ANKARA
Foreign trade done in local currencies between Russia and Turkey will strengthen renewed bilateral economic ties, experts said Friday.
Ankara and Moscow are reinstating their annual bilateral trade target of $100 billion from around $30 billion in 2015 as relations are normalized between the two following a crisis last November.
"Turkish businesspeople want to trade with Russia in local currencies, the Turkish lira and Russian ruble," said Mehmet Buyukeksi, head of the Turkish Exporters Assembly (TIM).
Buyukeksi argued companies could avoid foreign currency risks by trading in local currencies.
"If the ruble and lira are used, fluctuations in the dollar and euro won’t directly affect them," he said.
Last year, the euro fell 19.7 percent against the U.S. currency from the previous year. While the dollar value of Turkish exports to Europe was $64.3 billion in 2014, this dropped to $58.7 billion in 2015, according to Turkey’s Economy Ministry.
The low value of the euro cost Turkish exporters $12.9 billion in revenue, according to ministry calculations.
According to Buyukeksi, the share of the Turkish lira in the country's exports was 5.1 percent in the first half of this year.
"This figure was 4.2 percent in 2015, and 1 percent in 2001. Similarly, a rising trend has been seen on the import side. The portion of the Turkish lira in Turkey's imports was 7 percent in the first half of this year, versus only 0.3 percent in 2001. This is evidence of how reputable the Turkish lira is and its increasing usage in global markets," said Buyukeksi.
Buyukeksi argued that trading in local currencies provides an opportunity to better handle the country's current account deficit, which was $19.1 billion in the first half of this year amid low oil prices.
"Remarkably, $3.2 billion of the deficit -- among approximately $6.9 billion in imports and $3.7 billion in exports -- resulted from trading in the Turkish lira. This means that we did not need foreign currency to finance this amount of the deficit," Buyukeksi said.
"The total share of the lira and ruble in Turkey's exports to Russia has risen tenfold in the last 11 years. We are happy with that. We aim to boost this further," said Buyukeksi.
Exports done in euros accounted for a 48 percent share of Turkey's overall exports in the first half of 2016, while those in dollars totaled 43 percent, in the lira 5 percent, and in the British pound 3 percent, according to the country's statistical authority, Turkstat. Europe remains Ankara's largest export market.
Turkey does 56 percent of its imports in dollars, 36 percent in euros, and 7 percent in liras according to Turkstat, leaving the country vulnerable to fluctuations in the euro/dollar rate.
In the first half of the year, foreign trade done in dollars accounted for almost 51 percent of the total, in euros 41 percent, and in liras 6.16 percent -- for the latter, an 8 percent rise from the same period last year.
"Trading in local currencies in foreign trade has been an upward trend in recent years, especially among China, South Korea, and Latin America," said Andrey Chuprygin, a senior lecturer at National Research University Higher School of Economics in Moscow.
"Trade in the ruble and lira could help to boost the trade volume between Russia and Turkey and provide job opportunities, especially in the tourism sector," he argued.
Nigyar Masumova of Moscow State International Relations University underlined the complexity of using the ruble and lira in trade.
"Shifting to local currencies is a challenging process. There has to be solid political support behind it," Masumova said.
"However, the idea of using local currencies is pointed to as these two countries want to deepen their economic ties considering that Turkey plays a key role in transporting Russian energy to Europe while Russia has a significant impact on the Turkish tourism sector and consumer goods."
This year so far, Turkey had done almost 50 percent of its exports to Europe amid ongoing economic uncertainty there.
During January-June, exports fell 2.4 percent compared to the same period last year while imports dropped 6.7 percent, resulting in a 16 percent reduction in the foreign trade gap to $28 billion.
"Both countries will take some steps to restore relations," said Boris Pivovar of the Russian Presidential Academy of National Economy and Public Administration in Moscow.
"I think this process will take two years to reach the pre-crisis level. Economic relations are very important despite all differences of political opinion," Pivovar added.
"The U.S. dollar is the strongest currency now," he pointed out. "Unfortunately it is not easy to leave the dollar even for two big countries, Russia and Turkey."
Ties between Moscow and Ankara entered a new phase following a meeting between President Recep Tayyip Erdogan and his counterpart Vladimir Putin on Tuesday.
(Reporting by Emre Gurkan Abay in Russia, Elif Ferhan Yesilyurt and Sumeyye Dalkılınc in Istanbul; Writing by Muhammed Ali Gurtas, Bahattin Gonultas in Ankara)
