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Russia has imposed sanctions on Turkey following the downing of a Russian fighter plane by a Turkish missile. The worsening of the diplomatic and trade ties is expected to negatively affect both countries, which are already suffering from a loss of investors confidence due to their respective geopolitical and domestic problems.

The sanctions target some Turkish food imports and place restrictions on tourism and work visas for Turkish nationals, and will cost Turkey the trade and investment opportunities recently gained from the worsening of trade relations between Russia and the European Union.

“The negative impact on the bilateral trade, and the business environment for Turkish businesses in Russia will be almost immediate,” says Lilit Gevorgyan, senior economist at IHS Global Insight.

Turkish producers and exporters had seen a significant rise in exports of fresh produce to Russia since last year. “In 2014, Turkish meat exports to Russia stood at US$23.1mn, vegetables exports at US$385mn, and fruits exports at US$622mn. These sectors may lose their market shares and export revenues coming from the Russian market,” explains Seltem Iyigun, chief economist at Coface.

She expects Turkish exporters to show resilience, as they are accustomed to having to shift away from troubled zones and find new markets. “The Russian economy has been in recession since 2014 and [overall] Turkish exports have been declining constantly since early 2014 at an average pace of 25-30% on an annual basis at the worse period of the recession. This gave some time to Turkish exporters to adjust their production and diversify their export markets,” she says.

Data from Russian officials claim Turkey accounts for 20% of the total Russian vegetable imports, and 4% of total food imports, totalling at US$1bn since the start of 2015. According to IHS’s Gevorgyan, former Soviet states in the South Caucasus and Central Asia regions stand to replace the Turkish market share. “These are relatively small producers, with less modernised businesses and smaller output, compared to their Turkish competitors. Therefore, their exports will be more expensive than the Turkish, and the Russian consumers will have to pay for the price difference,” she says.

For now, the energy and commodities sectors will remain outside of the sanctions’ grip for both economic and political reasons. “Turkey is one of the biggest clients of Russian energy exports and Russia may need funds coming from these exports to keep running its economy already in recession,” says Iyigun.

“Should Russia stop gas supply this will create a havoc with the Turkish economy but it will also be a blow for Gazprom’s image. The company has been keen to de-politicise its operations and defend its image as a reliable supplier of this strategically important commodity,” adds Gevorgyan.

This situation may change should the sanctions regime stay in place for an extended period of time. According to Gevorgyan, sanctions will not be lifted quickly, unless the Turkish president dramatically and actively makes amends. “Chances of this happening are slim. Instead, the restrictions are expected to last at least for a year,” she says.

In the case of further escalation in bilateral relations, the two countries may also need to reconsider long-term geopolitical risks associated with multibillion investment projects in Turkey. The Russian Energy Minister Alexander Novak has announced on December 3 the suspension of talks with Turkey about TurkStream, a pipeline designed to provide a route for Russian natural gas to reach the EU without going through Ukraine. If Russia considers Turkey a troublesome area too, “there would be little sense in building the expensive infrastructure,” concludes Gevorgyan.