ISSN 2330-717X

Will Domino Effect See Dollar Replaced In Region’s Russia Dealings? – OpEd

By

By Dr. Diana Galeeva *

Advertisement

On the sidelines of this week’s Astana troika summit in Tehran, Russian President Vladimir Putin met with his Turkish counterpart Recep Tayyip Erdogan. Among the issues discussed were traditional and nontraditional security threats, such as food security and the export of grain via the Black Sea, Turkish mediation efforts in the Russia-Ukraine conflict, and the Syrian and Nagorno-Karabakh situations.

According to Bloomberg, prior to the meeting another issue was expected to feature in the discussion — a possible transition to settlements in Turkish lira or Russian rubles for Russian energy supplies. What are the potential realities of this change and the reasons behind it? If Turkey follows the Iranian example of dealing with Russia in national currencies, should we expect a domino effect among other Middle Eastern countries?

The Turkish interest in using the lira in economic transactions can be explained by the domestic pressures on the currency. Turkey is facing higher inflationary pressure in comparison to last year, as it depends heavily on imports of agricultural products, metals and energy. At the national level, Ankara has already begun to deal with the challenges as, in April, a new law was passed making payments in Turkish lira mandatory for the sale of foreign exchange-indexed goods. These payments could help Ankara slow down the decline in its foreign exchange reserves.

At the geopolitical level, there is the possibility of a broader explanation for this change, as represented in some regard by shared anti-Western policies. This is also behind Turkey’s policy of balancing between Russia and the West in their current geopolitical rivalry, along with supporting the idea of a multipolar global order.

Galip Dalay of the Berlin-based Center for Applied Turkish Studies explains that Turkish anti-Westernism tends to be policy-focused and selective, while Russia’s is all-encompassing and structural. Russian anti-Westernism has been apparent to global observers in terms of its actions over the last five months and is straightforward in dividing the world into “friendly” and “unfriendly” nations, with Western countries in the second category.

Advertisement

It is more interesting to focus on the Turkish position. I believe a specific view of Turkey is discussed in Erdogan’s 2021 book “A Fairer World is Possible: A Proposed Model for a United Nations Reform,” in which he states: “The world is neither unipolar nor bipolar… It is possible to make the world multipolar, multicentric, multicultural.” He also explained his proposed reform of the UN, particularly the restructuring of the Security Council. He wrote: “Our proposed solution manifests itself in our motto: ‘The world is bigger than five.’” This is the stance that Turkey is taking in the current geopolitical rivalry with its balancing policy. As the economic dominance of the US dollar contributes to Washington’s dominance of the world order, so a reduced importance for the dollar aids broader multipolarity. In this regard, the policies of Russia and Turkey are aligned.

Turkey has already used currency policy to serve its national interests by shifting payments to national currencies in another field of close bilateral collaboration with Russia — tourism — where alternative payments have been accepted. Despite COVID-19 restrictions, in 2021, 19 percent of foreign tourists in Turkey were Russian. In 2022, despite flights between Russia and Turkey being reduced to eight airlines from 17 Russian cities, compared to 18 airlines from 46 cities in 2021, and the closure of some beach destinations, there is great demand in Russia for holidays in Turkey.

Despite high demand for hotels and flight tickets, Russians are ready to pay a higher price to visit their favorite destinations, such as Antalya. At the same time, the Turkish hospitality industry is very supportive of this move, with innovations including accepting the Russian payment system Mir in many places, even for Jet Ski rentals. Consequently, Russian tourists gain the feeling of having a holiday somewhere in the Russian south, such as Sochi or Gelendzhik, rather than in a foreign country.

If Turkey agreed to use national currencies in exchange for Russian energy, it might further support the domino effect of Middle Eastern countries doing the same in their dealings with Russia. For example, the central banks of Russia and Iran last week agreed to abandon the US dollar in settlements between the countries and convert them into national currencies. This can be perceived as an emerging policy among other Middle Eastern states to balance relations between the US/West and the rest of the world (particularly Russia, China and India). As fewer countries depend on the US dollar, the political and economic importance of America is reduced.

In contrast, with a great deal of investment in the US and other Western countries contributing to greater economic interdependence, there are more risks in this policy for countries like the GCC states. Therefore, the strategy of flirting with the idea of shifting to national currencies can continue to be an alternative in the hands of the Middle Eastern players, but in practice it will fit with the policies of countries that have openly declared anti-Western stances. Given Turkey’s policies, it is highly possible that it will take this stance. However, it does not indicate that it supports any one side, but rather that it follows its own aims of building a world “bigger than five,” with its special place in it.

  • Dr. Diana Galeeva was an academic visitor to St. Antony’s College, Oxford University (2019-2022). Dr. Galeeva is the author of two books: “Qatar: The Practice of Rented Power” (Routledge, 2022) and “Russia and the GCC: The Case of Tatarstan’s Paradiplomacy” (I.B. Tauris/Bloomsbury, 2023). She is also a co-editor of the collection “Post-Brexit Europe and UK: Policy Challenges Towards Iran and the GCC States” (Palgrave Macmillan, 2021). Twitter: @diana_galeeva

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz. Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

Leave a Reply

Your email address will not be published.