Why Türkiye and Saudi Arabia Are Deepening Economic Cooperation Now
Why Türkiye and Saudi Arabia Are Deepening Economic Cooperation Now
The political thaw has turned into an economic “golden year”
The current economic opening is based on a political rebalancing, after the situation reached a nadir after the murder of Jamal Khashoggi in 2018, resulting in an unofficial Saudi boycott of Turkish products and the collapse of bilateral trade. High level visits and words of reconciliation have since re-established the diplomatic pipeline and the economic relationship has bounced back quickly, from near‑freeze to renewed engagement, since 2022.
By 2023, bilateral trade volume reached approximately 6.8 billion USD, which is now pointed to by the Turkish and Saudi officials as the new yardstick to aim for in the future. Turkish Trade Minister Ömer Bolat goes as far as saying that 2024 may be a “golden year” for economic relations, as Turkish exports have increased dramatically, and many new projects are in the pipeline in the fields of construction, building materials and defence. This political thaw, in other words, has been quickly monetised. [1]
Vision 2030 meets Turkish capacity
The strongest current structural force behind the Saudi rapprochement is Saudi Arabia's Vision 2030. It looks forward to large-scale investments in infrastructure, tourism, urban development and industry, in projects from Neom and the Red Sea to the reimagining of a dozen cities around principles of quality of life and economic diversification. For this vision to come true, Riyadh requires professional contractors, engineering companies and manufacturers to provide at scale and on tight deadlines. [2]
The profile of the Turkish companies that have 2.3 billion USD of contracts in Saudi Arabia alone and are expected to exceed 3 billion USD at year-end is almost ideal. In the future, as both parties are transitioning to a “new economic era”, business forums between the two are talking about Turkish companies becoming part of the Saudi infrastructure, logistics and urban development projects, while Saudi companies growing into Türkiye's manufacturing, tourism and real estate industries. In summary, the need for capabilities from Vision 2030 and their availability in Türkiye are finally aligned. [3]
Defence industry and technology transfer as strategic glue
This economic cooperation is of a distinctly strategic nature because of the defence industry. In August 2023, Baykar and Saudi Arabian Military Industries concluded a landmark deal on the Akıncı unmanned combat aerial vehicle, signalling a new phase in defence-industrial cooperation. They signed a deal that covers co-production plans in Saudi Arabia, addition of sensors and smart munitions produced by Saudi companies Aselsan and Roketsan, and training and support services. [4]
Such deals fit in perfectly with Vision 2030's goal of increasing the proportion of Saudi defence spending to be sourced locally to over 50 per cent by the end of the decade, and Saudi officials openly describe the drone deal as a step in that direction. In the eyes of Türkiye, they will bolster its position as a supplier of low-cost, proven combat drones to the wealthy Gulf monarchies, and for Riyadh, they will be a means to technology transfer and industrial upgrading not just through Western defence firms. Defence becomes an economic multiplier as well as a geopolitical hedge. [5]
Energy, renewables and the search for resilience
In addition to defence and construction, the current deepening also includes energy cooperation. Saudi Arabia is still a significant exporter of crude oil and petrochemicals to Türkiye, which is a key component of the traditional trade routes. Meanwhile, on the other side, both countries are also exploring joint renewable energy and hydrogen projects, particularly in both solar and wind, as the Kingdom aims to reach its ambitious clean energy and hydrogen production goals.
Said officials and businessmen cite complementarities: Saudi knowledge and capital in hydrocarbons and new green technologies, and Türkiye's knowledge and experience in grid management, renewable energy deployment and equipment production. In these areas, joint ventures are expected to provide commercial benefits as well as energy security and diversification of energy supply chains in an era of global markets threatened by the war in Ukraine and wider geopolitical tensions. [6]
Domestic economic imperatives on both sides
Internal economic restrictions also influence this economic rapprochement. Türkiye has high inflation, current account deficit and needs foreign currency inflows, and the Gulf capital, and especially Saudi capital is a politically convenient option to full dependence on Western financial markets. By early 2024, Saudi investments in Türkiye had been revealed to be in the vicinity of 2 billion USD, and hundreds of Saudi companies were active in various fields ranging from tourism to manufacturing. [7]
In Saudi Arabia, the need is to diversify and move beyond the all-too-reliance on oil revenues in the long-term. The construction of new engines of growth in tourism, services, manufacturing and high-tech industry, and partnership with countries such as Türkiye are part of the aim of Vision 2030. Working on common projects in Africa and 3rd markets – which is a key point stressed by Turkish trade officials – allows the economic sense to go beyond the bilateral one, making both countries co-investors, co-contractors in a wider regional space.
Regional order, great‑power politics and hedging
Thirdly, the growing economic integration is part of the ongoing restructuring of the regional and international economic system. The US is facing competition on its home turf and the great power competition is growing in force as conflicts unfold from Ukraine to Gaza, changing the dynamics of energy routes, security agendas, and diplomatic preferences in both Ankara and Riyadh. Economic cooperation has been directly tied to broader political and strategic goals, as high-level Turkish-Saudia coordination councils begin to explicitly do so; foreign ministers have talked about “momentum” as a result of a shared regional vision. [8]
Economic interdependence in this context is a sort of ‘hedging': it lowers the price of political divergence, raises the stakes in the game of crisis management, and broadens the choice available for both countries to take action in their dealings with the West, China, and Russia. The trade targets of 10 billion USD within a year and 30 billion USD in the medium and long term are positive, and even achievable, figures which highlight the importance of this partnership in the leaderships' concept of national power. [9]
The reason why both Türkiye and Saudi Arabia want to step up economic cooperation now, then, is not only because of “business is good”, but because each country considers the other as a “must-have” partner when attempting to maneuver through a decade of uncertainty, a partner with capital or capacity, legitimacy, or leverage, in a region where the cost of going it alone is rapidly rising.
References
[4] https://aviationweek.com/defense/aircraft-propulsion/turkeys-drone-diplomacy-scores-saudi-success
[5] https://www.arabnews.com/node/2341796/middle-east
[6] https://www.trtworld.com/article/9541fbf9d1d1
[8] https://trendsgroup.org/insight/turkiye-and-saudi-arabia-between-competition-and-cooperation/
[9] https://orfme.org/expert-speak/revisiting-turkiye-gcc-economic-cooperation-amid-trump-2-0/
Author: Dávid Biró, Senior Advisor, Research and Academic Network Lead of the Ludovika Center for Turkic Studies
Image source: brandeis.edu