which does this hurt more? A country of 75 million mildly burdened by the repatriation of migrant workers in the mere thousands or a country that faces serious demographic challenges and requires a constant influx of foreign labor to have any chance of sustained economic growth? Hint: it’s the latter. And that country is Russia.
The Turkish banks raided by the FSB will not collapse if they are forced to abandon the Russian market. But what happens to liquidity in the Russian economy if they and other foreign banks continue their exodus from Russia? Every time Putin seeks to punish countries in this way he spurns their businesses, ensures that fewer of them will eventually return, and reduces the likelihood that foreign economic actors will decide to absorb the increased risk of operating in Russia.
Turkey today is not as dependent on Russia for energy supplies as Ukraine, Georgia, and other countries were when Putin targeted them. Natural gas is 35 percent of the country’s overall energy consumption, and it uses 55 billion cubic meters (bcm) each year compared to Ukraine’s 75 bcm in the mid-2000s. On a per capita basis, this comes out to 1,630 cubic meters (cm) for Ukraine and 733 cm, or less than half of that, for Turkey. The difference is even starker in terms of natural gas consumption per unit of GDP; Ukraine was at 1,440 cm at the time of Russia’s first gas cutoff, compared to a mere 16 cm for Turkey today.
Ankara did stand to benefit from the Turkish Stream gas pipeline that Putin had proposed in lieu of the canceled South Stream project but later suspended after the downing of Russia’s military aircraft. Those forfeited transit fees, however, pale in comparison to the immediate consequences of Russian natural gas cutoff for a highly dependent and gas-intensive economy like Ukraine.
Russia provides 55 percent of Turkey’s natural gas imports at the moment but the long-term future looks bleak for Turkish energy dependence on Moscow. By 2018, the $10 billion Trans-Anatolian Pipeline (TANAP) will bring gas to Turkey from Azerbaijan and the Caspian Sea. The project is ultimately intended to have a capacity of 60 bcm, although this implies the construction of a Trans-Caspian pipeline that would provide access to Turkmenistan’s large natural gas reserves.
In December, Ankara’s Petroleum Pipeline Corporation (BOTAS) signed a memorandum of understanding with Qatari Petroleum that envisions delivery of liquefied natural gas (LNG) to Turkey from the Persian Gulf country. President Reccep Tayyip Erdogan indicated that the agreement was made because of “known developments.” Shortly thereafter, the Economy Ministry announced that $10 billion in various incentives would be offered for the development of a new gas storage facility on Turkey’s western coast.
A promising rapprochement between Israel and Turkey may see Ankara purchase Israeli gas in the not-too-distant future. While multiple factors were present, Turkey’s readiness to overcome the dispute that emerged after Israel stormed a Turkish ship headed for Gaza in 2010 was at least partly fueled by its desire to access Israeli natural gas. The Leviathan and Tamar gas fields hold almost 700 bcm of gas, though Israel will require time to develop them and overcome a number of domestic challenges. Still, Israel has an eager buyer in Turkey and its own geopolitical calculus may provide added incentives to sell gas to Ankara.
The potential settlement of the dispute in Cyprus, which has offshore reserves, could provide another alternative source of natural gas for Turkey. This may or may not require Cyprus, Greece, and Turkey to first reach a mutually acceptable solution that leads to the island’s reunification. Turkey could in theory move to normalize energy relations with Cyprus without the full normalization of their broader relationship. If Turkey showed real interest, Europe and the United States would likely pressure Cyprus to consent to energy engagement in the belief that it would have positive spillover into other areas that divide the two countries.
Much like Lithuania, Poland, and others that have faced Russian energy blackmail in the past, Turkey will develop LNG and pipeline infrastructure over the next few years in order to diminish Russia’s leverage. It will have to substantially expand its modest LNG gasification and storage capacity in order to supplant Russian gas with Qatari, Israeli, Cypriot, or perhaps American LNG. But there is little doubt that Ankara now plans to move forcefully in that direction. Furthermore, although Turkey currently imports 30 percent of its oil from Russia, oil is a far more fungible commodity than natural gas and Ankara will have little trouble finding other suppliers, especially given the low price and large supply of crude oil today.
Putin’s tourism sanctions will cause Turkey some pain, particularly in the summer months and for its coastal regions, where millions of Russians vacation each year. But this too will harm Moscow more than Ankara. Russians travel to Turkey for a reason: They enjoy it. As a result of Putin’s policies, however, they find the number of countries accessible to them shrinking by the day.
After the downing of a Russian passenger plane by terrorists over Egypt—likely related to Moscow’s military intervention in Syria—Russians found their travel to that country restricted. They view another popular destination, Montenegro, as no longer hospitable because of Kremlin propaganda that portrays Podgorica’s NATO membership ambitions and alignment with the EU’s Russia sanctions as reflective of growing anti-Russian sentiment. Russians have fallen from 70 percent to 22 percent of total tourists in just a few years.
The cumulative effect of these formal and informal travel restrictions, coupled with the psychological impact of global sanctions imposed on Russia for its aggression in Ukraine and their consequent economic ramifications, leaves many Russians with an uncomfortable sense of confinement that will eventually manifest itself in the form of discontent with Kremlin policies.
Similarly, Putin’s decision to prohibit the import of certain food products will hurt average Russians more than Turkish exporters. This ban is essentially an extension of Russia’s agriculture sanctions against the EU, which were adopted as a tit-for-tat response to the EU’s punitive measures over Russian aggression in Ukraine. Although some damage has been inflicted on Turkish and European exporters to Russia, these costs are minimal compared to the pain imposed on the Russian people. Moscow’s policies amount to self-imposed sanctions that have caused both food prices and overall inflation to increase substantially in Russia.
Putin’s sanctions against Ankara, despite his propensity for surprise, stem from a predictable repertoire of tactics used to punish countries that diverge from what he views as acceptable behavior. But the effectiveness of such policies and his ability to successfully reemploy them diminish with each use. The targeted countries and their exporters learn to live without the Russian economy, diversify to other markets, and either decline to return when the sanctions are lifted or come back on a far smaller scale.
As a result, Putin’s efforts to punish Turkey will boomerang in a way that harms the Russian economy and ultimately weakens his regime.