The Sultan woos the Sheikhs: Turkey’s improved GCC relations bolster external financing
This report is a joint publication co-authored by Atilla Yesilada and our GCC analyst, Justin Alexander.
* Turkey received a $5bn Saudi deposit in March and possibly undisclosed support from UAE and/or Qatar that averted a currency crisis ahead of the May elections and helped keep Erdogan in power.
* More financing is needed to minimize the pain before the end-March 2024 local elections and some of the $11.5bn credit pledged by the UAE’s ADQ may come by year-end.
* Rising trade and tourism from the Gulf is already helping the balance of payments. However, FDI inflows will be slower to arrive, despite interest from the UAE and Saudi Arabia in green energy projects.
* For the Gulf states, Turkey is increasingly seen as a fellow “middle power” as they seek to stabilize the Middle East and carve out an international role between the West and East.
* Both sides have buried sources of political tensions, including over the Muslim Brotherhood and Jamal Khashoggi, but differences of opinion remain on some key regional files.
* Further support and investments to Turkey will have to compete with requests from many other countries, including Egypt and Pakistan, as well as internal Gulf priorities.
* Gulf support won’t be sufficient to correct Turkey’s economic policy mistakes, but the rapprochement could buy it time and create tangible credit and equity opportunities in certain sectors such as defense and energy.
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