Turkish exporters re-route goods to dodge unofficial Saudi trade blockade, traders say

  • Exporters act to ditch 'Made in Turkey' tags
  • Unofficial boycott began last year on political grounds
  • Turkish-Saudi tensions worsen since 2018 Khashoggi murder
  • Ankara raised boycott issue at WTO meeting this week

DUBAI/ISTANBUL/RIYADH, April 1 (Reuters) - Some Turkish exporters are re-routing food, clothing and other goods to circumvent a months-long unofficial blockade by Saudi Arabia that has reduced trade between the regional rivals to record lows, according to exporters and traders.

Production in nearby countries allows exporters to obtain customs documents and ditch "Made in Turkey" product tags, allowing goods to enter Saudi Arabia, exporters, traders and a diplomat told Reuters.

Riyadh has never publicly acknowledged the boycott against Turkey, but last year top Saudi businessmen endorsed it as a response to what they called hostility coming from Ankara, particularly since the 2018 murder of Saudi journalist Jamal Khashoggi inside the Saudi consulate in Istanbul.

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Turkey raised the boycott issue this week at a World Trade Organisation Goods Council meeting in Geneva, at which Saudi Arabia's "restrictive policies and practices concerning Turkey" was discussed and Riyadh responded, the WTO's website said. Ankara's move could help bring about a settlement.

A review of official trade data shows that in the first quarter of the year Turkish exports to the kingdom plunged 93% on an annual basis to $56 million. [nS8N2K800R]

Exports of food, electronics, garments, jewellery and automotive goods were all down more than 90% from a year earlier, according to the Turkish Exports Assembly.

"A black market is now emerging where brokers take the Turkish goods to other ports and forge the documents so they appear to be coming from China or Europe for fees," said one importer of building materials to Saudi Arabia, who requested anonymity.

Trade data also shows unusual parallel jumps of 200% to 400% in Turkish garments, textiles, chemicals and jewellery arriving in Oman and Lebanon.

"Some companies who rely on Saudi Arabia as a main client re-routed their production lines in order to continue to be able to sell," another trade company official told Reuters.

Seref Fayat, head of Turkey's TOBB clothing and garment council, said manufacturers were considering sending fabrics the other way, to Bulgaria or Serbia, for "finishing touches" on Saudi-bound goods.

In so doing, Turkish companies could honour contracts with retail brands which commit them to global deliveries, including to the kingdom, he said. "Exporters are trying to overcome the blockade, but this means additional costs out of their pocket."

The data published on Thursday showed Turkish exports to Bulgaria and Serbia were up 58% and 44% respectively in March, compared to a 38% rise to all countries in that time frame.

Turkey-based business councils for Oman, Lebanon and Saudi Arabia did not immediately comment.

'RESTRICTIVE POLICIES'

Three traders who spoke to Reuters said large Turkish companies had held talks in Saudi Arabia in recent months to reopen trade with the kingdom, without any clear breakthrough.

A diplomat who requested anonymity said Saudi traders had lost billions of riyals last year as goods piled up at customs.

They complained to authorities and eventually found "a turnaround to still get the Turkish products in, especially those with no better alternatives", the diplomat said.

Riyadh's media office did not comment on the reported blockade. In an interview in November - before trade started dropping dramatically - the foreign minister said no data pointed to a boycott.

Turkey's main opposition party has ramped up pressure for a tit-for-tat response to the boycott and compensation for export losses. "If you put a ban on my goods, (we should) put a ban on yours," CHP lawmaker Mahmut Tanal said in an interview.

In a response to Tanal, Foreign Minister Mevlut Cavusoglu said Turkey would "take any necessary steps" if dialogue and diplomacy fail to end the "unofficial Saudi boycott".

Ankara and Riyadh have in recent months attempted to repair some diplomatic damage after a decade of tension, especially evident since the Khashoggi murder in 2018.

Turkish President Tayyip Erdogan and Saudi King Salman agreed in November to "keep channels of dialogue open to improve bilateral ties and overcome issues," and Ankara has also recently pursued better relations with Saudi ally Egypt.

Support for the boycott from top Saudi businessmen drew complaints from Turkish trade groups last year, but only a muted response from Turkey's government.

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Reporting and writing by Jonathan Spicer in Istanbul; Additional reporting by Davide Barbuscia in Dubai and Philip Blenkinsop in Brussels; Editing by Jan Harvey

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