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. Last Updated: 07/27/2016

State Threatens to Ban Turkish Builders

The government is considering barring Turkish construction companies from operating in Russia in retaliation for Ankara's refusal to buy gas via Gazprom's $3 billion Blue Stream pipeline, the Energy Ministry said.

"This is one option being considered," a spokesman for the ministry said on condition of anonymity. "Turkey has taken a unilateral step in breaching its agreement with Gazprom and a ban on construction companies in Russia could be a possible consequence of the dispute."

Real estate experts in Moscow said the move would force up the costs of development and harm the economies of both countries.

"It would be very painful for the market," said Yulia Nikulicheva, associate director at Jones Lang LaSalle. "Turkish contractors are some of the major providers of such services in Russia."

Ankara cut imports of Russian gas through the pipeline, which links the two countries under the Black Sea, in March after the two sides failed to agree on how to calculate payments.

Gazprom last month filed suit in the International Arbitration Court against Turkey's state-owned pipeline company Botas for its refusal to buy gas via Blue Stream, and Gazprom's export arm Gazexport said Monday that the company would sue the Turkish government itself if the stand-off is not resolved.

Turkish Energy Minister Hilmi Guler, however, said Tuesday that talks with Gazprom would resume this week and that the issue can be resolved out of court, Itar-Tass reported.

Gazprom said it was still hoping for a resolution to the conflict.

"Gazprom is not involved in the closure of Turkish companies in Russia," company spokesman Igor Plotnikov said. "We count on reaching an agreement with our partners."

The Turkish Embassy in Moscow said in a statement that Turkey and Russia have "broad-based, well-established economic and trade relations" that totaled some $5 billion last year, from which Russia generated a $2.69 billion surplus.

Since Turkish construction companies entered Russia in the late 1980s, they have worked on an estimated $11 billion worth of projects, including shopping centers, offices, apartments, factories, and infrastructure, the embassy said, adding that Turkey has a total of $11 billion invested in Russia and plans to invest more.

"We hope the problems [over the gas deliveries] will be resolved for the mutual understanding and benefit of both countries."

Neither Enka, the biggest Turkish construction company in Russia, nor its retail joint venture Ramstore, nor Alarko, another large Turkish company, would comment on the possible ban.

Enka is the largest commercial office developer in Moscow and has invested some $400 million in the capital.