- The market response to the embargo imposed by Türkiye on exports to Israel mitigated its impact on the Israeli economy. The embargo reduced Israeli exports to Türkiye in 2024 by approximately US$ 1 billion compared to their level in 2023.
During the Swords of Iron War, Türkiye imposed an embargo on trade with Israel starting in April-May 2024. This analysis presents the limited implications of the Turkish embargo on the Israeli economy and considers it a case study for the importance of trade openness as a tool for mitigating the effects of limited-scale sanctions.
Economic Relations between Israel and Türkiye before the Turkish Embargo
In the last decade and a half, Türkiye has been a significant source of imports for Israel.[1] In 2023, the volume of Turkish goods totaled approximately US$5.3 billion, which is about 6.3 percent of Israel's total imports.[2] The value of imports purchased directly from Türkiye was about $4.6 billion, and goods produced in Türkiye worth at least $660 million were purchased through third countries. Türkiye was an important source for Israel's imports of construction and production inputs, with about half of the total imports of cement, gypsum, and their products, and about one-fifth of the total imports of iron and steel coming from Türkiye. Israel also imported plastic and its products, vehicles, and mechanical and electronic machinery extensively from Türkiye (Table 1 and Figure 1). Additionally, Türkiye benefited from approximately 824,000 visits by Israeli tourists in 2022 (Turkish Statistical Institute).
Conversely, exports to Türkiye were limited in scope, amounting to approximately US$1.5 billion in 2023, which is only about 2.5 percent of Israel's total goods exports. The main export products to Türkiye were chemical products, plastic and its products, and metal and steel scrap (Table 1). Exports of business services to Türkiye and the number of tourists from Türkiye were negligible. Therefore, Israel had a significant trade deficit in goods and services with Türkiye, and the potential impact of the Turkish embargo policy was mainly reflected in the reduction of the supply of goods and products in the Israeli economy.
The Turkish Embargo and Its Impact on the Israeli Economy
Israeli-Turkish trade continued without interruption in late 2023 and the first quarter of 2024, despite the deterioration in diplomatic relations between the countries, which was reflected in the cessation of direct flights and a decline in Israeli tourism to Türkiye in late 2023 and 2024.[3] In April 2024, Türkiye announced an export ban to Israel on 54 goods, mostly construction and production inputs such as cement and its products, and metal and steel products. From early May 2024, Türkiye banned all trade with Israel. In response to the Turkish embargo, Israel acted to assist Israeli exporters and importers in finding alternative trade partners and easing import procedures.
Following the imposition of the embargo, Israeli exports to Türkiye ceased from May 2024, reducing total Israeli exports to Türkiye in 2024 as a whole by approximately $1 billion compared to 2023. The cessation of exports to Türkiye contributed to an overall decline in chemical product exports during 2024, while its impact on other industries was marginal. Following the imposition of the embargo, the volume of imports of Turkish products decreased from about $550 million per month at the beginning of 2024 to about $100–200 million per month by the end of the year, with a significant decline in most major product categories (Table 1 and Figure 1). Turkish data even indicate a complete halt in exports to Israel, in line with Turkish policy (compare the red and blue lines in Figure 1).
The main explanation for the discrepancy between Israeli and Turkish data is trade through third economies, including Turkish exports to the Palestinian Authority, which is part of the Israeli customs area (Rows 3 and 4 in Table 1 and the black line in Figure 1). Turkish exports to the Palestinian Authority began to decline in October-November following a Turkish demand for a Palestinian certification that the goods indeed reached the Palestinian market. The effectiveness of this measure was also partial, leading to a decline, but not a complete cessation, of Turkish goods imports to Israel in the last quarter of 2024.
The embargo was expected to lead to higher import prices for Turkish products imported indirectly and substitutes for Turkish products. Import prices (in dollars) of production inputs, which were the focus of imports from Türkiye, and prices of construction materials (in shekels) in the residential construction input index did rise, but the increase was small (0.6–0.7 percentage points). These modest price increases were offset by price declines of other imported goods, and the overall import price index even decreased slightly in the third quarter (Table 1, Panel B).
Türkiye paid special attention to the export of construction inputs to Israel and banned their export to Israel as early as April 2024, possibly due to their importance for security-related construction. Although imports of stone and cement products and metal products from Türkiye continued after the imposition of the embargo (Table 1, Rows 5 and 6), cement imports from Türkiye ceased entirely. The ban on cement sales to Israel was perceived as particularly sensitive, as about 45 percent of the cement used in Israel was imported from Türkiye.[4] However, Israel found alternative sources for cement imports, and the quantity and value of cement imports even increased in the second half of the year, after declining in the first half of 2024 due to the slowdown in the construction sector. Despite the substitution of import sources, which typically involves higher importation costs, there was no noticeable increase in cement prices or in the residential construction input price index (Table 1, Panel C). The increase in cement imports without a rise in its prices illustrates the limited effectiveness of the embargo imposed on Israel. This conclusion is also supported by the fact that in most product categories where Turkish imports had a significant market share in Israel, the total value of imports (from all countries) did not decrease after the embargo.
Conclusions
The Turkish embargo’s impact on imports and prices of imports to Israel was limited. This illustrates the importance of functioning markets and liberal trade policies in creating economic security, as well as the difficulty of individual countries to use trade restrictions on tradable goods as a political tool. Some of the exports from Türkiye to Israel, banned by the Turkish government, were reported as exports to other markets, including the Palestinian market. At the same time, Israel found substitutes for Turkish products the imports of which were halted. Finding alternative sources for cement imports without an increase in cement prices, even though most cement imports came from Türkiye before the embargo, is a notable example of the limited impact of the embargo. In this case, economic openness and the diversification of import sources—rather than isolation and domestic production—provided a solution to trade restrictions on tradable goods with a well-functioning international market.
[1] For more information on Israel's trade with Türkiye, see: Bank of Israel (2023), “A Peninsular Economy? Tightening Trade and Tourism Relations between Israel and Mideast Countries”, Bank of Israel Annual Report for 2022, pp. 54–59.
[2] Including trade in defense or energy products that the Central Bureau of Statistics does not report on its partners.
[3] The number of Israeli tourist visits to Türkiye fell to about 81,000 in 2024, a contraction of about 90 percent compared to 2022 (Turkish Statistical Institute).
[4] The share of cement imported from Türkiye out of total imports—72 percent—is calculated in dollar value, while the share of cement produced in Israel is calculated by weight: in 2023, about 6.7 million tons of cement were imported to Israel, and according to publications by the sole local producer, it produced about 4.6 million tons of cement per year.