Turkey's perfect partnership tilts towards the Gulf states

Recep Tayyip Erdogan, the prime minister of Turkey, has just visited Sharjah and his nation's relations with the UAE grow ever stronger.

Amr Moussa, the former secretary general of the Arab League; Recep Tayyip Erdogan, the prime minister of Turkey; Dr Sheikh Sultan bin Mohammed, Ruler of Sharjah; and Kofi Annan, the former secretary general of the UN, at the Sharjah Government Communication Forum. Antonie Robertson / The NationalShow less

Recep Tayyip Erdogan, the prime minister of Turkey, was the darling of an Arabian Gulf conference this week, reinforcing his credentials as a political leader of the Muslim world.

As the star foreign politician at the Sharjah Government Communication Forum, he milked the applause from the mainly Emirati audience for his forthright opposition to Israeli policy and president Bashar Al Assad's government in Syria.

But behind the scenes of the forum, he took another step along the path Turkey has taken in parallel to the championing of political causes in the region: the enhancement of his country's economic and trade relations with GCC states.

A memorandum of understanding signed by investment officials from Turkey and Sharjah aims to extend further the business relationship between Turkey and a UAE emirate.

Following earlier visits by Mr Erdogan to the UAE in the past year, and growing trade relations between the two countries, the Sharjah MOU is a reminder of how Turkey is pursuing an economic policy of "soft power" in the region alongside its political initiatives.

Mr Erdogan has been increasingly looking south and east in the course of his 10-year-old administration, rather than west and north, as had been the focus of Turkish economic policy for most of the past century. Protracted negotiations for membership of the European Union hit obstacles mainly because of worries in several European countries about the perceived diffulties of admitting such a large Muslim country into the EU. On the other hand, the euro-zone crisis has made EU membership much less attractive to Turkey.

Mr Erdogan certainly seems to have pulled back from full-blown commitment to a Europe-orientated strategy. Asked recently if Turkey would be a member of the EU by 2023, he replied: "They won't keep us waiting that long, will they? If they do, the EU will lose, at least it will lose Turkey."

In contrast, relations to the south-east seem never to have been better. At a recent gathering of Turkish and UAE officials and businessmen in Dubai, Mohammed Ahmed Al Shihhi, the Undersecretary of the Emirates Ministry of the Economy, talked about the "strategic 21st century partnership" being built by the two countries. All the indicators are that trade and economic relations are blossoming.

Turkish investment in the UAE reached a value of US$6 billion (Dh22.04bn) in 2011, with the UAE investing $5bn in Turkey in that period.

The value of trade between the two stood at $5bn, and is forecast to double by 2015. Construction, tourism, property and, of course, energy products are the main sectors of trade between the two, but increasingly financial institutions in the UAE and the Gulf are looking to expand in Turkey.

In particular, they see a potentially huge market for sharia-compliant banking as Turkey appears to be drifting from its strictly secular traditions in finance as much as in politics.

Turkish companies have been involved in some of the biggest projects in the Emirates: last year the country's infrastructure group TAV Insaat led a consortium of Middle East contractors that won the contract to build a $3bn terminal at Abu Dhabi International Airport.

Going the other way, Taqa, the Abu Dhabi energy company, signed a multimillion-dollar deal to develop a major power project in southern Turkey.

The Turkish ambassador to the UAE, Vural Altay, who was present at the Sharjah ceremony, urged the UAE business community to "utilise the vast opportunities that the Turkish economy offers".

The economic synergies between Turkey and Gulf states are potentially enormous. As Tim Evans, the regional head of trade finance at HSBC, says: "Take a simple example. Turkey needs to import energy and has surplus food production. Many countries in the Gulf have an energy surplus and need to import food.

"Many Middle East energy exporters have large current account surpluses, generating excess capital looking for a home. Turkey has a current account deficit. Middle East governments need expertise and capacity to build critical infrastructure projects. Turkish contractors are among the biggest and best in the world."

So Mr Erdogan's strategic approach would seem to be pushing on an open door in the Gulf region, and especially the UAE. "The fact is that our two countries have a close bonding in practically every area of strategic activity," said Mr Altay.

But, the economists point out, there are several factors that suggest the advantage is tilting towards the Gulf in this seemingly perfect partnership.

Perhaps the most persuasive is that Turkey's economy is no longer the dynamo of the region, as it has been for most of Mr Erdogan's term. GDP growth last year was less than 2 per cent, well behind the close-to double digit levels it clocked up for most of the past decade.

With Iranian sanctions hitting Turkish oil supplies and a chronic current account deficit, Mr Erdogan's main requirements are oil and cash. These, of course, are exactly what the Gulf region has in abundance.

Perhaps the Turkish prime minister sees this as the perfect time to bank some of the reputational capital he has built up in the region.