Turkey opens the doors to Russian money | International


Since sanctions against Russia began to unravel, the Mediterranean has seen a procession of superyachts heading east. These luxury vessels, owned by Russian billionaires well connected to the Kremlin and some of them among the largest in the world, have left their usual abodes on the Spanish, French or Italian coast to anchor in the bays of the Turquoise Coast or in Istanbul. . Among these runaway yachts have been identified the Universe of former Russian President Dmitry Medvedev, the Eclipse and the Solaris of the oligarch Roman Abramovich, the Polaris of the builder Maxim Shubarev, the clio and the Sputnik of aluminum tycoon Oleg Deripaska and the rahil of Arkadi Rotenberg, Putin’s friend since childhood and builder of the bridge linking Russia and the annexed Crimean peninsula. For all of them, Turkey is a safe harbor.

“We will keep our doors open to those companies that want to park their potential in Turkey,” explained the Turkish president, Recep Tayyip Erdogan, at the end of March in Brussels. His Foreign Minister, Mevlüt Çavusoglu, also made it clear: “If Russian oligarchs or any Russian citizen visit my country, they are welcome. We have not decreed sanctions, because we only apply those endorsed by the UN. If they want to do business, that’s fine too, as long as they’re within the law, of course.”

With galloping inflation (61% according to official figures and 143% according to independent analyses), a high current account deficit, the highly devalued Turkish currency and the recovery plan through exports and tourism disrupted by the Russian invasion from Ukraine, Turkey has seen an opportunity to attract funds from Russians going into exile or those who fear falling under EU, US and UK sanctions. “Since most of the oligarchs will not be able to do business in the West, they will use Turkey as a refuge. Turkey has a very special relationship with Russia, but geopolitical reasons aside, the main one is that this money comes to the rescue at a delicate time for the Turkish economy,” says Emre Ersen, professor of International Relations at Marmara University.

One of the sectors where it is being noticed is real estate. “Although we sell to many foreigners, in the last two months 70% of our sales have been to Russians,” explains Gül Gül, CEO of Istanbul-based company Golden Sign. Also in Antalya, the southern province preferred by Russians and Ukrainians to spend the summer, an increase in property sales has been noted, explains a real estate source. A resident of the area details: “The rents are skyrocketing and they are even kicking out old tenants with any excuse to be able to rent higher to the Russians who are arriving.”

According to data from the official statistical institute, during the first quarter of this year, real estate sales to Russian citizens increased by 60% compared to the same period in 2021, although they were still higher in the last quarter of last year, with more of 2,000 properties sold. It is likely that many sales have not yet been reflected in the cadastre, which is where the statistics come from. In total, one out of every 200 properties sold in the last three months in Turkey has been bought by a Russian.

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“The minimum that our clients usually spend is about 350,000 dollars [unos 325.000 euros]”, assures Gül: “There are those who do it as an investment and others for the nationalization program”. Turkey has maintained a system of granting nationality in exchange for investment for five years. Until 2018, it was required to invest a million dollars, but that year the amount was reduced to 250,000 dollars. Proof that the program is going from strength to strength is that an increase in the minimum investment of up to $400,000 has been announced, which will come into force in the coming weeks. “The process is very simple. You buy the house, put a three-year sale restriction on the house and the residence permit is granted immediately. The nationality is requested and, in three or four months, you already have a Turkish passport”, explains an Istanbul lawyer in whose firm the increase in interest in this program has also been noted, despite which he emphasizes: “Above all they are Russians who are fed up with their country and their government and for whom this program is an escape route”.

The young exodus

Since the beginning of the war, several tens of thousands of Russians, mostly young professionals, have arrived in Turkey, many as a first stop to flee elsewhere. The first problem they face, with the major Russian banks excluded from the SWIFT system, is how to access their savings. “They are the ones who have problems transferring money, not the oligarchs who have accounts abroad,” explains the lawyer. According to the International Consortium of Investigative Journalists, the account system offshore used by oligarchs “can mitigate the effect of sanctions because it allows them to hide their assets behind anonymous shell companies.”

Although there are no restrictions in place against Russian citizens, opening an account in Turkey is difficult for them. Turkish banks, especially those with European capital, are being “very cautious” in their checks before agreeing to open an account for a Russian citizen, explains a banking source, in order to avoid secondary sanctions, as happened to the Turkish public bank Halkbank , used to convey payments to Iran and has been tried in the US. A young man who fled Russia for political reasons recounts: “I was in 20 offices of different banks and in each one I received a different reason why I could not open the bill. In most they ask to block a deposit of between 1,000 and 3,000 dollars. In the end, in an office in Maltepe [un distrito alejado del centro de Estambul]a very nice man told us that he understood our situation and the next day we had a bank account and cards”.

There are different ways of transferring money from their country, according to several Russians consulted: there are those who bring as much as possible in cash or ask those who leave after them to do so, but methods such as PayPal, the international transfer system, are also used Russian Korona Pay (similar to Western Union) or the MIR payment system, of the Central Bank of Russia and whose cards are increasingly accepted by Turkey. And then there are the cryptocurrencies: “I buy cryptocurrencies with my Russian card and then I convert them into cash at any office here in Turkey,” explains the young Russian.

A loophole in sanctions

It’s not just about individuals’ funds. Turkey also wants to attract companies. Both the Western ones that are leaving Russia because of the sanctions, and the Russian ones that are moving their headquarters abroad in order to continue interacting with the world. And likewise, the Eurasian country can supply those Russian companies that can no longer supply themselves in the countries that have approved sanctions. “If Turkish companies take advantage of this opportunity, they will achieve important and lasting cooperation with the Russian Federation. We are receiving requests from our Russian partners who are looking for medical and health products, auto and machinery spare parts, construction products…” explains Kadir Kurtulus, director of the Russo-Turkish Trading House, an advisory body supported by the Russian Embassy in Ankara.

This can open loopholes in the architecture of sanctions devised in Brussels: Turkey is a member of the European Customs Union, so it is not ruled out that material from community companies ends up in Russia through exchanges mediated by Turkish companies. At the moment, the EU is not pressuring Turkey to support its sanctions because it appreciates the mediation effort it is making. Even a Ukrainian diplomatic source admits that Turkey cannot be asked as much as the EU countries, because its economic situation is fragile: “We are very grateful to Turkey for its support. It is the only country that has managed to bring Russia to the negotiating table, while others have failed”.

“The EU accepts that Turkey does not sanction Russia. However, it is one thing not to punish and quite another to become a refuge to escape sanctions. When we ask about it, in Brussels they tell us that they are monitoring the transactions very carefully. If it is something specific, nothing will happen, but if in a few months it is seen that it has become something systematic, then we could start talking about applying secondary sanctions in Turkey”, says Ilke Toygür, professor of Geopolitics of Europe at the Charles III University.

“Turkey needs all the foreign currency it can get,” Professor Ersen concludes: “It’s like walking a tightrope; Turkey understands the risks of ending up sanctioned for what it is doing and, even so, it takes the same risk.”

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