* Russia threatens economic revenge through trade, tourism
* Turks, Russians differ on where jet was shot down
* Western leaders urge sides not to let situation escalate (adds Erdogan, Putin, Merkel quotes)
ISTANBUL, Nov 25 (Reuters) - President Tayyip Erdogan said on Wednesday that Turkey did not want any escalation after it shot down a Russian warplane near the Syrian border, saying it had simply acted to defend its own security and the “rights of our brothers” in Syria.
But while neither side has shown any interest in a military escalation, Russia has made clear it will exact economic revenge through trade and tourism. Prime Minister Dmitry Medvedev said on Wednesday that important joint projects could be cancelled and Turkish firms could lose Russian market share.
The downing of the jet on Tuesday was one of the most serious publicly acknowledged clashes between a NATO member and Russia for half a century, and further complicated international efforts to battle Islamic State militants in Syria.
Russian President Vladimir Putin said the plane was attacked when it was 1 km (0.62 miles) inside Syria and warned of “serious consequences” for what he described as a stab in the back administered by “the accomplices of terrorists”.
U.S. President Barack Obama and French President Francois Hollande, seeking to forge a broader alliance against Islamic State after attacks in Paris this month, pressed Russia to focus on the jihadist group and urged Moscow and Ankara not to let the situation escalate.
Speaking at a business event in Istanbul, Erdogan said the Russian jet had been fired at while in Turkish airspace but had crashed inside Syria, although he said parts of it landed in Turkey and injured two Turkish citizens.
“We have no intention of escalating this incident. We are only defending our own security and the rights of our brothers,” Erdogan said, adding Turkey’s policy in Syria would not change.
“We will continue our humanitarian efforts on both sides of the (Syrian) border. We are determined to take all necessary measures to prevent a new wave of immigration.”
Turkey has been angered by Russian air strikes in Syria targeting Turkmens near its border, who are Syrians of Turkish descent. It had repeatedly warned Russia over airspace violations since October and last week summoned the Russian ambassador to protest against the bombing of Turkmen villages.
Putin has said Russian planes had in no way threatened Turkey, but had merely been carrying out their duty to fight Islamic State militants inside Syria.
Erdogan dismissed that version of events.
“It has been said that they were there to fight Daesh,” he said of Russian air strikes, and using an Arabic acronym for Islamic State.
“First of all, the Daesh terrorist organisation does not have a presence in this region of Latakia and the north where Turkmens are based. Let’s not fool ourselves.”
He said Turkey had made a “huge effort” to prevent an incident like the downing of the Russian aircraft, but that the limits of its patience had been tested.
Putin on Wednesday accused Turkey’s political leaders of encouraging the “Islamisation” of Turkish society, something he described as a deeper problem than the downing of the jet.
German Chancellor Angela Merkel said the downing of the jet had complicated efforts to find a political solution in Syria and said everything needed to be done to avoid an escalation.
“Of course every country has a right to defend its territory but on the other hand we know how tense the situation is in Syria and in the surrounding area,” she told parliament, adding she had asked Turkish Prime Minister Ahmet Davutoglu to “do everything to de-escalate the situation”.
Increased tensions could have significant economic and political repercussions which are in neither Moscow nor Ankara’s interests, analysts warned. But both Putin and Erdogan are strong-willed leaders ill-disposed to being challenged.
“If Erdogan becomes involved a cycle of violence, FDI (foreign direct investment), tourism, and relations with the EU and U.S. will all be in jeopardy,” risk analysis firm Eurasia Group said in a note.
“Our bet is that the episode will not escalate ... National interest will probably prevail over emotion, but given the players, that’s not a sure bet.”
Turkey imports almost all of its energy from Russia, including 60 percent of its gas and 35 percent of its oil. Russia’s state Atomic Energy Corporation (Rosatom) is due to build Turkey’s first nuclear power station, a $20 billion project, while plans are on the table for a gas pipeline from Russia known as TurkStream.
Turkish building and beverage companies also have significant interests in Russia.
Shares in Enka Insaat, which has construction projects in Russia and two power plants in Turkey using Russian gas, fell for a second day on Wednesday. Brewer Anadolu Efes , which has six breweries in Russia and controls around 14 percent of the market, also saw its shares fall on Tuesday.
Russians are second only to Germans in terms of the numbers visiting Turkey, bringing in an estimated $4 billion a year in tourism revenues. But Russian Foreign Minister Sergei Lavrov on Tuesday advised them not to visit and one of Russia’s largest tour operators to the country said it would temporarily suspend sales of trips.
“Erdogan is a tough character, and quite emotional, and if Russia pushes too far in terms of retaliatory action, I think there will inevitably be a counter reaction from Turkey (like) tit-for-tat trade sanctions, perhaps extending to things like the Russia nuclear deal,” said Nomura strategist Timothy Ash.
“But I think there is also a clear understanding that any such action is damaging for both sides, and unwelcome. The ball is in Russia’s court now,” he wrote in a note.
Additional reporting by Can Sezer and Ayla Jean Yackley in Istanbul; Maria Kiselyova in Moscow; Paul Carrel and Madeline Chambers in Berlin; Writing by Nick Tattersall; Editing by Pravin Char
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