Indications are growing that a US threat to hit financial firms facilitating business with Russia with secondary sanctions may have chilled Turkish-Russian trade. Turkish exports to Russia sank by 30.4% y/y to $551mn in January, according to a trade association’s data.

The stark drop in exports from January 2023’s $972mn was recorded by the Turkish Assembly of Exporters.

The US sanctions move has disrupted or slowed some payments for both Russian oil imported by Turkey and Turkish goods dispatched to Russia, according to seven sources familiar with the matter, cited by Reuters on February 19. Its report comes on the heels of a near-fourfold fall in trading in the Turkish currency on the Moscow exchange. It was recorded in January as bank sanctions bit, hitting bank settlements through Turkish banks, which severed correspondent relationships with Russian banks and closed Russian corporate accounts.

Listing some year on year declines shown by its January export data, the Turkish Assembly of Exporters said chemical exports fell by 41.1%, fresh vegetables and fruits by 20.4% and cars by 7.6%. Machinery exports declined by 23.9% and shipments of electronics and electrical equipment by 48.8%, it added.

It was in December that the US issued an executive order that appears to have complicated some Turkish payments for Russian crude as well as Russian payments for a broader range of Turkish exports, Reuters reported its sources as saying.

Turkey, which during the Ukraine war has stuck to a policy of maintaining good relations with both Moscow and Kyiv, has not imposed any conflict sanctions on Russia, but claims to be making sufficient efforts to ensure its traders respect Western sanctions imposed on the Kremlin. Nevertheless, major capitals in the West have become increasingly unsettled by indications of substantial export flows of “dual-use” items, which can be used by Russia’s defence industry, heading for Russian buyers from, or via, Nato member Turkey. Efforts at ensuring Turkish sanctions compliance were thus stepped up.

The emerging payment issues are related to Turkish banks meticulously reviewing business and tightening compliance as regards Russian clients, four sources were quoted by Reuters as saying. The issues, however, have not disrupted Turkey's crude supplies, delaying only a small number of cargoes, two oil industry sources reportedly said.

"It has become difficult to make some energy payments to Russia, especially after the new sanctions [threat] at the end of December. Some payments were disrupted," a Turkish source familiar with the payments issue told the news agency.

"The originally agreed upon method had to be changed or the payment had to be postponed, but the shipment continued. There may be problems on a cargo-by-cargo basis," the source added.

In signing the executive order, US President Joe Biden threatened firms helping Russia circumvent sanctions with the risk of losing assess to the US financial system. Financial institutions conducting business on behalf of those targeted by US sanctions are at risk, the order said.

At the start of February, the Kremlin said it was aware of Turkish banks tightening rules on Russian clients due to "aggressive" US pressure. It added that it was working with Ankara to find solutions. It appears solutions have not yet been found and applied.

Russian central bank governor Elvira Nabiullina observed on February 16 that for Russia additional difficulties in foreign trade transactions related to settlements and logistics have emerged.