BACKGROUND: As the pressure from the U.S. and EU mounts against Iran, the Turkish-Iranian relations have entered a decidedly new phase. In March 2010, Prime Minister Recep Tayyip Erdoğan had assured the world that Iran’s nuclear ambitions were peaceful. Turkey’s attempts to assume a role as a mediator between Iran and the West were to be crowned by the uranium exchange agreement signed by Turkey, Brazil and Iran in May 2010. (See Turkey Analyst, 24 May 2010 issue) However, the agreement fell apart within a week, with Iran withdrawing its signature, when the U.S. administration dismissed it as an attempt by Iran to merely gain time. Turkey, which had been left in a difficult position between the West and Iran, nonetheless stuck to its line regarding Iran and cast a no vote when the UN Security Council, at which it held a temporary seat in 2010, when the matter of new sanctions against the Iranian regime was put to a vote in June 2010.

Ankara argued that diplomacy ought to be privileged in dealing with Iran. However, since 2010 Turkey has had to revise its Iranian policies, as the rapid changes in the region have increasingly made it difficult, if not impossible to maintain its prior stance. Turkey has agreed to host a radar installation as part of NATO’s missile defense shield, which is designed as protection against an Iranian missile threat to Europe and the Middle East. (See Turkey Analyst, 23 January 2011 issue) Yet,  the mounting Western pressure against Turkey nonetheless means that Ankara faces difficult choices ahead.

The government of the Justice and Development Party (AKP) has been loath to view Iran as a security threat against Turkey. One reason for this reluctance is the fact that leaders of the AKP have tended to take an ideologically tinged, favorable view of the Islamic Republic of Iran. Even though the AKP is a Sunni Muslim movement, a universal Islamism or concept of Islamic solidarity has prevailed over the traditional Sunni-Shia divide. Tellingly, the conditions of the substantial Azerbaijani Turkic minority in Iran have not been a preoccupation of the AKP government, and the human rights abuses that this and other minorities have had to endure have not been allowed to disturb friendly Turkish-Iranian relations.

More than anything, economic factors rather than ideological affinity account for Turkey’s Iran-friendly stance during the AKP’s rule. Turkey’s economic relations with Iran have deepened substantially during the last decade; while the volume of Turkish-Iranian trade amounted to US$ 1 billion in 2000, it surpassed US$ 10 billion in 2011, and Turkish and Iranian officials expressed their aim of a trade volume of US$ 30 billion annually by the next five years. And Iran is not only an increasingly important export market for Turkey, but also a crucial transit country, since a substantial part of Turkey’s export to the markets in Central Asia transit via Iranian territory.

IMPLICATIONS: The international sanctions against Iran, and most recently the moves to stop importing oil from Iran, are going to have a major impact on Turkey. Natural gas and oil account for the major part of the trade between the two countries. Turkey has an agreement with Iran to import 10 billion cubic meters of natural gas annually; and Turkish energy minister Taner Yıldız recently stated that Turkey imports between forty and fifty percent of its oil from Iran. Forty percent of Turkey’s electricity is produced by the use of natural gas, and Iran is Turkey’s main supplier after Russia. Indeed, Iran’s importance as a supplier of natural gas has only increased as the agreement with Russia regarding supplies of six billion cubic meters was not extended. Currently, Turkey has agreements that secure an annual supply of 41 billion cubic meters of natural gas; however, its annual consumption well surpassed 40 billion cubic meters in 2011, as a result of rapid economic growth. As the Turkish economy continues to grow, the question of securing energy supplies will also become increasingly important to address.

In the short term, there is no supplier that would be able to step in and provide Turkey with its additional natural gas need through pipelines. Azerbaijani natural gas from the Shah-Deniz field is not expected to reach Turkey before 2018. Thus, Turkey remains dependent on Iran, and it is improbable that it would be able to join in the oil import embargo that the EU countries have decided to impose from July 1, 2012. In the case that Turkey were to cease to import oil from Iran, it would face Iranian retaliations which would seriously imperil the health of the Turkish economy.
Yet while Turkey and Iran are economically linked, bound together by a mutual dependency, the two countries are simultaneously and increasingly engaged in a geo-strategic rivalry as well. Recent developments have made Ankara more prone to view Tehran’s nuclear ambitions as a strategic threat. In the wake of the Arab uprisings, the assumption that guided Turkey’s much vaunted “zero problems with neighbors” foreign policy has unraveled; that policy posited that strategic rivalries in a sense had become irrelevant, and that developing trade would bring with it an end to historical enmities. Turkey and Iran are now not only adversaries in Syria and Iraq, but the “return of history” in the region makes it clear that economic interests and political divisions in the final analysis cannot be kept isolated; the Turkish economy suffers as its southern trade route through Syria has now been blocked, with the additional threat looming that Iran may shut down its eastern trade route to Central Asia.

Iran has explicitly threatened Turkey after it agreed to host NATO’s anti-missile radar in Malatya, and it has become apparent that Iran no longer cooperates with Turkey in combating the guerillas of the Kurdistan Worker’s Party (PKK). Meanwhile, Iraq’s pro-Iranian Prime Minister Nouri al-Maliki has taken a confrontational stance against Turkey.

CONCLUSIONS: From the standpoint of economic rationality, Turkey and Iran do not enjoy the luxury of engaging in controversies that would entail the risk of endangering their mutually beneficial relationship; however, the current evolution of in international events nonetheless have the potential of bringing about a confrontation that would have appeared utterly unthinkable only two years ago. And as he has revealed in the case of his handling of Syria, Turkish Prime Minister Recep Tayyip Erdoğan is a pragmatist who has no compunction in totally reversing policy and abandoning erstwhile friends. With that record in mind, it is conceivable that Erdoğan might reverse course on Iran as well.

Yet, it must still be assumed that neither Turkey nor Iran will voluntarily seek to break off their relationship. In economic terms, Turkey’s importance as a gateway for Iran has only increased as Iran is embargoed by the Western powers. Iran in turn remains extremely important for Turkey in terms of energy supplies, trade volume and as gateway to the Central Asian markets. Barring the outbreak of an armed conflict in the region, in which case neutrality may not remain a viable option for Turkey, the two countries will most likely do their best to protect their relation. Turkey is on the other hand likely to pay more attention than before to Iran’s activities in the region and to the evolution of its nuclear program.

Inevitably, Turkey’s involvement with Iran will continue to put a strain on the Turkish relations with its Western allies. However, by agreeing to host NATO’s radar installation, Turkey has nonetheless chosen its side in security matters. Ultimately, it is probable that Ankara this time around – unlike in the case of the war against Iraq in 2003, when it adopted a position of non-involvement – will try to make sure that it is on board with the winning side.

M. K. Kaya is a contributing editor to the Turkey Analyst.

© Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center, 2012. 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".