Emre Demir:  Kanal Istanbul, Turkey’s Middle Corridor, and the Belt and Road Initiative

Despite mounting opposition from political and civil society groups due to potential environmental and political issues, President Recep Tayyip Erdoğan is determined to proceed with the controversial Kanal Istanbul project, an artificial, 45-km long shipping canal that will connect the Sea of Marmara to the Black Sea. On June 26, Erdoğan attended the groundbreaking ceremony of what he referred to as his “crazy project.” Many, including the Mayor of Istanbul, scientists, retired admirals and ambassadors, and ordinary people, have criticized the project due to its environmental, economic, and security impact.


So far, the project’s estimated cost is 15 billion US dollars. However, the amount is likely to reach 21.06 billion US dollars once operational and financing costs are added.


Erdoğan insists that Kanal Istanbul will contribute to Turkey’s economy and help reduce traffic on the Bosphorus.


According to the Minister of Transport and Infrastructure Adil Karaismailoğlu, the profits from the canal will cover the estimated costs 12 years after the canal is completed.


Despite the profit and cost projections, the ruling Justice and Development Party (AKP) seems to have underestimated the country’s financing capacity, and instead, has been trying to secure foreign investors. Some of these potential investors include the Netherlands, Belgium, and Russia — though China has emerged as the most viable option. However, China’s possible involvement is likely to worsen an already negative perception of China in the country.


Turkey’s Middle Corridor Initiative

The Middle Corridor, formally known as the Trans-Caspian East-West-Middle Corridor Initiative, reflects Turkey’s dream of building links to China via the Caucasus and Central Asia. The Middle Corridor trade route project connects China to Europe via Turkey through railways and highways. Turkey views the Middle Corridor as a complement to China’s Belt and Road Initiative rather than a competitor. (Map below)

Completed in 2017, the Baku-Tbilisi-Kars (BTK) Railway is one of the initiative’s main projects. It is estimated that by 2034, the BTK will carry 3 million passengers and 17 million tons of cargo annually.


So far, the first cargo train from China to Europe using the Middle Corridor arrived in Turkey in November 2019, and the first cargo train from Turkey using the same route arrived in China in December 2020.


As part of the Middle Corridor and BRI, Turkey has made numerous substantial infrastructure investments. The most prominent ones are Marmaray undersea railway, Eurasia Tunnel, and the Third Istanbul Bridge that connects Europe and Asia through Istanbul and the Istanbul Airport. Several other infrastructure projects such as the Çanakkale Strait Bridge, Edirne-Kars high-speed rail, and the Three-Level Tube Tunnel are also underway.


Both China and Turkey are eager to integrate the BRI and Middle Corridor. President Erdoğan said that “the Middle Corridor… lies at the heart of the BRI” and that Turkey “will continue to work with our Chinese friends to integrate the Middle Corridor into the BRI.” China’s President Xi Jinping “called on the two sides to promote synergy between joint construction of the Belt and Road Initiative and the Middle Corridor project of Turkey.” In the meantime, Turkey’s Minister of Transport and Infrastructure Adil Karaismailoğlu said that Kanal Istanbul is an integral part of the Middle Corridor, noting, “With Kanal Istanbul, our Middle Corridor objective will become stronger.”


Sino-Turkish economic relations

Turkey-China trade relations grew substantially after China joined the World Trade Organization on December 11, 2001. At the time, bilateral trade was less than 2 billion US dollars. Over the next 20 years, the turnover reached 26 billion US dollars. However, this is a very uneven relationship. While China’s exports to Turkey total 23.041 billion US dollars, Turkey’s exports to China total a mere 2.865 billion US dollars.


One way to change the uneven trade landscape is to increase Chinese investments in Turkey through initiatives like the BRI. Although China is not among the top ten investors in Turkey, over 1,000 Chinese companies have invested in areas such as finance, energy, production, and infrastructure. In 2019, the former Chinese Ambassador to Turkey, Deng Li, expected Chinese investment to reach 6 billion US dollars by the end of 2021. When paired with tourism revenues, Chinese investments in Turkey can play an important role in reducing the foreign exchange outflow from Turkey.


China has also made significant infrastructure investments in the country. In 2015, a Chinese consortium acquired 65 percent of Turkey’s third-largest container port, Kumport, for 940 million US dollars. In January 2020, a Chinese consortium attempted to acquire 51 percent of the Third Istanbul Bridge for 688 million US dollars, however, recent reports suggest the deal is yet to be finalized. This development could derail China’s BRI-related infrastructure investments in Turkey, especially as the Turkish state increasingly views the bridge as a major part of its Middle Corridor initiative.


Controversy over Chinese funding

Among all Chinese investments in the country, possible Chinese funding of the Kanal Istanbul project has triggered the most heated debate in Turkey.


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The Turkish government estimates the cost for the project will reach 15 billion US dollars. But with mounting economic problems, which have worsened due to COVID-19, the ruling government needs a cash infusion. Furthermore, according to Reuters, Turkish banks have largely stayed away from the project because of the expected environmental damage, potential financial risks, and widespread political and societal opposition to the project.


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Several reports claim that China is eager to finance the expensive project and has discussed it with Turkish officials during diplomatic visits. On April 30, 2021, Turkish Minister Karaismailoğlu confirmed China’s interest and added that Netherlands, Belgium, and Russia are also interested in financing the project.


Republican People’s Party (CHP) President Kemal Kılıçdaroğlu has warned potential investors and foreign governments not to finance the project. On May 9, he stated that if the opposition coalition wins the next election, the new government will not pay back the money invested by the investors and will even distance Turkey from the investing countries. A similar warning was made by the leader of the Good Party (İYİ Parti), Meral Akşener.


According to a MetroPOLL survey, the majority of Turkish society opposes the building of Kanal Istanbul. While 51 percent of respondents think that the main reason for the project is to generate profit, only 29.1 percent believe Erdoğan’s claim that the canal will reduce maritime traffic in the Bosporus.


So far, the government has shrugged off the criticism by focusing instead on actively promoting the Kanal Istanbul project.


This story is part of a Civic Media Observatory investigation into competing narratives about China’s Belt and Road Initiative and explores how societies and communities hold differing perceptions of potential benefits and harms of Chinese-led development. To learn more about this project and its methods, click here.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.