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UAE and Turkey ink deals with billions

Faisal Ali

It would have been a difficult development to predict before this summer. But mid-last week, on a rainy winter afternoon in Ankara, the Crown Prince of Ahu Dhabi, Mohammed bin Zayed (known widely as MbZ), was welcomed by President Erdogan to the presidential palace with a guard of honour, a cavalry procession, and a 21 gun salute. 

The pomp with which MbZ and his high-level delegation was received was a harbinger of what was to come. The two countries inked MoUs & a series of cooperation agreements worth billions of dollars, in a variety of different fields including energy, defense, environment, health, ports, stock markets, technology & central bank cooperation. 

The CEO of the Abu Dhabi Developmental Holding Company also said $10bn had been ring-fenced to invest in Turkey in addition to reports emerging of a currency swap deal worth up to $5bn. 

At the closure of the meeting, the Lira made modest gains against the US dollar, and Turkey’s stock exchange, the Borsa Istanbul, closed with a new record

“The UAE and Turkey have the two most dynamic economies and societies of the region,” said the UAE’s minister of industry and advanced technology, and the broad scope of the deals signed suggests the leaders of both countries want to maximize their collective economic potential. “I look forward to exploring new cooperation opportunities to benefit our two nations & advance our mutual development goals” MbZ tweeted after the meeting. 

In 2020, Turkey & UAE were the two of the most lucrative destinations for FDI in the Middle East, and the first and third-largest economies respectively in the region. Despite that bilateral trade stood at a modest $9bn in 2021, the majority of which consisted of gold, precious stones, and jewelry.

Erdogan’s meeting with his de facto counterpart is the first in a decade since the Arab Spring exposed the differing visions Ankara and Abu Dhabi had for the region. Egypt was the first major flashpoint, where a Saudi & Emirati backed coup overthrew the Muslim Brotherhood-linked Freedom & Justice Party whose leader has close ties to President Erdogan. 

The protests, which spread right across the Arab world, put the countries on a collision course, which saw their crescendo following the Gulf Crisis in 2017 when Turkey quickly came to Qatar’s defense to Abu Dhabi and Riyadh’s chagrin. This translated into a series of proxy conflicts throughout the Middle East and Africa, which despite their intensity, didn’t have too much of an impact on bilateral trade and investment. 

During the period between 2002-2020, the UAE was the leading Gulf investor in Turkey and between 2004-2011 UAE investments accounted for more than half of overall Gulf FDI flows to Turkey, though over the last 5 years Qatar has taken the lead

Turkey’s FDI outflows to the UAE hit a peak in 2005, then slowed during the Emirati financial crash in 2011 and immediately picked up again before a brief lull during the bitter Gulf Crisis. During that same period, UAE was also Turkey’s primary export market in the Gulf region, with Saudi Arabia and Qatar not far behind. The UAE was also the third-largest consumer of Turkish aerospace and defense products globally in 2021. 

“In general, it’s clear they’ve taken their economic ties into consideration despite their political differences and shielded them, but not totally as bilateral trade sharply declined after the Gulf Crisis,”  

Ali Bakir, a Middle East analyst and professor at Qatar University tells The Somalia Investor Magazine.

Indeed, two years into the Gulf Crisis, Dubai’s state-owned Emirates NBD bank – the country’s 2nd largest – bought the once Turkish state-owned but then private investment institution, Denizbank. Describing Denizbank as a “powerhouse”, Hesham Al Qassim, NBD’s managing director said “we are proud to mark a new chapter in our growth journey by welcoming Denizbank to the Emirates NBD family.” The acquisition of Denizbank is the largest Emirati investment in Turkey.

Turkish fintech companies were still seeking and obtaining audiences with investors in Dubai and Abu Dhabi despite political tensions and against the grain, trade volumes also increased 21% in 2020 during the pandemic, doubling in the first half of 2021. 

The robustness of Turkey and the UAE’s economic ties contrasts quite sharply with those between Turkey and Saudi Arabia, which deteriorated when the bilateral relationship became turbulent says Ali Bakir. “The UAE’s a relatively small country, and has to be flexible when the international & regional settings change but larger countries take more time to make these shifts.”

A new chapter in UAE-Turkey relations or false dawn?

The signs of possible normalization were on the horizon early this year when Anwar Gargash, a diplomatic advisor to the UAE’s president said “we want to tell Turkey that we want normal relations with it that respect mutual sovereignty.” Shortly after, the foreign ministers of both countries exchanged Ramadan greetings.

But the move towards normalization gathered momentum after Sheikh Tahnoun’s visit to Ankara – a younger brother of the crown prince and national security advisor. Described as the “point man” for MbZ, Sheikh Tahnoun, 51, is a powerful Emirati business & political figure who treads softly, but whose mandate has a broad scope. Rarely seen without his dark aviator sunglasses, Sheikh Tahnoun is known for his pragmatism and is often sent as MbZ’s personal envoy to iron out thorny issues with foreign leaders before peer-to-peer contacts are made. 

Following his visit to Turkey to meet President Erdogan, Turkey and the UAE’s foreign ministers exchanged calls again, followed by a call between President Erdogan and MbZ. By early September the UAE and Turkey began discussions about cooperation in the fields of space exploration and advanced technology, before MbZ’s eventual visit upon Erdogan’s invitation to Turkey. 

The direct call between the leaders piqued the interest of Emirati investors, who began surveying what opportunities Turkey presented to investors. The International Holding Company, the UAE’s second most valuable listed company, which Sheikh Tahnoun chairs was among those according to Bloomberg. ADQ, which he also chairs, committed to investing $10bn in Turkey after MbZ’s trip to Ankara.

Though the agreements had a broad scope and led many analysts to anticipate the warming of ties, the unscheduled press conference after the meeting didn’t address any of the substantive political differences between Ankara and Abu Dhabi. 

Despite the limited scope of the meeting Taha Arvas, a Professor of Finance at Bogazici University and former vice-chair of the Capital Markets Board of Turkey says it will increase the confidence of investors on both sides.

“These agreements will remove doubts that firms in both countries have as to the sustainability of the trade ties between the countries,” he tells The Somalia Investor Magazine.

Faisal Ali is an Istanbul-based multimedia journalist. Follow him on Twitter: @fromadic92

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