May 28, 2017 11:00 am JST

Russia eases Turkey sanctions but won't budge on tomatoes

Soaring food prices send Turkish inflation to a nearly 8-year high in April

AKIHIRO SANO, Nikkei staff writer

Soaring prices hit Turkey's tomato-loving consumers hard. © Reuters

ISTANBUL -- Russia has lifted some of its economic sanctions against Turkey, but it refuses to budge in one area: tomatoes.

The sanctions began after Turkey downed a Russian warplane on the Turkish-Syrian border in November 2015.

Russian President Vladimir Putin and his Turkish counterpart, Recep Tayyip Erdogan, put bilateral relations back on track at their May 3 summit in the southern Russian resort town of Sochi. At a joint press conference after their talks, Putin said the process of normalizing Russia-Turkey relations was complete.

But he also said some restrictions would stay in place, including the import ban on Turkish tomatoes. The news caused prices of the food item to gyrate in Turkey.

Erdogan tried to persuade Putin to reverse the decision, but he ultimately accepted the extension in the hope that the issue would be resolved soon. Also, the Turkish leader had more pressing matters on his mind: the construction of natural gas pipelines connecting the two countries via the Black Sea, resuming a Russian-led nuclear power plant project and shoring up the decline in Russian tourists.

Putin said the ban will remain in place long enough to give Russian tomato farmers time to recoup the investments they have made to boost output since the restrictions were introduced. However, market players remain skeptical over whether he actually intends to end the ban.

The two countries are split over war-torn Syria. Russia backs the regime of Syrian President Bashar Assad, while Turkey is calling for his resignation. Nevertheless, Erdogan is keen to restore relations with Moscow, despite Moscow's sanctions and support for Assad.

In addition to keeping the tomato ban in place, Putin also chose not resume a visa waiver program that has been suspended since the warplane incident. He probably wants to maintain a trump card against Turkey.

Price roller coaster

The tomato ban has hurt Turkish farmers and consumers alike. Local media reported that retail prices of tomatoes were 10 lira ($2.80) per kilogram in early May, up 70% from just a few weeks earlier. The price then tumbled by nearly half to about 5 lira after outdoor-grown tomatoes started shipping.

Expensive or cheap, Turkish shoppers will continue to buy tomatoes because they are a key ingredient in the country's cuisine.

Since the import ban began in early 2016, Turkish farmers have been forced to switch to bananas and other products and seek out new export destinations.

Farmers are even feeling the squeeze of waning Russian tourism. In 2014, some 4.4 million Russians visited Turkey. Last year, the number shrank to just 860,000 after Putin banned cheap charter flights between the two countries. Fewer tourists means fewer orders for tomatoes from hotels.

That factor, combined with shrinking exports, has prompted growers to cut output. The resultant supply shortage sent prices higher.

According to data from the Turkish Statistical Institute, consumer inflation jumped 11.87% on the year in April, the biggest rise in more than eight years. Driving the increase were soaring food prices, such as tomatoes and meat.

Putin's diplomatic tactics have highlighted the challenges facing Turkey's agricultural sector, such as the dwindling amount of farmland due to the spread of hotels and housing developments, outdated logistics infrastructure and protectionist farm policies in the form of high tariffs.

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