The Putin-Erdogan Row May Help Eurasian Bank's New Purchase

  • Kazakh bank benefiting as Putin clamps down on Turkish imports
  • CEO Michael Eggleton speaks during client visits in Istanbul

Eurasian Bank’s aim of positioning its newly acquired unit as a place where Turks can transact business with Russia was dealt an unexpected boost when, a month after the deal was signed, the two countries stopped talking to each other.

Vladimir Putin and Recep Tayyip Erdogan in September 2015. Photographer: Sasha Mordovets/Getty Images

Vladimir Putin and Recep Tayyip Erdogan in September 2015.

Photographer: Sasha Mordovets/Getty Images

That’s because the unit, like its new owner Eurasian Bank, is based in Kazakhstan, which maintains cordial relations with both Turkey and Russia even though the nations’ trade ties have gone sour. Bank Pozitif Kazakhstan, the lender acquired for $26.3 million from Istanbul-based Bank Pozitif Kredi Ve Kalkinma Bankasi AS, has seen a surge in interest from Turkish companies realigning themselves to manage the fallout, according to Eurasian’s Chief Executive Officer Michael Eggleton.

"A lot of the Turkish businesses within Kazakhstan or the region were working with big Russian banks, and they were nervous that some of the politics may affect their own business," Eggleton said in an interview at a Bosphorus-front hotel that a week earlier had hosted Kazakh President Nursultan Nazarbayev, who was in town to help drum up trade ties. "We started to get many more knocks on the door."

New Clients

Clients for the Kazakh unit include Turkey’s largest weapons maker Aselsan Elektronik Sanayi & Ticaret AS, and conglomerate Turkuaz, which has a distribution network of 4,000 stores across the sparsely-populated republic. Kazakhstan has a population only slightly higher than Istanbul’s at 17 million, but is the ninth largest sovereign state in the world by land mass.

Direct trade between Russia and Turkey, which had topped $30 billion annually, is plunging in the wake of Turkey shooting down a Russian jet that it said was violating its southern airspace in November. Immediately after the incident, Turkish President Recep Tayyip Erdogan complained that his Russian counterpart, Vladimir Putin, stopped taking his calls. Soon after, Russia introduced sanctions on goods including Turkish fruit and vegetables, hurting the Turkish exporters who counted Russia as one of their largest export markets. 

Trade Signals

Evidence suggests that Kazakhstan, which is a member of the Russian-led Eurasian Economic Union free trade zone, is already benefiting from that, according to Eggleton. He spoke between a series of meetings in Istanbul, where his pitch to potential clients included the bank’s ties with both Turkey and Russia, and its retention of Turkish-speaking branch staff in Kazakhstan.

The Caspian port of Aktau, the closest entry point for goods exported from Turkey, saw as much tanker traffic in the year’s first quarter as it did in all of last year, before Russia’s bans went into effect, he said. In 2015, Kazakhstan’s total trade with Turkey amounted to $1.9 billion, according to data compiled by Bloomberg, compared with $24 billion in Turkey-Russia trade.

A quarter of the projects carried out by Turkish contractors abroad last year were in Russia, Haberturk newspaper reported at the end of April. The total number dropped to 179 from 328 the year before, it said.

"It makes financial sense and it makes geopolitical sense for there to be some sort of smoothing over," Eggleton said of the six month-old dispute between Turkey and Russia. "I don’t think there’s going to be a line in the sand."

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