Turkey and Germany in the Balkans: Competing with Each Other?

• Author: Nuroglu, Elif
• Position: ARTICLE - Report

Introduction

It is claimed in academic circles and in the media that there is a conflict of interest in the Balkans between Turkey and the EU in general, but Germany in particular. (1) Many countries such as Russia, China, India, the EU, and the U.S. vie to expand their economic, cultural, and political influence in the Balkans. Germany has many advantages in this competition as a main trade partner and creditor of the Balkan countries. (2)

The Balkans is an important element in the foreign policy of Turkey, which has deep historical and cultural ties with the region. One of the basic principles of this policy has been designated as maximum economic integration. Western countries, on the other hand, aim to guarantee their energy supply and achieve their strategic goals under the stance of bringing stability to the Balkans. (3)

This paper aims to examine the extent of commercial and financial rivalry between Turkey and Germany in the Balkans. We examine export volumes, exported items, and foreign direct investments (FDIs) of Germany and Turkey to five Balkan countries. These five countries are Bosnia and Herzegovina, Greece, Kosovo, Romania, and Serbia. They constitute approximately 80 percent of the Balkan trade of both countries, and serve as a representative sample for the whole Balkans.

The research question of this study is: 'Do Germany and Turkey compete in the Balkans market, if yes to what extent and in which sectors?' In order to answer this question, export data is collected from Turkish and German official statistical institutes. Turkey and Germany's export flows to and investment activities in five Balkan countries are examined and compared. Top ten goods exported by Turkey and Germany are listed from 2008 till 2017. According to the annual changes in exported product groups, the tendency for competition between Germany and Turkey in export products, if any, is remarked upon. Moreover, local reports, magazines and, newspapers have been scanned and representatives of Turkish governmental institutions, NGOs and private companies have been interviewed. They have been asked about the practices in the field and their observations about the rivalry.

We find that despite regional, historical, and cultural closeness, Turkey has not become the main trade partner of the Balkan countries, yet. However, as the export growth of Turkey in the region continues to increase as it has done in the last two decades, Turkey has the potential to be a serious competitor to Germany in electrical goods and appliances, motor vehicles, parts and components, power generating machinery and vehicles, metal articles, specific and general industrial machines, and plastics. It is also worth mentioning that Germany's export size as of 2017 is 9.2 times bigger than that of Turkey's. Therefore, when analyzing Turkey and Germany's exports to the Balkans, the commercial supremacy of Germany should always be kept in mind.

Increasing Presence of Turkey in the Balkans

As a result of changes in regional and global conditions, and the increased self-confidence of Turkey in the last decades, Ankara started pursuing a soft power policy in the Balkans. (4) The development of a 'Balkan Vision for the Future,' which was introduced by Ahmet Davutoglu, then the Minister of Foreign Affairs, is an important step. Balkan countries as transition economies need lots of investment, a need which was also realized by Turkish authorities who want to integrate more with the economies in the region around Turkey. The multi-dimensional foreign policy followed by the ruling AK Party government after 2002 shows itself as increased economic and commercial relations with neighboring countries. Although Turkey's interest and activism in the Balkans is not new and cannot solely be attributed to the AK Party government, the inclusion of an economic aspect in Turkish foreign policy is something new. As a result of Turkey's economic achievement after 2002, it has started to prioritize the role of enhanced economic relations and interdependence with all neighbors including the Balkans. (5) The Turkish business world was also designated as the primary driver of Turkish foreign policy, (6) and Turkey has been transformed into a trading state that promotes trade and investment. (7)

Turkey's activism in the Balkans was also driven by external factors such as structural shifts related to the spread of democracy, Europeanization, and globalization; rather than by ideology or Ottoman nostalgia. The European Union's expansion towards the Balkans transformed Turkey's approach from power politics to a multidimensional policy based on trade, foreign investments, and application of soft power. To understand Turkey's increased involvement in the Balkans, there is no need to return to the Ottoman times but it is enough to analyze the 2000s better. Stabilization in the Balkans and the EU integration goals of the countries in the region made the Balkans suitable for investment not only for Turkey but also for many international actors. The developments after the Customs Union with the EU in 1996 and the signed Free Trade Agreements with the Balkan countries paved the way to more integration. (8)

A high level of enthusiasm from Turkey to improve cultural and economic relations with the Balkans coincides with the slowdown of the ongoing EU accession process of the Western Balkan countries that increased the chance of Turkey to revive demographic and cultural linkages with the countries in the region. (9) It has even motivated Serbian politicians, who have many reservations about Turkey, to seek for Turkish investors in Istanbul. (10) This situation led German scholars to warn the EU leaders about losing their strength in the Balkans and giving rein to Russia, Turkey, China, and other states which have interests in the region. (11) The Western Balkan countries' desire to be accepted in the EU has been put on hold because of the EU's internal problems like Brexit, and that situation has exposed the Balkans to additional economic and political influence from Turkey, China, and Russia. (12) Although Turkey's increasing investments and concomitant soft power have disturbed France's Emmanuel Macron who told the European Parliament before the EU Summit in 2018, that he did not want a Balkans that turns toward Turkey or Russia, the EU does not know how to tackle Turkey's increasing influence in the region. (13) Hatipoglu compares Turkey's successful mediation attempt in the Balkans, which resulted in the Istanbul Declaration, with the failure of the Prud/Butmir process, and suggests that Turkey's historical ties can add richness to bureaucratized European foreign policy. (14)

Turkey traditionally formulated its foreign policy based on geopolitical and security calculations. The Balkans has always been a major security concern for the Republic of Turkey and there is indeed continuity in Turkey's formulation of its relations with the region. Since Davutoglu came to power, Turkey did approach the region with a better structured vision, greater pro-activeness, and significant exercise of its soft power capabilities. However, trade relations and investments of Turkey in the region are modest and did not develop in line with strategic interests. (15)

Turkey has signed Free Trade Agreements first with North Macedonia in 1999, and then similar agreements with all countries in the Balkans in the 2000s to remove trade barriers and improve economic cooperation. However, Turkey's trade volumes with the Balkans indicate that economic relations do not develop in line with strategic and political goals. When we consider that Turkey makes only seven percent of its foreign direct investments to the region, it is apparent that the Balkans are not among the economically most favored regions for Turkey. In fact, compared to the EU countries, Turkey invests in and trades less with the Balkans. (16) Most of the Balkan markets are not attractive for Turkish businessmen due to their small size and poor population. (17) Nevertheless, the observed increase in Turkey's investments since the 2000s, and improvement in trade relations show that Turkey's efforts in the region do give positive outcomes. (18) This improvement is also observed in the 2017 figures. In the first nine months of 2017, Turkey's foreign trade volume with 11 Balkan countries was approximately $14 billion, recording an increase of 17.5 percent compared to the same period of the previous year. (19)

Table 1 shows that exports to the Balkan countries constitute 6.4 percent of Turkey's total exports in 2017, while the Balkans' share is only 2.5 percent in Germany's total exports. Although Turkey's exports are lower in volumes, they constitute a higher share in total. It is seen in Table 1 that in 2017 Turkey's total exports constitute 0.11 percent of Germany's total exports. It is also obvious in the table that both countries could not yet reach pre-crisis levels of exports. This has to do with the close connection and high integration of the Balkan countries with the EU. Since they conduct two thirds of their trade with the EU countries, they were severely hit by the crisis.

Balkans as a Soft Power Application Area

Turkey has begun to follow an active policy in the Balkans following its economic achievement in the last two decades. As a result of purely economic interest and pursued internal and external policies, Turkey wanted to develop commercial relations with the Balkans and at the same time act as a mediator in the solution of political disputes. (20) There is a prevailing opinion in some circles that Turkey and Germany compete in the region in practicing soft power, (21) with some EU members expressing their concerns about the soft power Turkey practices in the Balkans. (22) Although the West viewed Turkey as a stabilizing force for many years, today the country is seen as a competitor. Therefore, it is suggested that the EU and...