Russia is Turkey’s main energy supplier, as Turkey imports 98.8 percent of its natural gas consumption, with Russia accounting for 56 per cent of these, said the EBRD statement.

RUSSIAN MARKET

Russia is the 7th largest exports market for Turkey, the statement also said, adding that the Turkish tourism industry has strong ties with the Russian market.

Meanwhile, Turkish contractors, especially in the construction industry, have large operations in Russia.

“Russia was the 4th largest foreign direct investor in Turkey in 2014. Russian foreign direct investments in Turkey were around 0.1 per cent of Turkey’s GDP in 2014” the statement added, underlining several mega projects between the two country: The Akkuyu nuclear plant, which is under construction, and the so-called Turkish stream pipeline, which is still in the initial planning stage.

According to EBRD, “the sanctions imposed so far persist and are fully applied through 2016, they may have a negative impact of around 0.3-0.7 percentage points on Turkey’s GDP in 2016” and mainly tourism and food exports will be affected, while the impact on Russia’s GDP is expected to be limited.

Additionally, as Turkey is the most important destination for Russian tourists travelling abroad, “while the travel ban may boost domestic tourism, existing capacity constrains would lead to a substantial increase in prices” the organization warned.

If the travel ban persists, the price of travel services may rise by up to 25 per cent over the next year, adding a further 0.5 percentage points to the inflation in 2016, according to EBRD.

On the other hand, a disruption to energy supply seems highly unlikely, said the statement:

“The cost of the sanctions to the economy will be at the lower end of the estimate provided currently operating contractors and workers continue to be exempt from sanctions, and provided the affected exporters and contractors quickly find alternative markets for their goods and services.”

EBRD urged, “However, a further escalation of the sanctions cannot be ruled out, in which case Turkey’s country risk premium and cost of funding could rise, causing a larger than estimated impact”.