Azerbaijan can benefit from Turkish-Russian joint banking hub

Turkiye and Russia are planning to establish a joint bank to overcome the problems they face in trade and payment transactions between the two countries. This issue has also been brought up before, but no concrete progress has been made.

A Turkish banking industry source stated that this issue is still being discussed, but no clear decision has been made yet. It is known that Turkish banks have recently started to close the accounts of Russian companies.

This situation negatively affects economic relations between the two countries. The Russian-Turkish Dialogue Association, on the other hand, stated that they had no information that Turkish banks were following a policy of collectively closing the accounts of Russian companies.

Establishing a joint bank between Turkiye and Russia could be an important step to increase the trade volume between the two countries and provide ease of payment.

The correspondent of Azernews learned the opinion of the MUSIAD board member and former banker, Ünsal Sözbir, on the issue. The expert noted that the practice of countries with strong trade establishing joint banks to increase trade further and enhance their cooperation is a structure that has many examples in the world. The most important previous example of Russia and Turkiye establishing a joint bank is the Black Sea Trade and Development Bank (https://www.bstdb.org/index.htm). Not only two countries, but 11 countries, including Azerbaijan, came together here to set up a joint bank.

"These countries are Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkiye and Ukraine

This bank, which was established with the intention of creating a regional power, has made significant contributions to its member countries so far," Ünsal Sözbir pointed out.

He said that according to the report prepared by the Turkish Embassy in Moscow, the trade volume between the two countries has increased.

The former banker noted that Russia's exports to Turkiye amounted to 16.2% of total imports (according to 2022 data), and the share of exports from Turkiye to Russia is around 3.7%.

"The commencement of the Russia-Ukrainian war significantly impacted this trade, and Turkiye was the country most affected by the restrictions imposed on Russia by Western countries. Reasons such as removing Russia from the SWIFT system, closing local credit cards to international payments, and removing it from the money transfer system apparently targeted Russia, but they affected Turkiye the most negatively. It is based on extremely reasonable justifications for Turkiye to take steps to minimise this impact," he said.

Ünsal Sözbir also noted that it is a fact that one of the efforts to increase trade and prevent existing commercial relations from being negatively affected will be solving the problems experienced in payment systems. The development of trade with local currencies and the creation of a banking infrastructure to mediate this will ensure it.

He added that, despite the fact that there has not been enough official explanation about what stage the negotiations are at, it would be in the favour of both countries if such a thing were considered and designed.

As for the benefit of this bank to the economies of neighbouring countries such as Georgia, Azerbaijan, and so on, Sözbir pointed out that Turkiye and Russia are the two major countries and economies of the region.

"Strategists predict that local economic cooperation will increase as a trend within the developments that are likely to take place in the next 10 years. Within the framework of this assessment, the economies of Turkey and Russia have a total size approaching 4 trillion US dollars. Both countries have an active and decisive role in their environment. These two large economies have very important effects not only on themselves but also on countries such as Azerbaijan and Georgia, which are in their natural hinterland, and they will continue to do so. It is also very clear that financial cooperation, which will improve trade and economic cooperation, will also accelerate this effect, and this will also benefit the surrounding countries," Ünsal Sözbir concluded.