Governments have been able to overrule the Reserve Bank for 80 years. Why stop now? 
What central banks are doing to safeguard financial stability and why they must proceed with caution 
Why the Bank of England is now more upbeat than the IMF 
Why central banks should stop raising interest rates 
The RBA has kept interest rates on hold. Here's why it'll be cautious from here on 
If the RBA’s right, interest rates may not fall for another year. Here’s why. 
Why central banks are too powerful and have created our inflation crisis 
Sure, the RBA froze interest rates on Tuesday, but there's plenty of pain to come 
The deterioration of trade relations between Russia and Turkey will likely be more detrimental to the Turkish economy. Turkey's Russia related trade income is approximately USD15-16bn (or c.2% of GDP), including exports of goods and services. Tourism would likely take the biggest hit as trade of goods between the two countries is unlikely to completely disappear and exporters could find alternative markets; while it is easier for Russian tourists to switch destination. Moreover, Russians will emotionally be very reluctant to go to Turkey. Last but not least, energy links between the two countries are significant.
"We don't expect Russia to cut natural gas supply to Turkey (accounts for 55% of Turkey's total natural gas imports), a potential 10% price cut from Gazprom is most likely off the table now", says Barclays.
On the Russia side, the largest impact will likely be on food inflation, perhaps reversing the deceleration in food inflation that has been ongoing for eight months. This will have implications for monetary policy. With the increased financial market uncertainty, due to various factors including lower global oil prices, we now forecast that the Bank of Russia (CBR) will remain on hold at its December rate setting meeting and begin cutting its key rate only in Q1 16.
This stands in contrast to the previous forecast that rate cuts could resume in December. Russia growth could be hindered by losses of sales in Turkish markets, for example possible cancellation of the building of nuclear energy facility in Turkey. A slowdown in construction in Russia may take place to the extent that activities of Turkish construction firms in Russia are constrained.
Turkey's exports to Russia, which hovered around 4-5% of the total exports between 2008 and 2014, recently declined to 2.7% (or USD4bn) as of October 2015 on a 12-month cumulative basis. Russia's economic slowdown and RUB devaluation account for a 36% y/y contraction in export volumes during January to October 2015 (compared with the same period last year).
Moreover, Russia makes up half of Turkey's shuttle trade revenues, according to Central Bank of Turkey (CBT) data, which were recorded at around USD9bn in 2014. The shuttle trade revenues already posted a 34% y/y decline in January to September 2015 compared with a year ago, reflecting the economic challenges Russia is facing.
Meanwhile, Russian tourists comprise 12% of the total foreign visitors to Turkey in 2014 (4.5 million), which approximately equates to USD4bn per annum. Last but not least, Turkish construction companies have large exposures to Russia (around 20% share in projects undertaken abroad). According to data compiled by the Turkish Contractors Association (TMB), Turkish construction firms have completed over USD60bn worth of projects since 1988 in Russia.
Turkish companies' revenue totaled USD4bn last year, and USD2.3bn year-to-date from projects in Russia according to TMB. The OECD, however, reports Russia's construction imports from Turkey as USD2.7bn for 2014. Overall, Turkey's income from Russia related trade is USD15-16bn (or c. 2% of GDP).
Russia is the largest provider of natural gas to Turkey with a share of 55% of total Turkish natural gas imports. Turkey also imports oil from Russia, although the dependency on Russia has significantly declined over recent years (from 33% in 2008 to 3.5% in 2014) as a result of diversification efforts. However, the ease of diversification for oil doesn't apply to natural gas, as natural gas infrastructure very much limits the ability to shift from one supplier to another. Turkey has increased its imports of spot LNG as part of diversification efforts, while there are cost and capacity restraints to substitute for natural gas.
"The natural gas is crucial for Turkey not only because it is widely used for heating across country, but also because around half of the electricity production is generated by the natural gas powered stations. While we don't expect Russia to shut natural gas supply to Turkey, it is most likely that a potential 10% price cut from Gazprom is now off the table', added Barclays.
