Skip to content Skip to Search
Skip navigation

Gulf sees potential in Turkish energy and defence

Newly appointed vice-president Cevdet Yilmaz visited the UAE this week Reuters
Newly appointed vice-president Cevdet Yilmaz visited the UAE this week
  • UAE and Saudi Arabia to invest
  • Central bank increases Turkish interest rate to 15%
  • Steep drop-off in lira value has spooked international investors

Saudi Arabia and the UAE will invest in the Turkish defence and energy sectors, new reports citing identified sources suggest.

If the Reuters report is accurate, the expected investments reflect a growing closeness between Turkey and the longstanding Gulf allies.

Gulf support could be vital for Turkey, which is struggling with soaring inflation, a collapse in the lira and dwindling foreign currency reserves.

Newly appointed duo vice-president Cevdet Yilmaz and treasury and finance minister Mehmet Simsek visited the UAE on Wednesday, while Erdogan met with Emirati officials in Istanbul earlier this month for talks, Turkey’s state news agency reported.

The hiring of Yilmaz and Simsek – along with new central bank governor Hafize Gaye Erkan – were seen as attempts by Erdogan, who was re-elected as president on May 28, to quell fears over his unconventional economic policies.

Following Erdogan’s surprise electoral triumph, Gulf officials are discussing direct investments in the Turkish energy and defence sectors, the sources told Reuters, although the size and timeframe for such purchases was unclear.

“Money inflow is expected in the coming period, especially from the Gulf region,” a source said.

“They’ve made some high-level contacts in Turkey. There will be some direct investments from Saudi Arabia and the UAE.”

Turkey has succeeded in improving relations with Saudi Arabia and UAE since the pair ended a four-year blockade on Turkey’s enduring ally, Qatar, in 2021.

Ankara has secured $28 billion in foreign currency swap deals in recent years, including from the UAE, Reuters reported.

“The (Turkish) authorities are expected to seek more bilateral support, but there is also a risk that partners especially in the GCC are more stringent on conditionality,” Thomas Gillet, director of sovereign and public sector ratings at Scope Ratings, told a Tellimer webinar.

“It does not make sense for the GCC to lend cash that is burned to defend the lira, but this will depend on the capacity of Erdogan to leverage Turkey’s regional influence in international negotiations.”

Foreign investors will likely give a cautious welcome to the central bank hiking interest rates to 15 percent on Thursday, from 8.5 percent previously, following its first monetary policy committee meeting under the helm of fledgling governor Erkan.

In a press statement, the committee said the increase was to try to curb inflation.

Annual inflation was 39.6 percent in May.

At Erdogan’s behest, the nominally independent central bank had slashed interest rates in response to soaring inflation.

This strategy contradicts mainstream economic thinking that interest rates should rise to combat increasing prices and sent the lira tumbling 80 percent versus the dollar over the past half-decade.

This collapse has spooked foreign investors, and assets priced in lira are worth a fraction of their former value.

For example, in 2019, Dubai bank Emirates NBD bought Turkey’s Denizbank for 15.48 billion lira, then the equivalent of $2.78 billion, but now just $638 million.

In 2016, Qatar National Bank paid 2.7 billion euros (8.6 billion lira) for Turkey’s Finansbank. The lira price would now be worth about 323 million euros.

Central bank investment figures, which use a broader definition than the internationally recognised UNCTAD database, show that Saudi investments declined to $225 million in 2021 from $864 million a year earlier.

Those from the UAE fell to $1.7 billion from $4.9 billion.

Yet both Saudi and the UAE seem keen to buy into the world’s third-largest Muslim-majority economy.

A Saudi Arabia-Turkey business and investment forum last December was attended by ministers and around 280 companies.

About 12 memorandums of understanding were signed, spanning industries including renewable energy, minerals, mining, petrochemicals and manufacturing.

In November 2021, the UAE announced it would establish a $10 billion investment fund in Turkey that will acquire interests in various sectors such as logistics, energy, health and food.

Latest articles

EV charger network UAE

UAE to roll out countrywide EV fast charger network

The UAE is speeding up the expansion of its electric vehicle charger infrastructure in support of the energy transition, the shift from fossil-based systems of energy production. UAEV, a joint venture between the Ministry of Energy and Infrastructure and Etihad Water and Electricity that was announced on Monday, intends to build a network of high-performance […]

Saudi Aramco CEO Amin Nasser (centre back) at the signing ceremony for the quantum computer deal with Pasqal

Aramco to use Saudi Arabia’s first quantum computer

Saudi Arabia plans to deploy its first quantum computer, after an agreement between the state oil company, Saudi Aramco, and the French computing company Pasqal.  Pasqal will install, maintain and operate a 200-qubit quantum computer, due for deployment in the latter half of 2025, Aramco said in a statement. Quantum computers use the principles of […]

A Tadawul trader looks at prices on the Saudi stock exchange. Aramco's profits have fallen as Riyadh reduces oil output

Saudi listed companies report Q1 profit rise

Businesses listed on the Saudi stock exchange, excluding the state energy giant Aramco, reported an 8 percent rise in first-quarter profits this year, highlighting the continued strength of the non-oil sector as hydrocarbon output is cut.  Net profit gains in the banking sector, and for telecoms operator STC and state mining company Maaden, helped to […]

A jet on the assembly line at the Airbus factory in Blagnac, France. Saudia says it is updating the interiors of its current fleet

Saudia announces ‘largest deal in Saudi aviation history’

Saudia, one of Saudi Arabia’s national carriers, has ordered 105 aircraft from Airbus, with the first batch due for delivery in early 2026. Saudia director general Ibrahim Al-Omar told an aviation industry forum in Riyadh that it is “the largest deal in Saudi aviation history”. A similarly large order has been made by new carrier […]