Turkey Looks for a New Détente With the Gulf

A quarrel over Egypt hurts Turkish business with the oil states

Recep Tayyip ErdoganPhotograph by Adam Berry/Getty Images

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By Alaa Shahine, Isobel Finkel, and Onur Ant

May 22, 2014 at 9:26 PM UTC

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This article is part of the May 26, 2014 issue of businessweek.

Turkish Prime Minister Recep Tayyip Erdogan is mending fences with his Middle Eastern neighbors in an attempt to salvage a decade’s worth of economic policy. Turkish exports to the Middle East grew eightfold after Erdogan came to power in 2003, reaching $38.6 billion in 2012. During his first 10 years in office, Erdogan courted the governments of oil-rich Gulf states to promote Turkish products, win construction deals for Turkish contractors, and lure investment.

The Arab Spring in 2011 and the election of the Muslim Brotherhood to run Egypt’s government in 2012 soured the relationship between Turkey and its Middle Eastern trading partners. Erdogan, who is moderately Islamic, enthusiastically endorsed the new regime and its leader Mohammed Mursi. He offered aid to the government, including a $1 billion loan.