Turkey’s Erdogan visits Gulf Arab states to seek funds for ailing economy

Turkish President Recep Tayyip Erdogan, left, and Saudi Crown Prince Mohammed bin Salman shake hands during a welcome ceremony at Al Salam Palace in Jeddah, Saudi Arabia, Monday, July 17, 2023.  (Saudi Press Agency via AP)

ISTANBUL — 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 at Al Salam Palace, shaking hands and attending a welcoming ceremony where he “expressed his happiness with this visit,” the state-run Saudi Press Agency reported early Tuesday.

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 percent last month, down from a high of 85 percent in October. Independent economists, however, maintain that the actual rate was around 108 percent in June.

READ: Turkey’s inflation rate slows to 38.2%

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.

READ: Turkey delivers big rate hike to 15% but U-turn still underwhelms

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 slaying of Saudi dissident journalist Jamal Khashoggi at Saudi Arabia’s consulate in Istanbul led to a further souring of ties with Riyadh. U.S. intelligence agencies assess that the killing was carried out at Prince Mohammed’s orders, something the kingdom denies.

However, none of those previous tensions were on display Monday as the two countries signed a number of economic agreements.

Since Erdogan launched a diplomatic re-engagement 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 Emirati 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 re-election 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.