Moscow will soon send a delegation to Turkey to discuss the steep tariffs Ankara recently imposed on certain Russian agricultural products, Russian Deputy Economy Minister Alexei Gruzdev told reporters April 24.

Russian businesses were surprised on March 15 when Turkey began collecting a 130% import tax on Russian products including wheat, corn and sunflower oil. In Russia, the tax is viewed as tantamount to a sanction on its goods.

“With such prohibitive taxes, the deliveries could be stopped,” said Dmitry Rylko, the head of the Moscow-based Institute for Agricultural Market Studies, in an interview with Russian news agency Interfax.

Russian Minister of Agriculture Alexander Tkachev also expressed concern and surprise on the ministry’s website March 22. He added that he was disappointed in his Turkish colleagues, as both countries had agreed on the necessity of normalizing bilateral trade ties. Tkachev also said that Ankara’s actions call into question its intention to build strong relations with Russia. On the same day, Russian Deputy Prime Minister Arkady Dvorkovich told Turkish Deputy Prime Minister Mehmet Simsek by telephone that Ankara’s action is hindering the restoration of ties.

Simsek and Turkish Minister of Economy Nihat Zeybekci traveled to Moscow on April 18. During the visit they met with Dvorkovich and Minister of Energy Alexander Novak. The tariffs were the main topic in their talks.

Zeybekci explained that the measures were taken on behalf of Turkish exporters, who suffer from the heavy sanctions Moscow hit Ankara with after Turkey downed a Russian jet in November 2015. Despite numerous discussions since then on normalizing bilateral ties, a number of Russian sanctions imposed on Turkish goods remain in force. During Putin’s visit Oct. 10 to the World Energy Congress in Istanbul, Russia did lift sanctions on many Turkish fruits.

Turks had hoped that the remaining sanctions would be fully lifted when a Turkish delegation headed by Prime Minister Binali Yildirim visited Russia in December, but no agreement was achieved. The Russian government did lift sanctions on Turkish cabbage, broccoli, onion and carnations. On March 10, Putin and Erdogan met in Moscow during the High-Level Russian-Turkish Cooperation Council, but tomatoes, cucumbers and apples are still banned.

Turkish tomato producers suffer most of all. Russia used to be Turkey’s main export market for tomatoes. Turkey and Egypt are the main destinations for Russian wheat. From July until February, Turkey bought 2 million tons of Russian wheat. Unsurprisingly, many analysts both in Russia and Turkey view Ankara’s recent wheat tax as a countermeasure.

“Of course this is some sort of retaliation against Russia,” Aydin Sezer, the head of the Turkey and Russia Center of Studies, an Ankara-based think tank, told Al-Monitor. “We and everyone in Turkey admit that. Some Turkish products are still banned in Russia. These products are banned by a political decision, not by the decision of the Federal Service for Veterinary and Phytosanitary Surveillance. This is retaliation, which has an adverse effect on bilateral relations.”

The tomato situation is especially touchy. “The main producers of tomatoes are in Antalya, where Minister of Foreign Affairs Mevlut Cavusoglu comes from. He is under heavy pressure,” Sezer said.

In Russia, wheat, corn and sunflower oil producers are very upset with Ankara’s action. “We will see more losses and price reductions,” wrote director Andrey Sizov of SovEcon, a Russian company that does agriculture markets research and consulting, in a column for Russian business publication Prime. “Redirecting deliveries [to new markets] does not work in practice.”

According to a joint report provided by analysts from the Russian Foreign Trade Academy, the Russian Presidential Academy of National Economy and Public Administration and the Gaidar Institute for Economic Policy, Russia could lose as much as $1.3-$1.5 billion if Turkey doesn’t rescind the high tariffs on Russian wheat, corn and sunflower oil.

The wheat tax doesn’t even benefit Turkish businesses. According to Zekeriya Mete, the head of Turkey’s Cereals, Pulses, Oil Seeds and Products Exporters Association, Ankara’s decision may inflate food prices. “Our profits depend on low shipping costs, and if [Turkey is] forced to buy wheat from markets farther away, our costs will inevitably increase,” she said in a telephone interview with Bloomberg.

Dvorkovich has said Moscow will take retaliatory measures if Ankara maintains the tariffs, but he also expressed hope that the two sides will find common ground.

Neither side benefits from the politically motivated conflict, a resolution to which depends on a range of political compromises. How far it could reach depends largely on developments in Syria, where Russia and Turkey hold opposing positions on the regime and Syrian Kurds. The April 4 chemical attack in Idlib has made Russian-Turkish relations regarding Syria even more complicated.

Author Yekaterina Chulkovskaya

Read more: http://www.al-monitor.com/pulse/originals/2017/04/russia-turkey-talk-tariffs-wheat-import-taxes.html#ixzz4fL29smJQ