Is a Deal with Iran Bad for Turkey?

In the short term, it's a big opportunity. But in the long term, it could be a challenge.

The interim agreement finalized last week by Iran and the six major powers seeking to prevent Iran’s acquisition of a nuclear weapon represents a major victory for international diplomacy and promises significant benefits for Iran’s neighbors, especially Turkey. But while Turkey has much to gain, economically and politically, from a peaceful resolution to the decade-long dispute over Iran’s atomic ambitions, the accord may become yet another challenge to Turkey’s quest for regional influence, leadership and primacy.

Turkey is one of the principal beneficiaries of the deal struck in Geneva on November 24, 2013, the technical details of which were finalized this past Sunday. Turkey is deeply committed to the idea of a nuclear weapons-free Middle East. Statements in recent years by Turkish prime minister Recep Tayyip Erdoğan and foreign minister Ahmet Davutoğlu have evinced a deep skepticism of Western claims that Iran has been seeking a nuclear weapons capability. Nonetheless, they have been very consistent in their condemnation of any attempts to introduce new nuclear weapons into the region[1] and have vocally denounced Israel’s presumed nuclear arsenal.

Iran’s acquisition of nuclear weapons has the potential to seriously destabilize the region by prompting an arms race that might spur Saudi Arabia, Egypt and even Turkey to develop their own nuclear arsenal to deter aggression and restore some balance to the regional power dynamic. By capping Iran’s uranium enrichment and implementing a strict monitoring regime, the Geneva agreement significantly reduces this threat and, at least theoretically, keeps the hope of a nuclear free Middle East alive.

Nearly as important for Turkey as removing the threat of a nuclear-armed Iran is doing so by peaceful means. The United States, Israel, and some European powers continue to stress that the use of military force to prevent Iran’s acquisition of a nuclear weapon is an option that remains “on the table.” An Israeli or American strike on Iran’s nuclear facilities (which would likely require a lengthy bombing campaign) would put Turkey in an impossible position diplomatically and has the potential to cause significant problems for the Turkish government with their own citizens, particularly if attacking aircraft used NATO bases in Turkey or Turkish airspace for the attack. Both Israel and the United States are highly unpopular with the Turkish populace, and with the ruling Justice and Development Party’s (AKP) constituents in particular. The Iraq War was almost universally opposed within Turkey and imposed significant costs on the country’s economy. No one in Turkey wants to see a repeat performance of the events of 2003-2011, or the sanctions that were imposed on Iraq during Saddam Hussein’s reign in the 1990s for that matter.

The Iraq War and the preceding sanctions regime were particularly unpopular because of their restrictions on Turkey’s trade with Iraq and the resulting higher oil and gas prices. Iran is an even larger trade partner for Turkey than Iraq and is also an important source of energy. Turkey runs a major trade deficit with Iran that it has long tried to overcome by expanding its exports—something which is hampered by the current sanctions regime. Many Turkish companies have been badly harmed by the strict sanctions imposed upon Iran by the US and European Union (EU). Turkish construction companies, financial institutions, and manufacturers all have seen their interests in Iran undermined by sanctions. Furthermore, Turkey has long been opposed to unilateral EU and US sanctions that go beyond those authorized by the United Nations and has argued that they disproportionately penalize ordinary citizens and impose unfair burdens on Iran’s neighbors.

The prospect of sanctions relief is good news for Turkey as much as Iran. Turkish-Iranian annual bilateral trade has already grown nearly twentyfold over the past decade, from about $1.2 billion in 2002 to almost $22 billion in 2012, in spite of the bite of international sanctions. However, overall trade with Iran and Turkish exports to Iran contracted by 41 and 63 per cent in the first eight months of 2013. Turkish business leaders believe that an Iran unbound by such restrictions would become a rapidly growing export market for Turkish goods and services as well as a fertile field for investment. According to an industrialist familiar with Turkey’s economic relations with Iran, an end to the sanctions regime could open the way for exports of Turkish goods and services to Iran worth more than $90 billion in the medium term. Additionally, the ability to import more of its energy from Iran would reduce some of the squeeze of Turkey’s current dependence on Russia, especially in the gas sector.