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Interview with Danish Ambassador to Turkey, Mr. Danny Annan

TPQ conducted a very informative interview with Danish Ambassador to Turkey, Mr. Danny Annan. Among the topics of discussion, post-pandemic economics, Turkish – Danish relations, recent developments in Europe and Ukraine as well as the green energy held a significant part.

 

Aybars: The first question we would like to ask is about Danish-Turkish relations in a broader context. How have the relations between these two countries changed through the last ten years? And what is your vision concerning the future of the bilateral relations between Türkiye and Denmark? We would like to ask what way a change occurred in Turkish relations in the last ten years? And what is your vision for the future of this bilateral relation between two countries?

Mr. Ambassador: First of all, I would like to stress that I believe Danish-Turkish relations are quite good. We have broad based cooperation. We have high level political dialogue, frequent meetings between Turkish ministers and Danish ministers. So, we have an opportunity to discuss a wide range of issues between our two countries. Then, obviously we are allies in NATO. I think , day by day is becoming increasingly important that we are a member of the 30-country club - hopefully soon a 32-member club with Sweden and Finland. Then, trade is quite advanced between our two countries. 

Also, we have people to people contact. We have, for a country like Denmark, a sizeable Danish Turkish community. Around 60-65,000 people of Turkish origin live in Denmark. A lot of them today have good positions and good education. They have integrated well into Danish society. We also see a lot of Danish tourists who favor Türkiye. It's a beautiful country. I've traveled all around the country myself and each and every corner is really nice. So, in 2019 before Covid19 hit, we had 335,000 Danish tourists coming in Türkiye which is quite a lot taking into consideration that the Danish population is 5.8 million. Then in 2020 due to Covid19, it fell to 45,000. Last year it was under 110,000. And this year, I do hope and believe that we will get much closer to the 335,000 again. So, we’ll get back to a more normal, situation when it comes to Danish visitors to Türkiye. We also have a Danish community living in Türkiye, primarily around Alanya. A lot of Danes have bought property in that region and obviously they're happy to be there. 

Then if we look at what kind of cooperation we have and what differs today from ten years ago -that is primarily when it comes to cooperation- we have a very close cooperation in energy. We work with the Turkish government, the Ministry of Energy, on renewable energy resources, primarily focusing on district heating and cooling, but also wind power. What we have also seen is an increase in cooperation when it comes to migration. Friday, I visited the Turkish western border to Greece, I saw some of the migration challenges there. Four months ago, I was in Van, visiting the eastern border to Iran, seeing some of the challenges there. So, Denmark is bilaterally funding a few projects here in Türkiye. We are working with three different international organizations/international NGOs, and we have committed, I think, 7.5 million euros for these activities. So that's some of the issues we're working together. 

And then, if we look into the future, we hope that there will obviously be closer cooperation. We hope that we will also see progress on EU Türkiye relations. But that of course also requires some steps by the government. If we look at the trade, a lot of Danish companies, sees a lot of challenges regarding supply chain issues. East Asia container prices have gone up, basically from $2,000 per container to $12,000 for a container. And sometimes it's not even the price that causes the challenge, it's also the ability to actually get the product that you want to buy in East Asia. So, as we have seen in the recent years, and I'm pretty convinced that it will continue in the years to come, we'll see more Danish companies looking closer to countries which are closer to Europe. And here, Türkiye is obviously very interesting as a country for production purposes. And in my dialogue with Danish companies, I always say that I think Türkiye is a good option. There are also challenges when it comes to foreign direct investment in Türkiye. But they should give it a chance, look at it. It’s one step away from the internal market of the EU. Basically, from Istanbul to Greece or Bulgaria is less than 3 hours with a truck. I believe that there are also good opportunities for what we call nearshoring. So no longer offshoring to the EU, but nearshoring to the EU. 

Aybars: So, our next question is more about the trade relations between these two countries. How devastating the Coronavirus pandemic was on Turkish-Danish trade relations? Are we still lagging behind pre-covered numbers or have any of the incentives proven fruitful? 

Mr. Ambassador: To answer the question in very short: no, we are not lagging behind. On the contrary, trade between our two countries is booming. But if we look at 2019 to 20, when Covid hit in 20, Danish exports to Türkiye went down 12.5 percent and Türkiye's exports to Denmark dropped 2 percent. So Türkiye’s was at least a minimal drop. But then, if you look at 2020 to 21, Danish exports to Türkiye increased 19.3 percent. So, we're already way above the losses from the year before. And Türkiye's exports to Denmark increased 23.9 percent. So, by 2021, everything was forgotten about Covid-19 when it came to bilateral trade between our two countries. And, if you look at the first three months of 2022, this has just continued,  with much higher speed. Danish exports in the first three months of this year compared to 2021’s first three months is up 30.5 percent. And I don't think we see a lot of markets where suddenly from one year to the other, you have an increase of 30 percent in your exports to that country. And Türkiye also did very well with their exports - Türkiye exports to Denmark is up 24.7 percent. So, we are looking at quite a substantial and positive development in trade between our two countries. Today, Türkiye is our 23rd biggest market globally. So, of course, a market of a certain size is an interest for Danish companies. Our total trade is around 4 billion euro. It’s 2 billion to 2 billion in both ways. So, it's a very balanced trade. That is something that Türkiye always stresses, that Türkiye would like to have a balanced trade. It's less important for Denmark. We basically just want to be able to get the products we need because we would just sell it somewhere else. So, if we buy something from Türkiye, we are not unhappy if Türkiye doesn't buy a lot from us, because what we buy from Türkiye is somehow a component for a bigger machine and then we just sell it to the U.S. or somewhere else. So that's not a big problem for us. When I just arrived in Türkiye, two years ago in October 2020, there was a meeting between the Danish Minister of Foreign Affairs and the Turkish Minister of Trade, and it was what we call a JETCO meeting. And the two ministers agreed that we should increase our trade to 5 billion euro. And I thought that was a little bit ambitious, but we're getting there and we're getting there much faster than anybody had imagined. And I would say that obviously primarily the Turkish and Danish companies should be applauded for that because they're the ones making the link between our two economies. 

Ece: What are the major products that are being exported between these two markets? 

Mr. Ambassador: A lot of pharmaceuticals, medical devices, a lot of renewable energy being exported from Denmark; and from Türkiye, a lot of textiles, a lot of garments are being exported. We have a lot of Danish companies very interested in the textile industry in Türkiye and I've been in the Ministry of Foreign Affairs for 26 years. And in all those 26 years, as a young diplomat and now as an ambassador, one of my primary tasks has always been to help Danish companies to sell their products in the countries I've worked in. Now I have an equally important task of helping Danish companies to buy products in the countries that I've been posted to. And that is because of this whole supply chain challenge that as I talked about before, that it is difficult for Danish companies and global companies to get microchips or even the spring collection for garment companies or for clothing companies. Everything is just now difficult to get. So, a task for us is also to help Danish companies buy what they need. So last year in November, for the first time, we had an incoming Danish business delegation to Türkiye not to sell their products but to find Turkish companies that could produce their products or companies which they could buy their products from. That's where we see a tremendous growth in financial tradeoffs, specifically Turkish exports to Denmark. 

And the thing is, when you talk about the clothing industry, Denmark, as I said, is a country of 5.8 million but we do have some international clothing companies. So, if you sell to Denmark, it's not only for potentially 5.8 million people living in Denmark; it's basically for, I was about to say Europe, but it's even wider, it's for a global audience. I'm sure you know, brands like Jack and Jones, a fashion company. And they're here, they are in Azerbaijan, they are in China. They're all over the globe. So that's why they're very happy to be able to get the products and get them on time. And that's where the time element and the closeness of Türkiye to the EU plays an important role. 

But it's not only trade. We also see substantial Danish investments in Türkiye. By 2020, we have invested 6 billion euro in Türkiye, and those investments have led to around 47,000 Turks working for Danish subsidiaries. Also, I would say, there are 700 Danish companies operating in Türkiye and they are a significant job creator in Türkiye. Most of them are smaller companies, I have to say. But I would say if you  look at the companies, maybe the 20 largest companies in Denmark, they are all here. So, it is an important market, that's for sure. Priority sectors for Denmark, as I mentioned, are renewable energy and energy efficiency. That is equally important. One thing is that you can generate renewable energy, but equally good is energy efficiency. So, you use less energy than you would have done otherwise. Pharmaceuticals, medical devices and then textiles, I would say, are the three main sectors in our cooperation. 

Ece: You’ve talked about challenges for foreign direct investments in Türkiye and now the Danish companies in Türkiye. What are those challenges? Do Danish companies encounter those as well or are there bilateral agreements that make it easier for them? 

Mr. Ambassador: No, there's no financial agreement. I would say what could be a challenge is the Turkish legislation saying that if you have foreign currency income as an export company, then you would need to sell 40 percent of your foreign currency. If a foreign company needs to sell 40 percent of their euro or dollar to the central bank at the central bank rate. If they don't need the Turkish lira and if there is a risk of a fast depreciation -as we have seen many times over the last two years I've been here, every time the interest rates go down from like 19 to now 14, every time there has been a cut in the interest rate, immediately you see the Turkish lira go down- and for a company operating on a smaller profit margin, if they suddenly lose 10 percent of their gains because of depreciation of the currency, then I would say the country they are operating in becomes, with that kind of a risk, less interesting.

In the renewable energy sector, there are also some challenges with feed-in tariffs, like the price and the currency being paid for the renewable energy you produce. Again, it's linked to the currency; right now, the feed-in tariffs are in local currency, and I understand why. But again, if you have agreed on a price and suddenly there's a depreciation and you lose 20 percent of what you thought was your profit, it is not very attractive. 

And another issue is for some sectors there is a Turkish requirement for localization, local production. And in some industries, and for some companies, it just doesn't make sense to have local production, even for a market of the size of Türkiye with 83-84 million people. So, that's some of the challenges I see for not only Danish companies, but for international companies operating here. 

And if you look at the investment, you know the foreign direct investment in Türkiye, I think from 2007 to 2021, foreign direct investment in Türkiye is down 33 percent. So, something is wrong. Even in Denmark, we have an extremely high tax level, but I think Denmark has been ranked as number one business friendly country in the world. And that is because it's easy, it's predictable, and stable. And I think that's what all companies want. They don't want to see their deposit in the bank lose 20 percent value overnight. It's just not feasible. 

Aybars: So, in a sense it is not as: "low Turkish lira will attract more investors". Rather, it works in another way, like creating a more unstable environment?

Mr. Ambassador: I assume that is the strategy of the government now, that the government is trying to make the Turkish economy more export oriented. And it sounds appealing, but it's just not black and white. Because there's also a black side to the depreciation of the Turkish lira, and that is obviously things become more expensive in Turkish society. I read those minimum wages have been increased 30 percent. So now it's 5500 Turkish lira, 330 dollar. And that of course will cost the companies as well. So, it's not only beneficial for them, but they also need to pay their employees a higher salary, which is of course fully understandable because everything becomes more expensive in Türkiye. There is then equally, if not even more, costly the energy prices. Some of the heavy industry in Türkiye uses a lot of gas, a lot of energy, and that is also increasing, especially if your own currency is going down and the dollar is going up. And since the dollar has strengthened a lot, energy will be so much more expensive. 

So, weakening your own currency to a certain extent is good, but it also definitely has negative elements to it such as salaries and energy… But also, a lot of Turkish companies are not producing everything they need themselves. They need support components for their production. So yeah, it's not fully beneficial for trying to make the system more export orientated. 

Aybars: After discussing the economic relations such as trade, maybe we can talk about some of the political problems we now face.  For instance, what does Denmark thinks about the Turkish position in the Russian-Ukrainian conflict right now  in the context of NATO? What are the points of divergence, if any, and convergence for these two countries’ policies? 

Mr. Ambassador: First of all, I think some of the things that Türkiye is doing are very important. So far not successful, unfortunately, but I think that Turkish efforts to facilitate a political solution between Russia and Ukraine is very positive. Already back in March there was a meeting in Antalya, Antalya Diplomacy Forum, between Sergey Lavrov and Dmytro Kuleba which was a positive attempt. And then there was a meeting here in Istanbul about a month later. It is positive that Türkiye is trying to facilitate a dialogue between Russia and Ukraine. 

It's also very positive of Türkiye when we look at Turkish efforts at Mariupol, for the need for an evacuation out of Mariupol. It's also very positive that Türkiye is trying to find a solution to the millions of tons of grain stock in corn silos in Ukraine. They are trying to find a solution so it can be transported out of the Black Sea. There's a food corridor to be opened where Russians will not use it to enter the territorial waters of Ukraine, that is very positive. 

On the other hand, I think a lot of countries in Europe would also have liked to see Türkiye being more tough on Russia, maybe even join a lot of the international communities’ sanctions on Russia. Having said that, I of course also fully understand the challenges Türkiye is facing when it comes to this conflict and to Russia. That is both from a security point of view, from an energy point of view, but also from an economic point of view. I think the most important thing is, now that Türkiye has not joined the sanctions on Russia, that Türkiye is not misusing the sanctions to increase its own trade with Russia. I think that's very important, yes. 

Aybars: Let's talk a bit more on Ukraine, if you would like. Considering the recent development regarding Ukraine’s accession to the EU -like their recent acquisition of a candidate status- do you believe that the membership process to the Union might be accelerated? Will the European Union pursue a more accepting, faster way for the process of Ukraine? Also, do you think Türkiye's membership, which has been a kind of debated topic for the last 30 years, can also benefit from this acceleration in the enlargement of the European Union? 

Mr. Ambassador: First of all, Denmark fully supports Ukraine’s European aspirations and we also supported Ukraine getting a candidate status. But it's also really important to understand that the EU is operating with objective criteria for membership and Ukraine needs to fulfill these requirements. They need to implement the so-called “acquis”, which basically means the existing EU rules have to be implemented into the Ukrainian legislative system. Ukraine needs to live up to certain standards. I'm sure you've heard about the Copenhagen criteria: rule of law, democracy and all that. So, for Ukraine, I hope it's going to be a short process, but I think history shows that it is normally a longer process for countries to live up to “the acquis”, but also for some countries, the Copenhagen criteria. As for Türkiye, each country is evaluated on an individual basis. So now that Ukraine has candidate status doesn't mean that Türkiye’s process is going to go faster or slower. Türkiye will progress at the speed where we see improvement in its relations with the EU. And there are some elements in the Copenhagen criteria where there needs to be some developments. There are some more general reform requirements we need to see before the process can really move forward. 

Aybars: Now, maybe we can talk about green transformation and discuss related topics. Can you briefly talk about the green transformation policies of Denmark and how successful are these policies? Do you believe these policies will further assist attempts to decrease the dependency on Russian energy of Europe? 

Mr. Ambassador: I would like to start from 50 years ago, because 50 years ago, in 1972, Denmark was 92 percent dependent on energy imports. Now, in 2022, 80 percent of all the electricity consumed in Denmark is from renewable energy. So, we have seen a tremendous shift in our whole energy mix and production. 

Now, with the Paris agreement, and Turkish ratification of it last year in October, we all talk about reducing our CO2 emissions and everyone asks, what can we do to reduce our CO2 emissions? Denmark has been down that road for many years from 1990 to 2019 and we have reduced our CO2 emissions by 36 percent. And since 1997, it has gone down every year. So, we are on a very positive track. We see it go down each and every year. For 2030, we have a very ambitious target, but I'm convinced that we will be able to reach it. Our ambition is that we should be down 70 percent with our CO2 emissions and be completely carbon neutral by 2050. But how do we do it? We have wind power; we have all sorts of renewable energy resources. 

Before I get into more details on that, I think it's very important, and especially to a Turkish audience, to stress that, for Denmark, we have reduced our CO2 emissions by 36 percent but at the same time, we have had quite significant economic growth in Denmark. So just because you go green doesn't mean that you lose jobs, or you lose economic growth. And if we look at the sectors individually, we have four times higher job creation in the green sector compared to the overall economy. So, it is actually a very good opportunity to increase economic growth and increase job creation. Of course, some people are going to lose their jobs, but others will gain a job. And I would go as fast to say, I assume more people would gain a job if the Turkish economy became greener.

So, going forward, as I said, approximately 80 percent of Denmark’s electricity today is from renewable energy. But we are going through a complete transformation of the Danish economy and Danish society. We have, now, a goal of no more natural gas by 2030. There are still houses in Denmark, not a lot but still, that are heated with natural gas. By 2030, we need to find other solutions for them. And that would be electricity. Electricity for so called heat pumps that will heat the houses, but by using electricity. And if that is electricity from a renewable energy resource, nobody will cause any pollution. And even more importantly, there will be no need for importing, for example, Russian gas so, it's a win-win. 

The Danish government has, two years ago, decided on the most ambitious construction project in the history of Denmark. We are investing 34 billion euro in creating an artificial island in the sea between Denmark and the UK, a so-called “Energy Island”. We will have another one in the Baltic Sea. By 2030, we will be able to generate electricity from those two islands for 5 million households. We are 1.6, 1.7, maybe 1.8 households, depending on how many are in the household; we will be able to generate more energy than the whole of Denmark needs. And you have to remember what I also said before; electricity will become an increasingly important energy resource, not only for light bulbs in your house, but for cars, for heating, and in the near future, for aviation, for shipping, for trucks. So, the whole economy is going green. 

Have you heard about Power-to-X, green hydrogen? So, for a normal car, you would plug in, and you would get electricity from the grid. But for an airplane, for a container ship, or for a big truck, it's not enough to put the plug in and get the electricity. It needs a more substantial energy resource. So, as I said, 5 million households, it's way more than we in Denmark need. So, a lot of this excess electricity would be used, converted into what is called green hydrogen or Power-to-X (p-to-x). This will be done by a chemical process or a physical process. I'm not into the details, but you will basically, as I understand it, make a kind of liquid energy, but through renewable energy from wind power, solar power. And then you can use that for airplanes, for trucks and for shipping. And this will make our economies go green. And this is, as I said, the most ambitious project Denmark has ever started. A few months ago, we had a meeting in Denmark, where prime ministers from Germany, Netherlands, Belgium all came, plus the other countries that will directly benefit from our production of energy. And this is the way forward. And this, as I said, 5 million households, it’s only the beginning. This is 2030. By 2050, we will have 10,000 windmills in North Sea and the Baltic Sea. And it's going to create so much energy that it's going to make the climate better.

Also, the government, in April this year, decided that we should get independence from Russian energy very fast. So, the government decided that by 2030, we would need to have quadrupled the energy we get from wind power and from solar energy. We don’t have a lot of solar energy, but we still have a little bit of sunshine.

And just to show the urgency of it; Gazprom, the Russian company, cut gas supplies to Denmark on 1 June because we refused to pay in rubles. But so far, it's not a big issue for Denmark. And I would say for each day that goes by, it's less of a problem because we have access to other energy resources in Denmark. There are several different electricity suppliers. And if you enter a contract with one particular company, you're guaranteed that all the electricity you get out of your contact is from renewable energy. And that is absolutely fantastic. When I have a contract with a company, when I turn on the switch, turn on the oven, or turn on anything in my house, I know I'm not polluting. And that's a very nice thing to know. 

Aybars: So perfect numbers. Exactly. And maybe here we can ask about your suggestions to the Turkish decision makers in order to adopt similar substantial changes and transformation in Türkiye as well. And what lessons should Türkiye take from the Danish success? 

Mr. Ambassador: I think the most important lesson you can learn from Denmark is the fact that while you can have a reduction in CO2 emissions, you can still have economic growth and high job creation. I think that is, in short, the most important lesson that Denmark can show other countries; that it is possible. But not only that, Türkiye is spending more and more money because energy is becoming more and more expensive. So, hard earned hard currency is being spent on buying fossil fuels from Russia, from Iran, from Azerbaijan, and that hard currency could be spent, I would say much more wisely, maybe not today, but hopefully in the future on investments in Türkiye. I have to say, every time I go to Izmir, I always have one big smile, because basically on each and every hilltop you see a windmill. And driving back from Edirne yesterday, to Istanbul, I also saw several wind farms. And what made me particularly happy was when I saw one of the windmills with the name of a Danish company. They are supplying a lot of windmills also for the Turkish market.

If Türkiye is serious, and I do believe that Türkiye is serious about this, with the ratification of the Paris Agreement; if Türkiye wants to have zero CO2 emissions by 2053, then Türkiye needs to get started now with its reductions. We have dialogue with Türkiye. Two months ago, the Danish climate ambassador came to Türkiye. We had an interesting meeting with the Deputy Minister for Energy. They co-hosted a conference in Istanbul talking about the way forward and cooperation between Denmark and Türkiye on renewable energy and more broadly on climate change, what we can do together. There are, of course, the people who refuse that climate change is manmade, but I think it's clear to everybody that something is definitely wrong. We saw it last year in Türkiye with extraordinary forest fires and a few weeks later floods on the Black Sea coast and lack of rain last year. Türkiye has also been very dependent on hydropower. The electricity generated from hydro plants went down. So Türkiye had to import even more Russian gas. 

Honestly, I think if you want to be a successful country in the future, you need to do the green transition today rather than tomorrow. Because this is the future not only for the economy, but also basically for the planet. We all share that. We need to bring those CO2 emissions down. Otherwise, it's just going to be more costly for all of us. Climate adaptation is going to be a big burden on the economies. It's going to create social unrest, it's going to cause economic crisis, it's going to cause an even bigger influx of climate refugees. Thisis going to be a big thing in the future. We already have passed 100 million on a global scale of refugees and internally displaced people. But that will only be the beginning. Certainly, parts of the world will no longer be able to sustain the population they have. So, we better get started, and rather now than later. 

Ece: Where do you think Türkiye should start this transition? Through education or with incentives? 

Mr. Ambassador: Türkiye has already started. When it comes to wind power, you already have a very strong industry, also sub supplying to bigger wind power companies. Like in Izmir. I think actually in Manisa, there's a Danish company. They make the blades for the windmills and as I said, a lot of sub suppliers. So, Türkiye is already there. 

If I should give one piece of advice, I would say that Türkiye should maybe be less strict on local production because I think that could create more interest from other countries and also for other investors. I'm even aware of Danish investors who would like to look more seriously at Türkiye. But one of the things they are concerned about is the fact that the feed-in tariff, as I mentioned before, is in local currency, and with all the uncertainty about the value of your investment. But there's a huge potential for renewable energy. As a country with, before Covid, tens of millions of tourists coming, they do also appreciate a nice clean environment. So, I think that's important.

Aybars: Our last question again is about this topic. What potential do you see in the energy cooperation between Türkiye and Denmark? 

Mr. Ambassador: We already have a good cooperation. Since 2017, Denmark and Türkiye have worked together. The Turkish Ministry of Energy has worked with the Danish Ministry of Energy, focusing on district heating and cooling. It is basically instead of each and every household having their own energy resource for heating the house, you make a grid where the whole neighborhood is connected. For example, in the Izmir area, there's a lot of thermal heating, underground heating, if you can use that as an energy resource and heat the whole neighborhood it's cheaper for the people, it's better for the state because you don't need to use hard currency to buy gas for heating up the houses. It's better for the environment, you just need the investment. And there's a certain potential for district heating and cooling in Türkiye that has been proven in a report I've seen. So, we're not talking only about thermal heating. You also have big industrial areas and a lot of the heat from the industrial production is going straight out of the factory. If you can catch that heat, put it into the grid, then you can heat your houses as well. And it's already happening in some of the places in Türkiye, but the potential is much higher for this heating and cooling. 

Then two years later in 2019, we started to work together on offshore winds. But I think today Türkiye is most likely more inclined to continue developing its onshore wind rather than offshore wind. Because it’s cheaper and because there's still plenty of land in Türkiye. So, that you can place the windmills on land where it doesn't really disturb people living around -just like the Izmir example, each and every hilltop you see a windmill. Denmark, it's more difficult. We are a smaller country, so you have the windmills closer to people. So, we have decided, not only because of this but also for the wind condition, just to place huge parks into the sea. So, if you ever fly to Denmark, when you basically leave Germany and go into the sea, suddenly you will start seeing huge parks of windmills and in the future and it's just going to be so much more. And I love it, I really love it that we will be able to transform our economy and contribute. But it's very important. 

One of the reasons why Denmark has cooperation with Türkiye and several other countries -not a lot of countries, we don't have that many resources in the Ministry of Energy, but we do have cooperation with some countries and Türkiye is one of them- it's because when you look at global CO2 emissions, Denmark is, if I don't remember wrong, 0.2 percent. So even if we go completely green, it's not really going to have an impact on the climate. So, we need to share our best practices with other countries. And here, of course, Türkiye is a big economy; we're also working with China, India, Indonesia, and several other countries, so we can share our experience, so we can have a bigger positive impact on climate change. 

The statements of interviewees do not reflect the official positions of TPQ.

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