Erdogan signs defence and energy deals with Saudi Arabia to fix Turkey’s ailing economy

Turkish President Recep Tayyip Erdogan is on a three-stop tour of the Persian Gulf states to help boost his nation’s ailing economy. He landed in Saudi Arabia on Monday (July 17) where he signed various memoranda of understanding (MoU) in various sectors including defence, energy and direct investments. 

Reuters reported Riyadh has reached two agreements to purchase drones from Turkish defence firm Baykar with “the aim of enhancing the readiness of the Kingdom's armed forces and bolstering its defense and manufacturing capabilities," Saudi Defence Minister Prince Khalid bin Salman was quoted as saying by Reuters.

The signing ceremony of the agreements between Saudi Arabia and Turkey was witnessed by Turkish leader Erdogan and Saudi’s de-facto ruler Saudi Crown Prince Mohammed bin Salman (MBS).

Erdogan on a charm-offensive

Business and trade are well on top of the agenda as newly-elected Erdogan visits the Kingdom of Saudi Arabia with an entourage of some 200 businessmen. Business forums have been set up in Saudi Arabia, UAE and Qatar to gather investments and direct support for the floundering Turkish economy.

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“We are hoping to improve our relations and cooperation in many fields. We will focus on joint investment and commercial initiatives to be realised in the upcoming period,” Erdogan told the local media in Istanbul before departing for Jeddah.

The sorry state of the Turkish economy

The Turkish economy continues to suffer from high inflation, a massive current account deficit and unemployment. Last month, the official annual inflation rate in Turkey decreased to 38 per cent from a peak of 85 per cent in October.

However, independent economists argue that the true rate of inflation in June was closer to 108 per cent.

Turkey is currently grappling with a historic high current account deficit, which amounted to $37.7 billion in the first five months of this year. To address this issue, President Erdogan is seeking assistance from the oil- and gas-rich Gulf states to fill this gap.

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In a significant move last month, the Turkish central bank implemented a substantial increase in interest rates. This decision signals a shift towards more conventional economic policies and comes in response to criticisms that Erdogan's low-rate approach had exacerbated the cost-of-living crisis.

Thaw between Arabs and Turkey

Turkey has worked on repairing its ties with Arab states over the last two years. The relations had soured following the 2011 Arab Spring and Ankara’s unequivocal support to Muslim Brotherhood. The 2018 killing of Saudi journalist Jamal Khashoggi at Saudi Arabia’s consulate in Istanbul further led to the deterioration of ties.