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G-20 summit Osaka

Turkey seeks Asian investment as Western ties fray

President Erdogan prepares for G-20 summit in Osaka and China visit

Turkish President Tayyip Erdogan, while in Japan later in June, may announce an agreement in principle on an economic partnership agreement with Japanese Prime Minister Shinzo Abe.   © Reuters

ISTANBUL -- Turkey is trying to strengthen ties with Asian economic powerhouses as relations with its traditional Western allies cool.

President Recep Tayyip Erdogan will travel to Beijing at the beginning of July, stopping first at the G-20 summit in Osaka on June 28 and 29.

On his way home from a regional security summit in Tajikistan on June 14 and 15, where he met with Chinese President Xi Jinping and other Asian leaders, Erdogan made his goals clear. "By utilizing such summits and meetings, we are diversifying strategic options for our country's national interests."

According to people familiar with the matter, Erdogan is asking Turkish business leaders to travel to Japan with him to meet with their Japanese counterparts. He hopes to attract new investment from Japan, including financing for infrastructure projects and energy development.

While he is there, Erdogan and Japanese Prime Minister Shinzo Abe may announce an agreement in principle on an economic partnership agreement covering trade in goods and services, investment and public procurement, Hasan Murat Mercan, Turkey's ambassador to Tokyo, told the Nikkei Asian Review.

Turkey has had a free trade agreement with South Korea since 2013, which was expanded to cover services and investment last August. In 2017, it entered into a trade pact with Singapore, and with Malaysia two years earlier. Ankara is also in talks with Indonesia, Thailand and Pakistan, according to the country's Trade Ministry.

In 2018, the Asia-Pacific region accounted for $60 billion of Turkey's total trade of $391 billion. Its biggest trading partner, the European Union, had a $165 billion slice, thanks to a customs union with the bloc.

The timing of Erdogan's Asian charm offensive is crucial as many experts say a scheduled meeting with U.S. President Donald Trump at the G-20 may be a last-ditch effort to avoid U.S. sanctions over NATO member Turkey's decision to buy Russian S-400 missile air defense systems. Erdogan has repeatedly said that the purchase is a "done deal" and that there is "no turning back" from it.

The U.S. Defense Department has given Turkey until July 31 to reverse its decision or face expulsion from its F-35 fighter jet project, both as a parts supplier and as a buyer. U.S. officials have also stressed that should Turkey go ahead with the purchase of the missile system, Trump would be required by law to impose at least five out of a list of 12 possible sanctions.

Russian S-400 missile air defence systems are seen before the military parade to commemorate the 75th anniversary of the battle of Stalingrad in World War Two, in the city of Volgograd, Russia on Feb. 2.   © Reuters

Last summer, U.S. sanctions over an American pastor jailed in Turkey for allegedly plotting against the government sent the Turkish lira spiraling down 30% against the dollar by the end of 2018. The sanctions pushed the country into recession and raised its annual inflation rate to 20%.

Turkey is also facing criticism from the EU and the U.S. over its gas exploration in the eastern Mediterranean, where Ankara is locked in a dispute with Cyprus over the boundaries of their exclusive economic zones. On Thursday, EU leaders threatened Turkey with sanctions over "illegal drilling activities," vowing to respond "in full solidarity with Cyprus." The leaders tasked the EU Commission to "submit options for appropriate measures without delay, including targeted measures."

Speaking to Nikkei, Murat Kolbasi, coordinating chairman of the Turkey-Asia Pacific Business Councils at the Foreign Economic Relations Board of Turkey, said Erdogan's visit to Asia is timely, adding, "The Asia-Pacific region is an alternative for Turkey to diversify trade and investment sources, and strengthening relations with the region will help decrease dependence on [its] Western partners."

China's ambassador to Ankara, Deng Li, told Turkish media at the end of March that Beijing wants to double its investments in Turkey to $6 billion and the number Chinese tourists visiting the country to 800,000 by 2021.

Erdogan appears eager to expand cooperation with Asia beyond economics with his remark about "diversifying strategic options."

"On Asia, a very different balance of power is emerging for the world. There are leaders there ruling the world. The Shanghai Cooperation Organization is a venue for a meeting of effective countries. In fact, my personal view is if they would add Turkey to the SCO it would be a very good development." Erdogan told Turkish media on his way back from the Tajikistan security summit.

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