Turkey’s trade ban: Importers seek indirect routes to bring goods to Israel

New shipping routes to circumvent the Turkey boycott, use of new suppliers, will raise prices, including housing, pushing up the already high cost of living

Sharon Wrobel

Sharon Wrobel is a tech reporter for The Times of Israel.

Pro-Palestinian, anti-Israel protesters in Istanbul, Turkey, April 5, 2024. (AP Photo/ Khalil Hamra)
Pro-Palestinian, anti-Israel protesters in Istanbul, Turkey, April 5, 2024. (AP Photo/ Khalil Hamra)

Turkey’s dramatic move to boycott all trade with Israel has left importers and exporters in dire straits, seeking alternatives even as the disruption of maritime trade in the Red Sea reduces the attractiveness of shipping goods from the Far East.

Many Israeli importers are looking for indirect routes to circumvent Turkey’s ban on trade by shipping goods through third countries, including Slovenia, which is a longer and costlier transportation route, while others may need to replace Turkish suppliers with much pricier ones in Europe and the US, according to experts.

Last week, Turkey announced that it will cut all bilateral trade, worth $7 billion a year, until a permanent ceasefire is declared, and humanitarian aid is secured in Gaza, where Israel has been fighting Hamas since the terror group’s October 7 brutal onslaught.

That’s after the Islamic country, which openly supports Hamas and has been one of the harshest critics of Israel during the ongoing Gaza war, in April imposed trade restrictions on 54 products exported to the country, including cement, steel, aluminum, and iron construction materials and equipment.

In the short-term, the Turkish boycott is bound to lead to an increase in prices in Israel for various imported products, including dry and fresh food, raw materials, electrical devices, iron, steel, and cars, as supply shrinks. Israeli importers will find alternative sources and substitutes, but they will be more expensive due to higher production and transportation costs. This in turn is likely to further fuel Israel’s high cost of living.

The close geographical proximity, competitive production costs, and a free trade agreement in place from the mid-1990s have turned Turkey into an important commercial partner for Israeli importers following the COVID-19 pandemic.

A ship of Freedom Flotilla Coalition anchors at Tuzla seaport in Istanbul, Turkey on April 19, 2024. (AP Photo/ Khalil Hamra)

“Turkey’s action was very sudden and with immediate effect meaning that importers had no time to seek alternatives or change suppliers,” Elad Barshan, co-founder and CEO of SlickChain, a digital supply chain shipping platform told The Times of Israel. “It hit us on the weakest point of our supply chain, because Turkey imports are fairly cheap, as transit times are very quick, taking only very few days, and there was a trade agreement, which is now being violated.”

“As this option is no longer on the table, some importers who heavily rely on the Turkish industry will struggle to survive,” Barshan cautioned.

In response to the unilateral move, Israel announced that it would take steps, including acting to limit all trade between Turkey and the Palestinian Authority (noting Turkish products amount to 18 percent of PA imports); and petitioning international financial forums for sanctions against Turkey over its violation of trade deals with Israel. Economy Minister Nir Barkat submitted a complaint to OECD chief Mathias Cormann Friday over Turkey’s move.

“Instead of going to international tribunals, Israel should ask its allies in the world to influence and put pressure on Turkey’s international trade,” warned Barshan. “If Israel does not act, it could have a snowball effect beyond Turkey, meaning that other countries may start to put restrictions or even full embargo on trade with Israel.”

In recent months, Israeli businesses have been looking to grow imports from Turkey, as the attacks by Yemen’s Iran-backed Houthi militants are disrupting maritime trade, fueling shipping costs and making goods from China and the Far East far more expensive.

Turkey is Israel’s fifth-largest source of imported goods. Last year, exports to Israel amounted to $5.4 billion, making up 6% of all of Israel’s imports. The figure was down from the $7.03 billion generated in 2022. Imports to Turkey from Israel amounted to $1.6 billion in 2023.

Elad Barshan, co-founder and CEO of SlickChain, a digital supply chain shipping platform. (Courtesy)

The volume of Turkey exports to Israel doubled over the past decade, despite the long-strained diplomatic ties between the two countries. Goods imported from Turkey to Israel are mainly steel, iron, machinery, plastics, and cement products for the local construction industry, as well as textiles, motor vehicles, olive oil, and some fruit and vegetables, according to the Israel Export Institute. From Israel, Turkey buys chemicals, metals, and other industrial products that are part of its plastic and paint industries.

Due to Turkey’s abrupt suspension of trade, many Israeli importers are likely to lose their money on shipping orders and contracts for Turkish products that have not yet been manufactured or put on vessels, Barshan said.

“Another option is that goods from Turkey are getting to Israel in transshipment via the port of a third country in Slovenia, where they are loaded on the ground, but are not entering the country or go through customs, but are reloaded to another vessel to their final destination in Israel,” Barshan elaborated. “It is of course more expensive as the shipping route is longer and therefore the commercial viability of this option depends on the value and dependency of the imported goods by factories in Israel.”

Yoram Sebba, president of the Israel Chamber of Shipping, said that Turkey’s trade suspension will force Israeli importers and businesses to start negotiating with alternative suppliers in Europe and the US.

“To hold negotiations and sign new contracts with suppliers when you are under pressure are not optimal conditions and will make goods more expensive also because of higher transportation and shipping costs,” said Sebba.

Barshan added that the more regulated the goods are that Israeli importers are shipping to the country, the more complex, and more expensive it is for them to change suppliers.

“For importers, one of the biggest challenges is to find a good supplier that will fit quality, transit time, and price requirements — it’s not just a matter of doing a quick Google search,” Barshan said. “For highly regulated goods, it’s a very painful, slow, and expensive process to initiate a process with a new supplier, especially for goods for the construction industry, such as aluminum, dry walls, or cement that need to meet requirements by the standard institute.”

Both, Barshan and Sebba expressed cautious optimism that once the fighting with Hamas in Gaza ends, Turkey President Tayyip Erdogan is likely to take steps to try and renew trade relations with Israel.

Yoram Sebba, president of the Israel Chamber of Shipping. (Courtesy)

“Israel-Turkey relations have endured a lot of crises in the past and it will eventually endure because to give up $5 billion of Israeli trade when the Turkish economy is in bad shape would be an act of madness,” said Barshan.

Meanwhile, Sebba also urged Israeli decisionmakers to take the necessary legislative steps to support and boost local production and manufacturing in an effort to reduce the country’s dependence on imports. Barshan sees a “huge opportunity” for the government to highly deregulate Israeli import regulations, including in the food industry.

“Prices in Israel are among the highest in the OECD, not because we don’t have enough entrepreneurs, or because we have a small market, the problem is the regulation,” emphasized Barshan. “Once the government deregulates imports, more players will join the market and competition will be the only efficient tool to reduce or mitigate prices.”

Reuters contributed to this report.

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