SAFE HAVEN

The Russian-Ukrainian war as well as the policy of harsh sanctions against Moscow initiated by the West have strengthened Turkey's position in the region. Obviously, Ankara is becoming one of the key intermediaries recognised by both Russia and Ukraine. However, the war could have both positive and negative consequences for Turkey. The latter may include deepening of the global economic crisis, triggering inflation processes amid the weakening tourism sector in Turkey. But it is also worth mentioning the factors that increase Turkey's importance in the emerging political and economic configuration.

Obviously, we can safely assume that the first of these factors is the drift of capital to Turkey. The outbreak of hostilities in Ukraine saw massive withdrawal of Ukrainian citizens from the country. Interestingly though a similar phenomenon has been observed on the other side of the frontline. While Ukrainians leave the country to escape the war, Russians leave Russia because of the consequences of Western sanctions and other risks associated with the war.

Russians now have more difficulties than ever when they travel to Europe, especially the EU states. That is why tens of thousands of Russians settle in Istanbul, Antalya and the neighbouring post-Soviet states.

Many Russian journalists, bloggers and artists chose Istanbul as their new home.

History is recurrent. Similar events were observed just over a century ago, in 1920, when a hundred thousand Russians fled to Istanbul after the Bolsheviks came to power. The New York Times reports that Turkish Airlines currently operates regular flights from Moscow to Turkey. There are days when the airline operates as many as 30 flights daily.

Due to a massive inflow of foreigners, rental prices in Turkey have tripled in the last month. Turkish resort areas have been traditionally popular among Russians, but demand for long-term rentals by Russian citizens has increased significantly since the start of hostilities in Ukraine. For example, in Antalya and Alanya, it has almost quadrupled. If, previously, the monthly rental rate was $200-600, it tripled in the last month.

According to Yekaterina Shimanskaya, manager of Just Real Prime Broker, rental rates in Istanbul, Izmir, Bodrum and Fethiye have doubled or tripled. Renting a small studio room in these cities now costs $1,000-$1,500 per month.

Housing prices in Antalya, the most popular southern city among Russians, have increased by 30-40%. According to current Turkish legislation, foreign nationals who buy real estate worth $250,000 or more in the country have more favourable conditions when applying for citizenship.

Incidentally, 3.9% of property sold in Turkey last year was bought by nationals of other countries. The most frequent buyers of Turkish property are the citizens of Iran, Iraq and Russia. Interestingly, while in 2015 the proportion of foreign buyers was 1.8%, in 2020 it rose to 2.7%. This year the figures are likely to be markedly different, as only in January-February 2022, 988 of the 877 apartments sold to foreign nationals in Turkey were bought by Russians.

Either way, if only 66,786 of 1.792 million foreigners living in Turkey before the war in Ukraine were Russians, after the war this number began to grow. Most of these people are representatives of middle- and high-income class who for various reasons cannot settle in Europe.

According to a number of sources, Russian businessmen and billionaires threatened by Western sanctions continue to transfer their fortunes to Turkey as well.

Although the volume of new Russian investments in Turkey is not remarkable, which is likely due to the reluctance of Russian investors to publicise their actions, yet there are first manifestations of this process. For example, the 140-metre yacht My Solaris, which is worth hundreds of millions of dollars and is owned by one of Russia's richest men, Roman Abramovich, owner of the English football club Chelsea, equipped with 48 cabins, 8 decks and a helipad, was unexpectedly seen anchoring not far from the Turkish resort area in the Mugla province.

Meanwhile, Abramovich's second yacht, the 162.5m Eclipse, one of the largest in the world, has been spotted near the Turkish resort town of Marmaris. The billionaire's vessels run a real risk of arrest in Europe. That is why Abramovich now prefers the safer shores of Turkey. And it is likely that Abramovich's real estate will soon be followed by the assets of other Russian oligarchs.

Interestingly, in March this year, after Abramovich announced his intention to sell Chelsea, the Turkish businessman Muhsin Bayrak declared his readiness to pay £1bn for as the new owner of the English football club. Mr. Bayrak is known as the founder of AB Group in 1999, which is engaged in construction as well as joint activities with Abramovich. It is clear that the Russian oligarch's sale of his club to a Turkish company is only the first part of his plan to move business assets to Turkey.

But Abramovich is not alone. Business ties have linked Russian and Turkish businessmen for many years. And now it is convenient for Russian businessmen threatened by Western sanctions to work under the Turkish flag, as Turkey is also a suitable country for investment.

As we can see, Turkey is turning into an ideal 'safe haven' for Russians and Ukrainians fleeing the war, as well as for Russian businesses trying to avoid Western sanctions. We yet to see and perhaps feel the consequences of the massive embargo.