A Transactional Romance: Economic Interdependence and Political Constraints in Turkey-EU Relations.

In the last few weeks of 2025, while all eyes were focused on the Free Trade Agreement deal between India and the European Union, another deal was taking shape - much more quietly - behind closed doors with another major actor of the global south: Turkey.  Indeed, despite everlasting geopolitical disagreements, public clashes, and being seemingly  more apart than ever before, both parties are negotiating for updating and expanding the  1995 customs union to include services and e-commerce. In fact, trade volume and other transactions are reaching new heights each year. This ambivalent relationship between the  EU and Turkey can be portrayed as a « transactional romance ». While the European  Parliament in Strasbourg regularly condemns Turkey for « human-rights violations », the Commission faces the bitter but undeniable reality of needing to cooperate on many  economic and geopolitical topics that we shall illustrate below.  

A marriage haunted by history

These contemporary tensions between European countries and Turkey actually find their roots in the decades following the early steps of the European construction process. Rising disputes over maritime zone delimitations and between local Greek and Turkish Cypriots  led the Turkish government to intervene in the Island in 1974, leading to the separation of  the island into Greek and Turkish territories. To this day, Cyprus remains the single largest  point of blockage in Turkey’s EU adhesion process, as the Turkish government does not  recognize the Republic of Cyprus. Beyond the island's status, other factors have led to the  freeze of the Turkish EU process, as European instances have repeatedly condemned what is  being called « democratic backsliding ». The most recent moment of significant strain was  the jailing of Presidential candidate and Mayor of Istanbul, Ekrem İmamoğlu. 

Allies when convenient, rivals when visible  

However, geopolitical friction extends far beyond domestic politics. This was notably  evident during the Azerbaijan-Armenia conflicts in 2020 and 2023, where Turkey’s massive  military support (notably via Turkish-made Baykar offensive drones) played a key role in  Azerbaijan re-taking Karabakh. Despite this, the European reaction did not go beyond  condemnation. Similarly, Turkey and the EU face disagreements over other conflicts in the  Middle East, most recently in Gaza. Indeed, Turkey vividly condemned human rights  violations in Gaza and accused Israel on multiple occasions of committing genocide, while  keeping close ties with Hamas and hosting Hamas officials in Istanbul and Ankara for  negotiations. On the other hand, the EU has classified Hamas as a terrorist organization  since 2001. Moreover, European countries have faced increasing backlash in the Muslim  world for their perceived ambiguous stance on Israel’s human rights violations.  

The refugee bargain  

Parallel to these security disputes, a major point of political tension arose during the  refugee crisis of the early 2010s. The Syrian regime’s violent internal repression displaced  millions, leading nearly 4 million refugees to seek sanctuary in Turkey and subsequently  exerting unprecedented migratory pressure on the borders of the European Union. Intense  negotiations led to the Refugee Deal of 2016, where Turkey accepted to host these  populations in exchange for 6 billion euros, promised visa-free access for Turkish nationals,  and a reinitiating of the adhesion process. Ten years later, both parties blame each other for  failing to deliver: European politicians accuse Turkey of blackmail over migrants, while  Turkish citizens still lack visa-free access. As of 2026, Turkey and the EU seem  irreconcilable; the divorce appears finalized. Despite all of this, both sides are perpetually  compelled to cooperate in areas ranging from finance and trade to security and energy.  

Too big to ignore  

First of all, Turkey and the European Union remain major trade partners, with bilateral  trade reaching a record high of 210 billion euros in 2025. The trade balance is remarkably  equal, with Turkey exporting 105 billion while importing 100 billion from the EU. Turkey  has also solidified its role as a major automotive hub; Turkish factories produced over 1.05  million cars destined for European consumers last year, supported by massive investments  from Stellantis and Renault. Furthermore, FDIs from Turkey to the EU are rising, reaching  30 billion euros in 2025. Most notably, in 2024, the Turkish manufacturer Arçelik finalized  a nearly 1 billion euro merger to take a 75% stake in Whirlpool’s European operations,  making its subsidiary « Beko Europe » the continent’s largest home appliances  manufacturer.

When Ankara sneezes, Europe catches a cold  

This economic integration is underpinned by critical banking relations, as European banks  hold over 150 billion euros of assets and exposure in Turkish banks, notably via Spain’s  BBVA and France’s BNP Paribas. The best illustration of this interdependence was the  « Black Friday » of August 2018, when BBVA’s and BNP Paribas’ stocks plummeted more  than 3% in one day as the Turkish Lira crashed by 18% against the dollar in one session.  Indeed, when the Lira devaluates, European banks must increase their expected loss  provisions, which reduces their ability to lend in Europe. The European Central Bank was  deeply concerned about a « contagion », fearing that a financial fever in Ankara could stall  the engine of European growth by « locking the brakes » on loans through spiked risk  premiums. This shows how Europe’s financial stability is now partially anchored to the  Turkish Central Bank’s stability.  

Pipelines and power plays 

Beyond finance, the EU and Turkey are « condemned » to collaborate on energy. The urgent  need to diversify providers following the Russian invasion of Ukraine in 2022 has placed  Turkey back at the center of the strategic chessboard. Driven by a need for a Southern Gas  Corridor, Turkey’s infrastructure has become a cornerstone of European energy  independence. This was codified on July 18, 2022, when the EU and Baku signed a  Memorandum to double gas imports by 2027; a deal that inevitably places Turkey as the  pivotal midstream link via its multi-billion euro TANAP pipeline. We can define Turkey as a  Natural Monopoly in this context, as its infrastructure is economically unviable to bypass in  the near future.  

Against this backdrop, other actors in the Mediterranean Basin have sought to break this  infrastructure path dependency. On January 2, 2020, the EastMed Pipeline accords were  signed by Greece, Cyprus, and Israel to bypass Turkish waters. However, this « bypass » is  precisely what stalled the project. Indeed, avoiding Turkey meant an astronomical cost of  €7 billion for a complex subsea pipe. Furthermore, the EU Green Deal targets, aiming to reduce gas consumption by 30% by 2030, rendered a project planned for the post-2030 era  a commercially obsolete risk. Finally, the 2019 Turkish-Libyan Maritime Deal created a  «maritime wall» that turned the project into a legal nightmare. Crucially, Europe’s  demand for energy is highly inelastic; the Union requires a sustainable supply regardless of  political costs. These developments reinforce Turkey’s role as an Energy Hub and a « Price  Maker » capable of leveraging transit fees for political concessions.

An indispensable middleman  

Such geopolitical crises often represent an opportunity for pragmatism to outweigh friction.  The Russia-Ukraine war brought to the fore how Turkey helped the EU avoid a Negative  Supply Shock that would have led to a stagflation crisis. The outbreak of the war led to a  blockade of Ukrainian grain exports; as Ukraine produces 10% of the world’s wheat and  15% of its corn, this could have led to skyrocketing prices. Turkey’s refusal to join Western  sanctions, although controversial, enabled it to act as the mediator of the « Grain Deal » in  2022, reopening the « lungs » of the global food supply. Turkey’s unique position as the only  NATO member with open channels to Vladimir Putin contributed to reducing geopolitical  uncertainty and avoiding a worse exogenous shock for the EU.  

A textbook prisoner’s dilemma  

Ultimately, this relationship has evolved into a masterclass of « Game Theory » and  Strategic Interdependence. Both parties face a « Prisoner’s Dilemma »: despite ideological  disagreements, open confrontation would lead to a worse outcome for both. The best  illustration remains the 2016 Migration Deal. If Turkey « defects » and opens the borders,  the EU faces a political crisis; conversely, if the EU stops paying or imposes sanctions,  Turkey faces economic and social instability it cannot afford amidst its hyper-inflation crisis.  The result is a « Nash Equilibrium »: a state where neither side can change their strategy  without making themselves worse off. They are « locked » into cooperation. 

In summary, Turkey-EU relations have entered a phase of Weaponized Interdependence,  where both parties wield significant leverage. As they have grown into massive trade  partners, Turkey has learned to utilize its control over vital « bottlenecks » as a source of  Bargaining Power. Conversely, the EU utilizes its stewardship of the Customs Union and  financial markets to maintain strategic alignment. Consequently, the relationship has  evolved from an Accession Model toward a Transactional Model governed by « Tit-for-Tat »  dynamics: a framework where cooperation is sustained only as long as it is reciprocated.  

However, the current geopolitical paradigm offers little room for prolonged friction. With  the United States no longer acting as an unwavering ally and China posing a systemic  threat to European industrial independence (all while Turkey faces the risk of being drawn  into the Middle Eastern powder keg), strategic isolation is an unaffordable luxury. To face  tomorrow’s common challenges, both Turkey and the European Union must look beyond  mere transactions and collaborate through a lens of mutual trust and a clear-eyed  recognition of each other’s sovereign interests.

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