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Erdogan Heads to Gulf States Seeking Funds for Ailing Economy

Saudi Arabia's Crown Prince Mohammed bin Salman meets Turkish President Tayyip Erdogan in Jeddah, Saudi Arabia, July 17, 2023. (Saudi Press Agency via Reuters)
Saudi Arabia's Crown Prince Mohammed bin Salman meets Turkish President Tayyip Erdogan in Jeddah, Saudi Arabia, July 17, 2023. (Saudi Press Agency via Reuters)

Turkish President Recep Tayyip Erdogan traveled to Saudi Arabia on Monday in a three-stop tour of Persian Gulf states to seek trade and investment opportunities for Turkey’s floundering economy.

Erdogan arrived in Jeddah accompanied by an entourage of some 200 businesspeople, according to the Foreign Economic Relations Board of Turkey. He met Crown Prince Mohammed bin Salman and is expected to meet King Salman. Business forums have been arranged in Saudi Arabia, Qatar and the United Arab Emirates during Erdogan’s three-day trip.

“We are hoping to improve our relations and cooperation in many fields. We will focus on joint investment and commercial initiatives to be realized in the upcoming period,” Erdogan told reporters in Istanbul before leaving.

The visit comes as Turks are hit with sales and fuel tax hikes that Finance Minister Mehmet Simsek has said are necessary to restore fiscal discipline and bring inflation down.

The official annual inflation rate stood at 38% last month, down from a high of 85% in October. Independent economists, however, maintain that the actual rate was around 108% in June.

Turkey’s current account deficit reached record levels this year – $37.7 billion in the first five months — and Erdogan is hoping the oil- and gas-rich Gulf states will help plug the gap.

Last month the Turkish central bank delivered a large interest rate hike, signaling a shift toward more conventional economic policies following criticism that Erdogan’s low-rate approach had made a cost-of-living crisis worse.

His Gulf tour was preceded by Turkish officials including Simsek, Vice President Cevdet Yilmaz and central bank Governor Hafize Gaye Erkan holding talks in all three countries.

Ankara has recently repaired ties with Saudi Arabia and the UAE following a decade-long rift. The split arose following the 2011 Arab Spring and Turkey’s support for the Muslim Brotherhood, considered a threat by some Gulf monarchies.

Worsening relations were exacerbated by a boycott of Turkish ally Qatar by Saudi Arabia, the UAE, Egypt and Bahrain. The 2018 murder of Saudi dissident journalist Jamal Khashoggi in Istanbul led to a further souring of ties with Riyadh.

Since Erdogan launched a diplomatic reengagement with previously estranged regional powers two years ago, funding from the Gulf has helped relieve pressure on the economy.

Erdogan visited both Saudi Crown Prince Mohammed — the country’s de-facto ruler — and UAE President Mohammed bin Zayed Al Nahyan last year, while the latter came to Istanbul for soccer's Champions League final a month ago.

Qatar and the UAE have provided Turkey with some $20 billion in currency swap agreements recently while Saudi Arabia deposited $5 billion into Turkey’s Central Bank in March.

Days after Erdogan won reelection last month, the UAE and Turkey signed a trade deal potentially worth $40 billion over the next five years.

Erdogan is due to meet Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, in Doha on Tuesday before seeing the UAE leader in Abu Dhabi on Wednesday.