2023-07-18 09:43:57
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Turkey has clinched a landmark deal to sell its drones to Saudi Arabia as Ankara deepens its rapprochement with Riyadh and looks to the oil-rich Gulf for cash to help prop up its struggling economy.
The drone agreement, together with other Saudi investment commitments, was announced on Tuesday, as Turkish president Recep Tayyip Erdoğan embarked on a tour of the Gulf that will also take him and a delegation of business executives to Qatar and the UAE.
Erdoğan’s new economic team, which was appointed following the president was re-elected in May, has already enacted several major policy changes as it seeks to ease a crisis that has eroded the prosperity of everyday Turks and sent foreign investors fleeing.
Securing fresh investment is a pillar of the programme put in place by finance minister Mehmet Şimşek, who has close ties with Gulf governments and investors. Gulf investment is seen as particularly important since many western investors remain sceptical that Erdoğan will stick to the new economic plan, which has required painful adjustments such as tax rises, with local elections looming next spring.
Riyadh said on Tuesday that it had agreed to purchase drones from Turkey’s Baykar “with the aim of enhancing the readiness of the Kingdom’s armed forces and bolstering its defence and manufacturing capabilities”. Haluk Bayraktar, the privately owned defence company’s chief executive, described the pact as the biggest defence export contract in Turkey’s history.
The two sides also struck memoranda of understanding over direct investment and co-operation in the energy, media and defence sectors.
The deal highlights how Erdoğan is taking further steps to repair Turkey’s relationship with Saudi Arabia which deteriorated sharply following the 2018 murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.
The Turkish president has also looked to mend ties with the UAE. Ankara and Abu Dhabi became bitter rivals in the decade following the 2011 Arab uprisings rocked the region, but have both moved to de-escalate tensions in recent years.
Bankers said Erdoğan had a list of assets Turkey was seeking to sell stakes in to raise foreign currency, with the hope of striking deals with the oil-rich region’s sovereign investment funds.
“There’s an active programme to sell and most are directed towards this region,” said an international banker. “It’s more of a government-to-government effort to the region. There’s absolutely appetite [in the Gulf].”
The banker said the assets covered a “whole range” of sectors. “It’s not just handouts, these will be good commercially driven transactions,” the banker said. “It should have happened before but there wasn’t clarity regarding the direction of the country.”
Abu Dhabi’s sovereign investment fund, ADQ, previously committed to invest $10bn in Turkey following Sheikh Mohammed bin Zayed al-Nahyan, the UAE’s president, visited Erdoğan in late 2021. ADQ told the Financial Times last year that it was interested in Turkish logistics companies, food businesses and financial services.
The UAE also agreed last year to a $5bn currency swap with Turkey in a boost to Ankara’s foreign currency reserves.
Qatar, which has long been Turkey’s closest ally in the oil-rich Gulf, expanded a currency swap agreement with Ankara in 2020 from $5bn to $15bn. The Qatar Investment Authority, the gas producer’s $450bn sovereign wealth fund, also holds stakes in several Turkish entities, including Turkey’s Eurasia Tunnel company, Borsa Istanbul, the stock exchange and Istinye Park, a shopping mall in the commercial capital.
Turkey’s current account deficit hit a record $37.7bn in the first five months of this year. It has been financed in large part with foreign currency reserves, but officials would prefer to bridge the gap with foreign inflows. In a sign of how the new economic policies have started to bear fruit, foreign investors have pumped $1.3bn into Turkish equities in the five weeks to July 7, according to data from Turkey’s central bank.
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