BACKGROUND: After the Justice and Development Party (AKP) came to power in Turkey in November 2002, there was a marked rise in economic relations with Iran. The total volume of bilateral trade between the two countries rose from $1.25 billion in 2002 to $10.68 billion in 2010. In the first 10 months of 2011, trade volume stood at $13.50 billion and was expected to exceed $16 billion by the end of the year. The balance of trade is more than three to one in Teheran’s favor, mainly as a result of Iranian hydrocarbons, which account for virtually all of its exports to Turkey. Iran is Turkey’s largest supplier of crude oil, providing 43.2 percent of the country’s total imports in 2010. In addition, it is Turkey’s second largest supplier of natural gas, providing 20.4 percent of total imports in 2010, behind the Russian Federation with 46.1 percent.

The AKP also sought to strengthen political ties with Iran, particularly from late 2008 onwards. In public statements, AKP officials repeatedly described Iran as a kardeş ülke or “sibling country” and, in a thinly veiled reference to Islam, stressed their “shared values and culture”. In June 2009, Prime Minister Tayyip Erdoğan publicly congratulated Iranian President Mahmoud Ahmadinejad on his reelection before the official results had been confirmed in what is widely regarded as a deeply flawed poll. Erdoğan also repeatedly dismissed claims that Iran was attempting to acquire nuclear weapons, arguing that it was merely exercising its right to a peaceful nuclear energy program. In the first half of 2010, Turkey energetically strove to broker a deal that would stave off further international sanctions against Iran. In June 2010, it even used its temporary membership of the UN Security Council in an unsuccessful attempt to block a new package of UN sanctions against Teheran.

Once the UN sanctions had been approved, Turkey dutifully abided by them, even forcing two Syria-bound Iranian planes to land in Turkey in March 2011 following intelligence reports that they were carrying proscribed cargoes; the first time inaccurately and the second time correctly. But the AKP insisted that it would refuse to enforce additional, much stricter, U.S. sanctions against Iran. Through late 2010 and early 2011, there was steep increase in the number of Iranian-owned companies established in Turkey, as businesses relocated from Europe where governments had become wary of hosting Iranian firms in case they were being used as fronts for Teheran’s procurement program. Although Turkish companies continued to trade with Iran, the country’s banks became increasingly reluctant to handle transactions involving Iranian companies for fear that they might be suspected of involvement in procurement activities. Most Turkish banks have assets abroad and are heavily dependent on foreign financing, such as syndicated loans; and were wary of becoming blacklisted or having their assets seized by the U.S. Through early 2011, AKP officials lambasted Turkish banks for their reluctance engage with Iranian firms and refused to bow to U.S. pressure to restrict the activities of the Iran-owned and Istanbul-based Bank Mellat, which Washington claimed was helping facilitate Teheran’s procurement program. But the AKP’s efforts were unsuccessful. Turkish banks all severed their links with Bank Mellat. In May 2011, the Turkish media quoted U.S. officials as claiming that the only Turkish bank still prepared to finance trade with Iran was Aktifbank, which is owned by one of Erdoğan’s closest associates.

Closer political relations were underpinned by shared security concerns. During the 1990s, Teheran often tolerated the activities of the Kurdistan Workers’ Party (PKK) on Iranian territory. The situation changed in 2004 when the PKK formed the Free Life Party of Kurdistan (PJAK) and launched an armed insurgency for greater rights for Iran’s Kurds. Over the years that followed, Turkey and Iran began to share intelligence and occasionally even to coordinate military strikes against the PKK and PJAK, although they have not staged any joint operations.

IMPLICATIONS: The vigor with which the Turkey pursued warmer ties with Iran from late 2008 onwards coincided with a significant increase in the AKP’s self-confidence both domestically and internationally; particularly its attempts to position Turkey in apposition – and sometimes opposition – to the West in order to bolster its claims both to regional preeminence and to leadership of the Muslim world. For Teheran, closer ties with Ankara provided an opportunity not only to detach Turkey from the West but also to try to reduce its international isolation. Yet Iran had its own aspirations to regional preeminence. Ironically, at the same time as they were issuing public declarations of solidarity, Turkey and Iran were also competing for influence; whether rhetorically by championing iconic Muslim causes – such as by excoriating Israel and highlighting the plight of Palestinians -- or by cultivating contacts with competing factions in countries such as Iraq.

Similarly, although religion may draw Turkey and Iran closer together against the West it pits them against each other within the Muslim world. Shia Iranians tend to be disdainful towards Turkish Sunni Muslims, who in turn are scathingly dismissive of the Shia of Iran, often privately describing them as untrustworthy heretics. Even the exiled Islamist preacher Fethullah Gülen, whose followers now constitute the most powerful non-state network in Turkey, has publicly referred to the Iranian Shia as a “reactive community”, incapable of “thinking correctly, making balanced decisions or acting according to prevailing global circumstances”. 

Nevertheless, there is no doubting the appetite of many Turkish companies for increased trade with Iran, particularly in the impoverished provinces along the Turkish-Iranian border, where geographical proximity has been enhanced by the ability to communicate in different, though mutually intelligible, dialects of Turkish. A large proportion of Turkey’s existing business ties with Iran are with members of its large and predominantly Shia Azeri minority, who speak Azerbaijani Turkish. However, despite numerous agreements and declarations of intent, in practice little has been done on an official level to encourage closer economic ties. In recent years, a string of grandiose projects have been announced, ranging from plans to build a joint free trade industrial zone, to Turkish participation in the South Pars natural gas field, and massive investments in infrastructure to allow Turkish ports to rival Dubai as Iran’s main foreign gateway to international markets. None has been realized. The lack of enthusiasm is particularly noticeable on the Iranian side. Turkish exports to Iran still face steep customs tariffs, while Turkish investors in the country complain of an opaque and xenophobic bureaucracy and judicial system. Although more than 2,000 Iranian-owned companies have been established in Turkey, less than 200 Turkish-owned companies have been founded in Iran.

The tensions and ideological rivalries underlying the declarations of amity and solidarity surfaced in February 2011, when the AKP suspected Iran of fomenting protests by Bahrain’s Shia majority against the country’s ruling Sunni elite. Although the AKP supported pro-democracy protests elsewhere in the Arab world, it drew the line at the potential replacement of a Sunni government with a Shia one.

More humiliating was the AKP’s reversal in Syria, which it had once regarded as a nascent Turkish dependency and one of the building blocks of a neo-Ottoman sphere of influence in the eastern Mediterranean. Syrian President Bashar al-Assad ignored the AKP’s calls for political reforms, marginalizing those members of his inner circle whom he regarded as being pro-Turkish and closely allying himself with Iran. For the AKP, dismay at being usurped by Teheran was compounded by suspicions that Iran was pursuing a sectarian agenda; first by supporting the Shia of Bahrain and then by strengthening its ties with its ideological affiliates in the form of the ruling Alawite minority in Damascus.

CONCLUSIONS: The AKP had initially opposed the deployment of any elements of NATO’s missile shield on Turkish territory. For many in Iran, Ankara’s abrupt about-turn was proof of what they had long suspected: namely that, despite its public proclamations of Muslim solidarity, Turkey remained a pawn of the West. In reality, the AKP’s reversal of its previous opposition to the deployment of the missile shield was – like the other about-turns which have characterized its recent foreign policy – based on pragmatic considerations rather than ideological commitment or a sense of solidarity with the West. Put simply, once it realized that the other members NATO were not going to be swayed by its protests and that it risked being marginalized and thus losing all influence within the alliance, Turkey calculated that it had less to lose by dropping its resistance to the missile shield than it did by maintaining it.

The AKP’s policies towards Iran have been motivated by similar utilitarian considerations; primarily the perceived economic benefits of increased trade and a means of asserting itself as a power in its own right, both in the region and in the wider Muslim world. However, there is no doubt that Iran has benefited more from the AKP’s policy – both politically and economically –than has Turkey.

Political tensions between Turkey and Iran over Bahrain, Syria and the deployment of the NATO missile shield are likely to rise still further if, as expected, al-Bashar is finally forced to step down and a Sunni-led government assumes power in Damascus; which would be likely to result in an increase in Turkish influence in Syria at Iran’s expense. However, there is also an awareness in Ankara that, despite the rivalry and sectarian antagonism, Turkey stands to gain more from a cordial relationship with Iran than a hostile one.

In addition, Turkey is dependent on Iran for energy. Although it can source much of the oil it currently buys from Iran from other countries, the same cannot be said for the natural gas it receives along the Tabriz-Erzurum pipeline. On October 1, 2011, Turkey announced that it would not renew its contract to import natural gas from Russia via what is known as the Western Pipeline. The decision made financial sense as Turkey is contracted to buy more gas than it needs and has to pay for what it does not use. But it also means that Turkey is now even more dependent on Iranian gas to meet its needs; and there have been occasions in the past when Teheran has chosen to suspend supplies to Turkey in the middle of the winter.

Gareth H. Jenkins is a Senior Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center.

© Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center, 2010. This article may be reprinted provided that the following sentence be included: "This article was first published in the Turkey Analyst (www.turkeyanalyst.org), a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center".