* Tourists reduced to a trickle in city’s historic heart
* Attack threatens industry that makes up 4.5 pct of economy
* New blow on top of damage from Russia-Turkey row
By Ayla Jean Yackley and Asli Kandemir
ISTANBUL, Jan 14 (Reuters) - On a normal winter’s day, Ramazan Uslanmaz would lead two groups of tourists around Istanbul’s historic Sultanahmet district, from the towering minarets of the Blue Mosque to the labyrinthine alleyways of the Grand Bazaar.
But since a suicide bomber walked into a group of German tourists as they stood by the Egyptian obelisk in the centre of Sultanahmet Square on Tuesday and blew himself up, killing 10 of them, the flow of visitors has all but evaporated.
The attack in Istanbul’s cultural and touristic heart, carried out by what the authorities say was a member of Islamic State who entered the country as a Syrian refugee, marked a shift in tactics by the radical Sunni group in Turkey.
Its previous attacks, including a double suicide bombing in Ankara which killed 100 people last October, had appeared to target pro-Kurdish groups sympathetic to its battlefield enemies in Syria.
Coming after anti-government protests and small-scale attacks by leftist militants, and alongside the threat of a violent spillover from an insurgency in the largely Kurdish southeast, the Istanbul bombing poses perhaps the greatest threat so far to Turkey’s vital tourism industry, which accounts for about 4.5 percent of the $800 billion economy.
Yet, like the half-dozen other guides loitering outside the 1,500-year-old Hagia Sophia, smoking cigarettes and chatting as a small trickle of tourists queued to enter on the day after the attack, Uslanmaz, 38, is resolute.
“People have started returning to Paris, and they’ll be back here too,” he said, referring to November’s attacks in the French capital in which Islamic State gunmen killed 130 people.
“This is the city of world civilizations, we have the Hagia Sophia and Sultanahmet mosque,” he said, referring to the museum that was once a place of worship for Christians and then for Muslims, and to the mosque famed for its minarets and blue wall tiles.
“People won’t give up on them,” Uslanmaz said.
Tour operators TUI, the world’s largest, and Thomas Cook have offered customers in Germany due to come to Istanbul in the next week the chance to cancel or change their bookings free of charge.
Both said customers had been enquiring about the situation but TUI said so far it had received only a few such requests. Germans make up the highest number of foreign visitors to Turkey, followed by Russians and Britons.
“Those here today are tourists who are finishing up their visits and heading home. We’ll have to wait to see if those planning trips decide against coming,” said Necdet Agir, 35, who has worked as a tour guide in Istanbul for seven years.
“This was clearly an attack on tourism, on our country, to make us look like one more dangerous place. It was an effort to undermine our future, to scare away tourists ... But I don’t think they will stay away for long.”
With around 12 million visitors a year, Istanbul is the fifth-most visited city in the world, according to the 2015 Mastercard Global Destination Cities Index. It is expected to have generated almost a third of Turkey’s $27 billion gross tourism revenues in 2015.
But even before Tuesday’s attack, the industry was already suffering.
A diplomatic row with Moscow after Turkey shot down a Russian fighter jet near the Syrian border in November has triggered trade sanctions from Moscow, including a suspension of package tours to Turkey and a ban on charter flights.
The number of Russians visiting Turkey fell 18 percent year-on-year in January-November of last year, although the overall number of foreign visitors fell just 1.4 percent, according to the latest data from the Culture and Tourism Ministry.
Turkey can ill afford a similar drop in German arrivals.
“Unfortunately, the attack will have a negative impact on Turkey’s 2016 tourism revenues along with the ongoing tension with Russia,” Ozgur Altug, chief economist at Istanbul-based brokerage BGC, told Reuters.
“If similar attacks targeting tourists continue through the spring, then the tourism outlook for this year will worsen.”
Tourism is key to Turkey’s ability to curb its gaping current account deficit, one of its main economic weaknesses.
The government expects the deficit to fall to $28.6 billion by the end of 2016 from $31.7 billion at the end of last year, but needs tourism revenues to remain at least flat to achieve that goal.
Its ability to prevent similar attacks to the Istanbul bombing will be key. But for now, the few tourists still venturing out around Sultanahmet are phlegmatic.
“Life goes on. We’re trying to stay away from the crowds ... The truth is this can happen anywhere,” said Robin Painter, 53, visiting with her son Chris from Boston, where bombers attacked the Boston Marathon in 2013, killing three.
Chris said his plans to move to Istanbul to teach English were unchanged, but his mother was less convinced.
“I’m not thrilled. I wish he’d consider moving somewhere else,” she said, before they wandered off to Sultanahmet Square.
Additional reporting by Joern Poltz in Munich; Writing by Nick Tattersall; Editing by Mark Trevelyan