Russia’s Economic Sanctions Against Turkey

Dmitry Medvedev

Meeting with deputy prime ministers.

Excerpt from the transcript:

Dmitry Medvedev: The Presidential executive order introduces special economic measures against Turkey. It includes instructions for the Government and decisions on restrictions against Turkish companies, Turkish businesses and Turkish professionals, as well as several transactions regarding the import of commodities that originated in Turkey.

I have instructed the Government to prepare proposals on some of the issues stipulated in this executive order within the framework of the authority given to the Government by this executive order.

Igor Shuvalov: The Government has prepared a draft resolution on ways to organise our work in the coming weeks and months. This resolution does not impose restrictions on individual legal entities or citizens of the Turkish Republic. It is not directed against the people. The issue rather concerns restrictive measures as they apply to economic relations. Individuals will be affected only in that visa regulations will be introduced for Turkish nationals.

With regard to labour relations, all contracts that are in effect now or will be signed on or before 31 December will remain valid for Turkish citizens, and they will be able to continue their work as usual. Under the contracts, which will be signed after this date, the Government will need to issue a special permit and take an appropriate decision regarding each particular business or employer. We do not rule out the possibility of Turkish citizens staying employed at construction sites in Russia, but this work will be strictly overseen by the Ministry of  Labour and Federal Migration Service.

The sale of vacation packages to Turkey were discontinued almost immediately. There will be flights, or maybe charter flights, to bring Russian citizens back from the Republic of Turkey, but all charter flights have been suspended. With regard to regular air service, additional security measures will be introduced.

Additional controls have already been introduced at ports, particularly at the ports of Crimea, the Black Sea, and the Azov Sea.

With regard to Turkish-made goods, we focus on groups of goods that account for a significant portion of Turkish exports, but Russian consumers will not be critically affected by restrictions on such Turkish exports. We will either replace such products with the Russian-made counterparts, or buy them from other markets. This will contribute to import substitution and help our producers, particularly, ones that grow fruits and vegetables. Also, we are already receiving inquiries from other countries regarding supplies to the Russian market.

Regarding industrial products, our proposal is not to apply restrictive measures on them. If necessary, the Government can always expand this list by including agricultural or industrial products.

Arkady Dvorkovich: Speaking about agricultural produce, the issue concerns two major groups. First, vegetables, including tomatoes and other vegetables. Second, fruits. We will do our best to avoid price hikes on the domestic market. To do so, we suggest delaying the ban’s imposition. You will specify the date in the resolution so our trade organisations has enough time (literally, several weeks) to switch to other suppliers. That includes Egypt and other countries producing such products. There will be several individual items on this list as well, but fruits and vegetables are two major groups.

Regarding transport, in addition to air carriers and ports, it has been proposed to introduce restrictions on motor trucking by Turkish companies. Currently, they are issued about 8,000 transport permits annually. It has been proposed to cut this number immediately to 2,000 next year already, with an option to further reduce the number to zero.

Dmitry Medvedev: Please get in touch with our partners in the Eurasian Economic Union and discuss with them termination or restrictions on motor traffic with destinations in Russia, or transit through Russia, to avoid problems and all sorts of fraud, which we, unfortunately, witnessed in some cases in connection with restrictions imposed on deliveries from EU countries.

Arkady Dvorkovich: Turkish companies that employ Turkish workers are involved in a number of investment projects in the construction sphere. We will go over the list of these employers and specific investment projects in the next two weeks. The issue concerns individual airports and stadiums for the 2018 World Cup, a number of major industrial projects in the chemical industry, the production of consumer goods, and steel products. This list will be ready in the next two weeks.

Dmitry Medvedev: Again, please note that we are forced to provide this response solely to ensure the safety of our people and in response to the aggressive behaviour of the Turkish Republic. This is our response to the unfriendly actions taken by the Turkish government. Indeed, the special measures affect a major portion of our economic relations, so we will act pragmatically, as follows from the presidential executive order. Namely, our decisions must be felt as much as possible by the Turkish side, and, at the same time, focus on our economic interests.

The measures included in the draft resolution are only the first step. Under the executive order, we can expand the list of goods whose imports to Russia are banned, expand the list of individuals who are prohibited from entering the Russian Federation, and take other measures aimed at limiting and curtailing cooperation with the Republic of Turkey. All of this will be done, if necessary.

Ultimately, these measures are not directed against Turkish citizens, and will be instrumental in achieving the goals outlined in the presidential executive order in accordance with the law on special economic measures in a particular situation.

Unfortunately, Turkish leaders have adopted a strange position. Reportedly, the Turkish prime minister expressed hope that Russia will reconsider its decision regarding its response to the incident with the Russian plane, but said that Turkey will never apologise for the incident. No comment.

Restrictions on Turkish goods, works and services in Russia

Government Meeting

Excerpt from the transcript:

Dmitry Medvedev: One of the main issues on the agenda of the past few days has been the downing of the Russian plane in Syria by the Turkish Air Force. The Russian President has offered a political assessment of that tragedy, and I’ve commented on it too. It was definitely an act of aggression by Turkey, a neighbour and a NATO member. Military and political reaction to this crime has been provided and more will be forthcoming. I’ll talk about economic measures.

We have discussed this issue with the President in Yekaterinburg. Based on that meeting, the Government has been instructed to consider economic and cultural response measures to this act of aggression. Our decisions will be based on the law On Special Economic Measures of 30 December 2006.

That law was intended to respond to situations like this and to protect our security. It stipulates the following measures: suspension of economic cooperation programmes, restrictions on financial and foreign trade transactions, amendments to import and export customs duties, measures in the tourism sector, transport (including transit), air flights and shipping services, cultural ties, and lastly, the workforce.

In accordance with the law, the planned measures will be formalised within special regulations, most likely a Presidential executive order and a subsequent Government resolution. These documents will cover restrictions and bans on Turkish economic operations in Russia, restrictions and bans on Turkish imports, including agricultural products, on works and services provided in Russia by Turkish companies, and other measures.

The same procedure may be applied to several investment projects, which were evidence of the high level of trust in our cooperation with Turkey. These agreements and investment projects could be suspended or terminated.

I also suggest that we curtail talks on an agreement with Turkey for preferential conditions for services and investment.

Alexei Ulyukayev: Russia can take measures to protect its national security and the legitimate interests, rights and freedoms of Russian citizens in several spheres based on regulations such as a Presidential executive order and a Government resolution drafted in strict compliance with national legislation, in particular the Federal Law on Special Economic Measures.

These measures can include a ban or restrictions on financial transactions; a ban or restrictions on foreign economic transactions, specifically trade and investment transactions; suspension of the implementation of all or some of the ongoing programmes on technical and economic assistance and cooperation; suspension or termination of Russia’s foreign trade agreements and other international agreements regarding foreign economic relations; approval of, or amendments to import and export customs duties; a ban or restrictions on calls at Russian ports and the use of Russian air space; restrictions on tourism; a ban on or termination of participation in international research and technological programmes.

These restrictions will be in full compliance with the recommendations of the World Trade Organisation. Article 21 of the General Agreement on Tariffs and Trade (GATT, 1994) allows using all of the above restrictions in trade, services and investment in case of threats to essential security interests, which is how the current situation can be described.

At the same time, we must clearly determine the measures that will be maximally effective without affecting Russian companies that cooperate with Turkish companies and partners.

Dmitry Medvedev: I request that this be done within two days so that we can impose these measures as soon as possible.

Furthermore, these documents should not stipulate any timeframe for these measures, as the timeframe will depend on the international situation, on the security provisions of the Law on Special Economic Measures, and lastly, on our relations with Turkey.