Syria divisions aside, Turkish PM eyes closer ties with Iran

ANKARA (Reuters) - The first visit by a Turkish prime minister to Iran in two years is unlikely to narrow deep divisions over Syria’s war, but it could boost trade ties as the lifting of sanctions on Tehran and political gains by reformists clear the way for a business boom.

Turkish Prime Minister Ahmet Davutoglu addresses the media in Ankara, Turkey February 20, 2016. REUTERS/Umit Bektas

Turkey, the region’s economic powerhouse, could be one of the major beneficiaries as President Hassan Rouhani, bolstered by reformist gains in elections last month, pursues plans to strengthen the private sector and welcome foreign investors.

Trade and energy ties will be high on the agenda during Turkish Prime Minister Ahmet Davutoglu’s visit on Friday and Saturday, accompanied by his energy and development ministers, other members of the cabinet and business leaders.

But differences on Syria, where Shi’ite Iran backs President Bashar al-Assad and Turkey backs the mainly Sunni Muslim opposition, will also be on the table, officials on both sides said. Iran is also concerned by Turkey’s deepening ties with Saudi Arabia, with which Tehran has cut diplomatic relations.

“We are in an environment of very big and deep problems with developments in the Middle East ... It wouldn’t be right to expect the two countries to agree on every subject,” said a senior Turkish government official, one of several to speak about the visit in advance on condition of anonymity.

“We don’t expect to solve everything in one meeting but it’s now necessary to move our relationship forward ... Regional issues, notably Syria, increasing trade and cooperation will form the basis of the discussions.”

Turkish trade with Iran reached around $22 billion in 2012 before dropping off sharply to less than half that by last year as international sanctions on Tehran were tightened. Turkish Economy Minister Mustafa Elitas told Reuters last month that Ankara aims to reach $30 billion in bilateral trade by 2023.

“Iran presents serious opportunities, they’re extremely open to future cooperation,” said a source in the Turkish automotive industry who has made several recent visits to Iran.

“There’s huge appetite for Turkish business. It’s a neighboring country where Turkish is widely spoken, with a similar culture. It’s very easy to engage with Iranian business,” he said, adding there were already signs of movement on industry reforms since the Feb. 26 election.

The vote ended more than a decade of conservative domination of the legislature and the Assembly of Experts, a body that oversees the Islamic republic’s supreme leader. The outgoing parliament, filled with hardliners suspicious of detente with the West, had acted as a brake on Rouhani’s plans to boost foreign investment and trade.

“Iran is a very attractive market for Turkish businessmen and ways of developing trade will definitely be taken up during the visit,” a senior Iranian official said.


The lifting of sanctions against Iran in January could prove a mixed blessing for Turkey, opening up access to a fast-growing, lucrative market, but one that could someday rival Ankara as an investment destination and exporter.

Turkey’s output of nearly $800 billion in 2014 was almost double that of Iran, which has a similar-sized population. But government incentives, a well educated workforce, and vast oil reserves that obviate the need for energy imports could help Tehran close the gap in the coming years.

A second senior Turkish official said that Davutoglu’s visit, during which he will meet Rouhani, comes at a critical time and that both sides understood their economic futures were dependent on containing instability in the wider region.

“Turkey and Iran need to adopt a common stance on protecting their two countries, acting together and fighting Islamic State,” the official said.

“Syria is the most serious problem but differences of opinion must be put aside faced with a common enemy. In this sense, this meeting may be the first kernel,” he said.

Sinan Ulgen, head of the EDAM think-tank in Istanbul, said Turkey and Iran needed to find at least a few common denominators for a fragile cessation of hostilities in Syria to become more lasting and facilitate a political solution.

“If Turkey and Iran cannot agree on these subjects, there is a pretty low prospect of the conflict in Syria being brought to an end,” he said, adding that the talks in Tehran would likely touch on Assad’s future and political transition in Syria.

Turkey, along with Western and Arab countries, say Assad must leave power. Iran and Russia have stood by him.

Turkish officials will also push for the implementation of an International Chamber of Commerce arbitration court ruling last month that Iran should discount the price of natural gas it exports to Turkey by 10-15 percent, backdated to 2011.

Turkey imports 10 billion cubic meters (bcm) of natural gas from Iran annually, or about a fifth of its annual needs. Tehran would like to sell it double that amount, but Turkish officials say price problems remain a sticking point.

“Turkey’s purchase of more gas from Iran would be a positive development but it is not realistic in the current climate,” a third Turkish official said.

Additional reporting by Parisa Hafezi and Can Sezer; writing by Daren Butler and Nick Tattersall; editing by Peter Graff