Turkey-UAE honeymoon on horizon after Erdogan's win, economic deals

DUBAI — President Recep Tayyip Erdogan secured his third term as Turkey’s leader last month, continuing his 20 years of power while embarking on repairing relations with Gulf states, especially the United Arab Emirates, on both the economic and political fronts. 

In March, Turkey — the Emirates’ sixth-largest trading partner — and the UAE signed a $40 billion trade agreement over five years that was ratified on May 31 after Erdogan’s reelection. This bilateral economic agreement is simply an expression of the foundational camaraderie between the two countries’ leaders, according to experts.

Abdulkhaleq Abdulla, an Emirati analyst and professor of political science, said this agreement is a reflection of UAE President Mohammed Bin Zayed (MBZ) approach to foreign policy that values personal relationships as a way to develop trust. 

“I think they (MBZ and Erdogan) clicked very well in their various meetings that they had. Sheikh Mohammed was expected to go to Ankara, probably next week or so according to reports. … This just shows you how much President Sheikh Mohammed Bin Zayed values friendship as much as the various strategic aspects of the relationship,” the Emirati professor told Al-Monitor. 

MBZ congratulated Erdogan on Twitter before the election results were made official on May 28. But this personal rapport was not always there between the two. 

Relations between Turkey and the UAE, along with other Gulf Cooperation Council (GCC) countries, suffered between 2010 and 2020, at the outset of the Arab Spring and then later in the aftermath of the killing of  Saudi writer Jamal Khashoggi. In 2016, media outlets close to Erdogan accused the UAE of funding perpetrators of the failed coup against the Turkish strongman. 

Under Erdogan, and following the Arab Spring in 2011, Turkey was seen as a major backer of the Muslim Brotherhood in Tunisia, Egypt and Syria. The group which is vehemently opposed by and outlawed in both Saudi Arabia and the UAE, was overthrown from power in Egypt in 2013, and has been ostracized from government in Tunisia since 2022. In Syria, both Riyadh and Abu Dhabi have now embraced the country’s ruler Bashar al-Assad while Turkey hasn’t. 

Ankara also sided with Qatar during the Gulf dispute in 2017, which saw Doha ​blockaded by its neighbors as they blasted its ties to the Islamist group. That blockade ended in 2021.

The UAE-Turkey relationship has gone through stages, explained Abdulla, with its high point occurring before the Arab Spring when Turkey was one of the UAE’s best trade partners. The two still maintained the relationship at their lowest points. 

“Even during the period of political rivalry that the two countries had, the economics of [the relationship] were strong and solid,” said Abdulla. After tensions thawed with Qatar in 2021, the UAE set up a $10 billion investment fund in Turkey. 

Immediately after two massive earthquakes that devastated Turks and their economy this year, the UAE pledged to donate $100 million in relief aid to Turkey as well as Syria, which was also heavily affected by the earthquakes.

“The relationship between the UAE and Turkey has changed significantly, almost 180 degrees over the past two years; they went from being rivals to being friends,” said Abdulla. "Now we’re seeing the two countries more aligned on political matters."  

“The new Turkey is increasingly giving up on its support for the Muslim Brotherhood,” said Abdulla. 

The expert said that this shift — in addition to the UAE’s push since the 2020 Abraham Accords for cooperation instead of confrontation with previous political rivals such as Israel, Iran, Qatar and others — is easing the growth of the Abu Dhabi’s economic ties with Ankara.

Bilateral trade between the two countries reached $18.9 billion in 2022, up 40% from the year before, according to Reuters. 

Abdulla said ongoing opportunities for growth are ripe for the picking and lie in more Turkish construction companies working in the UAE, using the country as a re-export hub due to its connected global ports, and cooperating with the Emirates to expand its aviation industry. 

Nicholas Heras, senior director for the Strategy and Innovation Department at the New Lines Institute, said that although competition for influence in Africa continues, the UAE is moving from a position of being in active opposition to Turkey's foreign policy to being an active investor. 

“The UAE views the Turkish economy as something of a distressed asset that it can invest in now on the cheap and make a lot more money on that investment later,” he told Al-Monitor. 

The potential is there, he added. Turkey’s growing population of currently about 85 million, its large industrial capacity and its generally well-educated population could open up emerging technology industries in agriculture, clean energy and military technology. 

Turkey’s central location, easily accessible to Europe, Africa and Asia, is an appealing opportunity for the UAE to capitalize on the country as a trade and tourist hub and to invest in commercial real estate. 

However, growth might be difficult as Turkey has faced immense economic hardship under Erdogan’s leadership, which saw its central bank’s net foreign reserves fall below zero this year for the first time since 2002 and year-on-year inflation that stood at 39.59% in May, according to government data. 

Since his third election win, Erdogan so far seems to be shifting away from his previous unorthodox economic policies and taking a more conventional approach to rectify his economic credibility. 

On Friday, he tapped US-based banking executive Hafize Gaye Erkan as the nation’s new central bank governor. This follows the appointment of Mehmet Simsek as the new finance and treasury minister. Simsek was kicked out of his position as economy czar in 2018 for pushing back against Erdogan’s policies. 

Heras said that these moves represent the practical side of Erdogan’s policy, which seeks to entice foreign investment but will not trade away his notion of the expansion of Turkish power abroad for foreign direct investment at home, adding that it’s not in the character of his policy approach.

“The greatest improvement that could happen in the near future for Emirati and Turkish relations is that Ankara and Abu Dhabi come to the mutual understanding that each country has spheres of influence in the broader Middle East that the other will not contest,” Heras said.