Did Turkey Turn On Israel To Boost Business From The Arab World?

Turkey Israel Floatilla Boat Protest

For decades the Turkish-Israeli alliance has been one of the defining relationships of the Middle East.

This month it broke down, shifting the ground of regional politics and economy.

Inflamed by a UN report on the Gaza Flotilla confrontation, Prime Minister Recep Tayyep Erdogan suspended military ties with Israel, kicked out the Israeli ambassador, and pushed the UN vote for a Palestinian state in a speech to the Arab League.

His rhetoric – comparing Israel to a ‘spoiled child’ – resonated in the Arab street and with his own Islamist voter base in Turkey.

Analyst Taufiq Rahim says it is a strategic gamble: Erdogan is betting that he can cut loose an ally in Israel, cultivate friends in the Arab world, and maintain the benefits of his ties to the West.

As a net effect, Turkey projects greater influence in the region.

‘Erdogan is on his empire complex,’ Rahim told Bloomberg Television.’ He’s creating an existential rift with Israel and using that currency to curry favour with a large part of the Middle East.’ That favour helps open new markets, diversifying Turkey’s map of trade and investment.

As an economic slowdown engulfs the West, Turkey is turning to the Arab world for more of its economic growth. Erdogan’s visit to Egypt, Tunisia, and Libya last week – the ‘Arab Spring’ tour – was a masterstroke in the politics of business.

Nearly three hundred Turkish businessmen joined his delegation, signing deals on the spot worth hundreds of millions of dollars. At stake in Libya alone: $15 billion dollars in unfinished contracts, some from projects between Turkish companies and the Qaddafi regime.

Today, Erdogan is moving to woo the new Libya, cheering the revolution and praying with the crowds in martyr’s square. That helps Turkish companies move to the fore, smoothing over old deals and angling for the projected $200 billion in infrastructure spending to rebuild Libya over a decade.

Politics, religion, and business have been intertwined in Erdogan’s Turkey, and they all point toward greater Arab-Turkish integration. Erdogan’s Islamist sensibilities favour a closer connection with the Muslim world, his supporters are warm to the anti-Israel, pro-Palestinian stance, and both have helped Turkish companies find fertile markets in places like Iraq, Egypt, Syria, and Saudi Arabia.

That’s a sharp shift from just a decade ago, slicing through the Arab-Turkish tension left over from the Ottoman empire. Across the Middle East and North Africa trade reached $30 billion last year, surging sixfold since Erdogan’s party took power in 2002. In contrast, trade between Turkey and Israel was $2.7 billion in the first seven months of this year, according to government figures.

But the strategic calculus is harder to crunch. ‘Turkey has quite a bit to lose here,’ said Jonathan Schanzer, analyst in Washington. ‘NATO is looking sideways at it right now, wondering whether it’s a reliable partner. And you have the U.S. questioning its alliance.’

Schanzer says Turkey’s shift is a lose-lose-lose – bad for Israel’s security, bad for Turkey’s long term strategy, and disastrous for U.S. interests in the Middle East.

Some Israeli companies have already lost from the diplomatic row. Elbit Systems, suppliers of military equipment to Turkey, saw its stock price fall 5% after Erdogan suspended military ties (though that tracked overall losses on the Tel Aviv Stock Exchange).

Menashe Carmon, head of the Turkish-Israeli Business Council, says he’s worried about a long-term decline in trade, rather than a direct, immediate hit.

‘Private business ties are continuing without any change for the time being,’ Carmon told Bloomberg Television. ‘[But] in the past year, people who were thinking to invest or make long term joint ventures are on edge, postponing decisions.’

I asked him if business leaders in Turkey and Israel are lobbying their governments to reconcile. Carmon said normally they would, and in the past they have. But this time they don’t think either side would listen.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.