Following the collapse of normalized relations between Israel and Turkey with the outbreak of war, relations between Israel and Turkey are deteriorating further, extending to the economic sphere and affecting trade relations between the countries.
In response to Erdoğan’s attempts to legitimize Hamas as a “freedom fighters organization,” Israel had no choice but to recall its ambassador in Ankara, Irit Lillian, for consultations. Within days, Ankara reciprocated by recalling its ambassador from Israel. It appears that we have returned to the low point of the 2010 Mavi Marmara flotilla incident, previously considered the worst period in Israel-Turkey relations. Now, it seems the countries are plunging to a new low.
Despite the diplomatic tensions during the war, the two countries have managed to cooperate, particularly in providing humanitarian aid to Gaza. Israel allowed Turkey to send humanitarian aid by sea to the port of El Arish in Egypt, from where it was transported to Gaza. This aid amounted to a significant 43.3 tons. However, this Israeli gesture was insufficient for Turkey. Ankara also demanded that Jerusalem facilitate humanitarian aid via airdrops conducted by Turkish Air Force planes. According to Turkish media, this request was denied by Jerusalem. Consequently, Ankara found the pretext it needed for further escalation of tensions with Israel.
The New Mavi Marmara Flotilla is Left Without a Flag
Following the severely negative results of the local elections on March 31, Erdoğan needed to regain the Turkish public’s favor. The election results demonstrated a costly disloyalty of the smaller Islamist parties, which demanded he sever all trade ties with Israel. Erdoğan’s associates also sought to fan the flames. Turkish Foreign Minister Hakan Fidan, previously accused by former Israeli Defense Minister Ehud Barak of being pro-Iranian, spearheaded the diplomatic move against Israel, likely aiming to regain local public support. Aspiring to replace Erdoğan in the future, Fidan feels compelled to deliberately and consistently downgrade relations.
Against this backdrop, on April 9, the Turkish Foreign Minister made an unprecedented announcement before the cameras, declaring partial trade sanctions against Israel. The list, compiled by the Turkish Ministry of Trade, announced the suspension of exports of 54 different products, mostly industrial raw materials like cement, aluminum, and steel, until Israel agrees to a sustained ceasefire and the unrestricted flow of humanitarian aid to Gaza.
Parallel to the Foreign Minister’s announcement, and in the same spirit, the organizers of the Mavi Marmara flotilla, namely the IHH organization—designated by Israel as a terrorist organization—declared their intention to launch a new flotilla to Gaza. To provoke and damage Israel’s image, the organization acquired three large ships named “Anatolia,” “Mediterranean,” and “Compass.” To avoid international legal responsibility, the organization used the flag of Guinea-Bissau, a West African country. However, due to Israeli pressure on the African nation, on April 26, Guinea-Bissau announced that it would not allow IHH to use its flag for the Gaza voyage.
The organizers, unwilling to sail under the Turkish flag, found no alternative solution for a flag sponsor and froze the project until further notice. As a reminder, during the previous flotilla, the Mavi Marmara used the flag of the Comoros, which also apparently did not want a repeat experience.
Turkey Approaches The Hague
It is worth noting that the United States did not remain indifferent to the Mavi Marmara scheme. Alongside Israeli pressure, the U.S. likely played a significant role in thwarting the plan. On the day the flotilla’s cancellation was announced, Turkish media also reported the cancellation of President Erdoğan’s planned visit to the U.S. on May 7. In hindsight, it appears that the U.S. punished Turkey for imposing partial sanctions on Israel, for its overt support of the terrorist organization Hamas, and for allowing another flotilla attempt.
As expected, Ankara did not leave this unanswered, and Turkey’s response was swift. Instead of responding directly to the U.S., Ankara chose to retaliate against what it perceives as the “U.S. branch in the Middle East,” namely Israel. On the same day Erdoğan’s visit cancellation was announced, Foreign Minister Fidan officially declared that Turkey would join South Africa’s “genocide” lawsuit against Israel at The Hague.
Erdoğan Continues to Sacrifice the Local Economy
As if these events were not enough, on the same day Fidan issued his threat, a Turkish cleric visiting Jerusalem as part of a delegation from the Turkish Religious Affairs Authority pulled out a knife and stabbed an Israeli policeman in the Old City of Jerusalem. The attacker was shot dead on the spot. This incident is clearly a direct result of the ongoing Turkish incitement against Israel. Notably, although this attack was the first of its kind within Israel’s borders, the IDF had already killed two Turkish terrorists in Lebanon on November 22 of the previous year, indicating a potentially alarming trend.
Since these events, Turkey has continued to take steps to dismantle further bridges of relations with Israel by unilaterally ending all trade ties. President Erdoğan admitted when announcing the trade cessation with Israel that the trade volume had reached a substantial $9.5 billion. It is worth noting that the balance of payments between the countries was significantly in Turkey’s favor—more than three-quarters of the trade consisted of Turkish sales to Israel. However, even this fact did not deter the Turkish president from making a decision detrimental to Turkish industry and trade, especially given the already fragile state of Turkey’s economy – with an inflation rate of 68.5% (according to official data, which likely understates the reality) and an unbearable interbank interest rate of 50%.
Erdoğan tried to justify his decision by emphasizing that, as a Muslim, he could not remain indifferent to what was happening in Gaza. In other words, Erdoğan openly admitted on camera that his decision was ideologically motivated, without rational consideration of economic implications.
Despite the massive loss inflicted on Turkey’s fragile economy, no major media outlet criticized this decision. On the contrary, the newspaper Hürriyet, once considered a watchdog of secularism and Western values, ran a front-page headline: “We are on the right side of history.” Predictably, pro-government media supported the decision across the board. To convey a message of “business as usual,” the newspaper Yeni Şafak even declared that Turkey had already found new markets to replace Israel: for instance, Germany, the U.S., and Iraq (Iraqi Kurdistan) were said to replace Israel in the steel sector. It is important to emphasize that before this decision, Israel was the second-largest importer of Turkish steel. A similar explanation was provided to readers regarding agriculture: pulses would be sold to Syria, Germany, Libya, and Venezuela, while fruits and vegetables would go to Ukraine, Poland, and Bulgaria. A critical reader can understand that most of these markets will not pay the prices that Israel did.
In contrast, Israeli exports to Turkey account for only 1% of Turkey’s total imports, so stopping Israeli sales – mainly chemicals for agriculture – will not significantly impact Turkey’s economy.
Israel reacted sharply to Erdoğan’s move, not because of a substantial economic hit but because of the unprecedented step, which is prohibited under WTO agreements. Economy Minister Nir Barkat has already filed an official complaint with the OECD, of which both Turkey and Israel are members, claiming that Turkey violated international trade agreements. Additionally, Foreign Minister Israel Katz announced that Israel would work in the U.S. to impose economic sanctions on Turkey. Katz added that with this decision, Turkey not only harms its own economy but will also fail to supply any products to the Palestinian Authority—a significant threat considering Turkey’s investment in the Jenin industrial zone.
Further Deterioration Possible
Despite the downward trend, it is important to note that when Turkey announced the sanctions, Ankara also made sure to leave the door open. Thus, if and when Israel agrees to a permanent ceasefire and allows the flow of humanitarian aid to Gaza both by sea and land, Ankara will likely be willing to renew trade with Israel. However, it is uncertain whether the trade volume can be restored to its previous levels.
Meanwhile, Israel will have no choice but to replace Turkey with other suppliers, emphasizing diversification of suppliers and strengthening local industry. Israel will undoubtedly draw conclusions about developing dependence on foreign suppliers, as in the case of cement—a basic raw material for key industries in the economy, where Israel developed a dependence on Turkey, the source of 30% of Israeli imports. Alternatives will likely include increasing domestic production and importing from Greece. Additionally, imposing a high tariff – likey 100% – on imports from Turkey would be a prudent measure.
President Erdoğan is certainly wary of an Israeli response. Recently, in a meeting with conservative businesspeople in Istanbul, he stated that he expects a “Western economic assault” against Turkey. In the past, Erdoğan has used international crises, especially with the U.S., the Netherlands, and Germany, to portray himself as a victim and a national hero unafraid to confront the great powers. This strategy has often won him public sympathy despite his resounding failures in the economic sphere.
Simultaneously, Erdoğan, through Turkey’s mobilized media, amplifies every positive data point as a significant success. For instance, on May 3, when the credit rating agency Standard & Poor’s raised Turkey’s credit rating from B to B+, it was hailed as a major achievement.
In conclusion, following the recent imposition of trade sanctions, it can be stated that in the absence of direct flights, tourism, and interaction between the two peoples, bilateral relations with Turkey have been emptied of substance. Now, apart from mutual recognition, there is a complete disconnect between the two countries that once had significant trade relations. Against this backdrop and in light of the ongoing operation in Rafah, decision-makers in Jerusalem must prepare for an unprecedented escalation with Ankara, which could even result in a declaration of open hostility against the Jewish state.
