Why So Many Russians Are Going to Turkey – The Journal. – WSJ Podcasts

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Ryan Knutson: As Russia has been feeling the brunt of economic sanctions and cracking down on free speech, many Russians have started to leave the country and a lot of them are pouring into Turkey. And they run the gamut. Some are just ordinary people. Other have a bit more money.

Jared Malsin: The most obvious example is yachts. We’ve had multiple Russian oligarch yachts showing up on the shores of Turkey.

Ryan Knutson: That’s our colleague, Jared Malsin, who’s based in Istanbul.

Jared Malsin: This real estate broker talked about how there’s a lot of wealthy Russians who are buying apartments here. And she said that out of every 10 apartments that they rent six or seven of them are to Russians.

Ryan Knutson: Jared says, Russians are arriving in Turkey with cash in their suitcases.

Jared Malsin: I’ve heard about a lot of people, just when they left kind of spur of the moment, they just took out as much cash as they could. And then they left and then maybe they worked with a relative, a parent tried to wire them the rest.

Ryan Knutson: One reason so many Russians are going to Turkey is because Turkey is making it easy.

Jared Malsin: The Turkish government hasn’t changed the rules on Russians entering the country. They have not imposed new restrictions on Russian money coming here. The Turkish foreign minister even said a couple of weeks ago that it’s fine for oligarchs to come here as long as they are coming here legally and doing business here legally. And so that’s made Turkey an attractive place for Russians and Russian money.

Ryan Knutson: This has made Turkey an outlier. While most countries that are part of the NATO Alliance have been closing their doors to Russia, Turkey is keeping them open.
Welcome to The Journal our show about money, business and power. I’m Ryan Knutson. It’s Monday, April 11th.
Coming up on the show, why Russians are pouring into Turkey and why Turkey wants them to.
Our colleague Jared in Istanbul has seen a lot of Russian newcomers lately.

Jared Malsin: There’s a whole world of young people, especially tech workers, young professionals, artists, intellectuals, academics, who are leaving either for political reasons or because they just want to get out.

Ryan Knutson: Jared introduced us to one Russian who recently moved to Turkey, a 25 year old graphic designer named (Rusan). We’re only using his first name. Rusan is opposed to the war. And after it began, he attended anti-war protests in Moscow. And then a few things happened that made him think about leaving. The Russian government started banning certain kinds of speech.

Rusan: Russia relays these censorship laws, where they forbid to call war, war. They have to call it special operations, otherwise it’s considered fake news. And it’s punishable by fee, in jail.

Ryan Knutson: He started worrying he might get drafted.

Rusan: And with me being a relatively healthy young man, it has some dangers.

Ryan Knutson: And the company he worked for.

Rusan: My employer advised all of us heavily to leave the country immediately, to kind of reduce risks.

Ryan Knutson: So in March Rusan decided to leave Russia.

Rusan: So, it was hard because I just rented the place in Moscow. And then this whole thing started and I didn’t really want to leave, but I understand that it’s not really super safe for me and I wasn’t really feeling good. There is no imminent danger, but I still decided to go while I still can to kind of reduce the possible risks. So just pack my shit and left.

Ryan Knutson: Why did you decide to go to Turkey?

Rusan: So I’ve been in Turkey previously a few times, so I’m kind of familiar with the country. I know how it works. I know the currency. I know the prices, so I was feeling like it’s a relatively familiar environment.

Ryan Knutson: It was also an easy flight. Turkey’s one of the only countries in Europe that still allows Russians to fly directly. And when they arrive, unlike in other countries in Europe, they still have access to their money.

Jared Malsin: There are these cash transfer companies that work a lot like a Western Union, basically, where you deposit rubles at an office in Moscow, you wire it to yourself and then you withdraw the money here, I think in dollars. So just like a Western Union and these companies, as far as I know, are not sanctioned. They’re still working in Turkey. I went to one of them recently and I asked if you could still send money from Russia, they said, “Sure, no problem.”

Ryan Knutson: And once they’re in Turkey, there’s a place in Istanbul they can go to get their rubles exchanged.

Jared Malsin: There’s one particular neighborhood called Laleli which is sort of the… It’s an area that’s popular with Russian traders. It’s kind of this historic area for the so-called suitcase trade. It’s like, these guys will like come from Russia, buy stuff, put it in a suitcase, then sell it in Russia. And that’s the one area where you can exchange rubles. You have to go over there to change your rubles, you can’t just do it at any exchange office.

Ryan Knutson: And if you have enough money, it can be relatively easy to get citizenship. Turkey has a program known as the golden passport.

Jared Malsin: Turkey has a citizenship through investment program. It’s one of the least expensive in the world. You have to invest a quarter million dollars in real estate. And if you do that, you can apply for a Turkish passport. And apparently there’s been an uptick in Russians doing that. Both coming from Russia itself and also Russians coming from the West, from Europe and so on, who are concerned about sanctions and concerned about the situation kind of disrupting their lives.

Ryan Knutson: How does the United States and other Western countries feel about what Turkey is doing here? I mean, these are countries that are trying very aggressively to try to punish oligarchs and other Russians, but here Turkey is sort of giving them safe haven.

Jared Malsin: So I think it’s something that Western officials are watching closely, but it’s not something thing that we’ve seen the U.S. or other Western countries directly or publicly criticize Turkey for at this point. And that’s partly because Turkey has done a lot of other things that Washington does want them to do. They’ve helped arm the Ukrainian Armed Forces by selling these armed drones that have been really instrumental and the resistance against the invasion. They’ve even closed the Black Sea to certain Russian warships. So they they’ve taken a really active concrete role in supporting Ukraine. So they’ve done a lot of positive things that right now, it seems like there’s probably more goodwill in Washington for Turkey than there will was before the war.

Ryan Knutson: While Turkey has done things the West likes, it’s also kept an open channel to Russia.

Jared Malsin: At the same time, they’re saying we want to be the conduit to Russia. And if everyone cuts ties with Russia, there’ll be no one to negotiate with them. And Turkey’s saying, well, we can do it.

Ryan Knutson: And that’s exactly what they’ve been doing.

Jared Malsin: They’ve hosted, now, two rounds of peace talks between Ukraine and Russia. The president, Recep Tayyip Erdoğan is really pushing for a peace agreement signed by the Russian and Ukrainian presidents here. So that’s the kind of unique role that they’ve taken in the crisis.

Ryan Knutson: How that unique role is paying off for Turkey, that’s after the break.
One reason Turkey has led in so many Russians and Russian oligarchs is because Turkey’s economy under president Recep Tayyip Erdoğan has not been doing well.

Jared Malsin: Turkey’s economy has undergone a lot of turbulence in the last couple of years, and it’s largely a self-inflicted crisis because Erdoğan’s government has pressured the central bank into cutting interest rates in spite of one of the highest rates of inflation in the world now.

Ryan Knutson: That’s the opposite of how most countries handle extreme inflation. Normally when inflation is really bad, you want to raise interest rates to keep prices down. Erdoğan has said he’s opposed to high interest rates and that he’s trying to encourage economic growth. These low rates have created major problems for Turkey’s economy and it’s caused the value of its currency, the lira, to plummet.

Jared Malsin: Turkey’s been going through a really intense economic crisis since last year in which the currency lost about 45% of its value in just three months. So that was pretty surreal. And everyone is kind of grappling with this kind of unsettling thing where the prices of basic goods change all the time. People’s wages are collapsing in value.

Ryan Knutson: One way to solve this problem is for the country’s central bank to buy lira using foreign currency.

Jared Malsin: So the central bank needs foreign currency, wherever it can get it right now. Because one of the things they’ve been doing to prop up the currency is they’ve been buying lira with the foreign currency that they have right now. They’ve been burning through their foreign reserves, to the tune of billions and billions of dollars since last year, in order to slow this collapse of the lira that’s been going on.

Ryan Knutson: In other words, Turkey needs foreign currency to help prop up the lira and that’s exactly what all these Russians are providing. Jared says, Russians have brought in and estimated $3 billion since the war started.

Jared Malsin: It helps balance out the central bank’s balance sheet. It gives them more ammunition to continue this policy of defending the lira.

Ryan Knutson: How much does all this Russian money help?

Jared Malsin: The newly arrived Russians are helping the economy at the margins. There’s about $3 billion in swaps that float into the Turkish central bank from domestic banks. So that’s the central bank buying currency from the domestic banks and vice versa. And that helps a little bit, but it’s not going to really turn the Turkish economy around. This is one of the largest economies in the world. It’s a member of the G20 and $3 billion is a drop in the bucket compared to the kind of bailout that Turkey’s finances would really need to get out of this crisis. But it doesn’t hurt.

Ryan Knutson: The place that is getting hurt is Russia. Many of the people leaving the country are highly skilled.

Jared Malsin: These are educated people who work in tech, in advertising, in universities, in the art world who are voting with their feet and leaving in huge numbers. You could even argue that it’s a beneficial thing for the West. I mean, these are young professional people for the most part who are pulling their money out of Russia and contributing to a kind of brain drain and saying that they don’t want their money to help fund the war in Ukraine.

Ryan Knutson: That’s exactly why people like Rusan left. He says he didn’t want his money supporting the Russian government.
So you plan to leave Russia for good?

Rusan: Yeah.

Ryan Knutson: You don’t think you’ll ever go back?

Rusan: It’s really hard to make such promises, especially now when the situation changes every day, every hour. But when this war started, obviously Putin kind of stole many lives of Ukrainians, but he also stole a future from Russia. And previously the war, among young people, there were hopes that probably Russia was going to be open border country where we all can live happily, but now you could see that it’s not going to happen.

Ryan Knutson: And for Turkey, Jared says the country is walking a fine line.

Jared Malsin: It’s a fascinating moment in which the Turkish government has managed to craft a policy where they’re both actively siding with Ukraine and with the West and maintaining a channel to Russia. And they’ve really pulled off a balancing act in a way that I think few people expected them to. And they’re now one of the main conduits to Russia, and Turkey’s hoping to win out economically. They’re hoping that capital will move here. They’re hoping that companies will move their operations here from Russia. The Turkish government has been saying if nobody else talks to Russia, who will? They want to be the channel, this open line to Russia that the rest of the West has really closed off.

Ryan Knutson: That’s all for today, Monday, April 11th. The Journal is a co-production of Gimlet and the Wall Street Journal. Additional reporting in this episode by (Elvin Kivel Jim). Thanks for listening. See you tomorrow.