The Aegean Dispute and Defense Dynamics: A Comprehensive Analysis of Greece-Turkey Rivalry and Its Economic Implications

This analysis is based on a detailed examination of 7 articles on the subject. It aims to provide a broader perspective by bringing together research on the Aegean dispute between Greece and Turkey, military expenditures, and the defense policies of these two countries. The varied perceptions and results come to offer a detailed apprehension regarding the causes of regional tensions and potential solutions.

The Greek-Turkish conflict is fundamentally one of competing claims relating to the division of territory, namely the Aegean Sea. Such conflicts inevitably play an overriding role in determining the respective defense policies and military spending of the two parties involved. That is, the primary issues at stake regard questions of territorial waters, the continental shelf, airspace, and demilitarization of certain islands. Diverse interpretations of international law, especially concerning the United Nations Convention on the Law of the Sea, have exacerbated tensions for an extended period. Greece advocates for addressing these conflicts through established international legal frameworks, whereas Turkey favors negotiations conducted on a bilateral basis. Both nations perceive these conflicts as existential threats and consequently influence their defense strategies in response.

This has led to both Greece and Turkey spending a substantial percentage of their GDP on military expenditure, at times even more than that recommended by NATO. In the case of Turkey, external threats include that of Greece, and there is also the issue of border security. Greece increases its military spending to balance the accruing increase in military build-up in Turkey. However, studies show that defense budget does not result in economic gain in both the nations; military spending, in fact becomes ultimately dependent on the economy when security determinants become dominant drivers.

The possibility of a Greek-Turkish arms race has been quite persistent. A few studies indicated that the defense budgets of the two countries are positively related with each other, thus assuming a symmetric relationship. A few other studies found no support for such a relationship, claiming that military spending is more likely to be determined by general geopolitical factors than by the direct adversary.

The budgets of Greece and Turkey include more than the amounts reflected in the budgets from these respective countries, according to the time series provided by SIPRI. Such discrepancies complicate defense spending even further and outline the necessity of financial transparency in this precise area.

Introduction

Relations between Greece and Turkey have been marked by a web of interaction among historical, legal, and geopolitical disputes. Issues concerning the Aegean Sea lie at the center of the argument setting the two states against each other: territorial waters, airspace, de-militarization of islands, strategic priorities, defense spending, and military modernization programs of the two countries. This article surveys views across the academic spectrum with a view to consider disputes in the Aegean and defense expenditure trends that have wider implications for economic development and regional stability. The understanding of complex interplays between the military, legal, and economic elements calls for an in-depth analysis that yields an integral view of the intricate relationship involved.

Aegean Disputes: Legal and Political Frameworks

Disputes over the Aegean’s territorial water boundaries, the question of the continental shelf, disagreements over air corridors, and sovereignty over a few uninhabited islets form part of the issues at the root of the tensions between Greece and Turkey. Claims put forth by each side hinge, in essence, upon a conflict of competing readings of international law, particularly the United Nations Convention on the Law of the Sea (UNCLOS), of which Greece is a signatory while Turkey is not.

According to the book “Aegean Disputes Between Turkey and Greece: Turkish and Greek Claims and Motivations in the Framework of Legal and Political Perspectives,” Greece claims that every island in the Aegean Sea automatically generates its continental shelf and thus extends its sovereign rights. However, to Turkey, none of such islands generate those rights since this would, in effect, “unfairly” limit the rights of Turkey lying off its coasts.

Further complicating the dispute is the fact that Greece says it will extend its territorial waters from 6 to 12 nautical miles, which UNLOS allows. Turkey considers such a move a direct threat to its sovereignty, even saying it would be a “casus belli” — cause for war. But the chronic problem under this multitude of islands, islets and rocks is a question of who owns what, where each side nurtures counterclaims based on historic treaties and legal interpretations.

Furthermore, Greece claims 10 miles of airspace over 6 miles of territorial waters, which Turkey does not recognize and also claims flight in height should be the same as what is accepted for territorial waters. Added complication arises from the status of the eastern Aegean islands as demilitarized under international pacts like the Treaty of Lausanne (1923) and the Paris Peace Treaty (1947). This is so because whereas Turkey maintains that Greece is in breach of these treaties by militarizing the islands, Greece repeatedly asserts its right to defend these islands from perceived threats emanating from Turkey.

Cases in the Aegean are still unsettled because of deep nationalism, mistrust, and conflicting interpretations on international law, despite many negotiations and treaties, for example, the 1976 Bern Agreement.

Strategic Necessities and Economic Impact

Correspondingly, Greece and Turkey have continuously apportioned a significant portion of their Gross Domestic Product to defense spending, reflective of security concerns derived from their unresolved dispute. Their military spending frequently rises above the recommendations by NATO, an indicator of the significance accorded by either country to maintaining military strength in response to perceived threats. This high level of defense spending has huge implications for their economies, as the engagement of resources is shifted away from important areas like education, health, and infrastructure development in countries with growing populations.

Another important contribution is the paper “Defence Spending and Growth in Turkey 1954–1993: A Causal Analysis” by Christos Kollias. His work provides valuable insight into the causal relationship that may exist between military expenditure and economic growth in Turkey. Utilizing Granger causality tests, the study found no causal relationship between military spending and economic growth during the period 1954–1993. External challenges remain the strong driver of Turkey’s defense responsibilities, which have continuously surpassed the NATO average. These include unresolved issues with Greece; tense relationships with its neighbors, especially Iran, Iraq, and Syria; and domestic conflicts, especially with the Kurdistan Workers’ Party (PKK). The lack of direct economic benefits suggests that Turkey’s military spending is more a product of strategic imperatives rather than economic ones. This would mean that security concerns are more important in driving military policies than economic development.

Along this line, a study by Dritsakis and Adamopoulos (2004) entitled “Defense Spending and Economic Growth: An Empirical Investigation for Greece and Turkey” underscores that both countries consider defense as vital for their national security; albeit it cannot contribute directly to economic growth, defense spending is like a necessary evil. The long-term cointegration between defense expenditures and economic growth is not evident for both Greece and Turkey. This paper identified a one-way Granger-causal relationship from economic growth to defense expenditure and in the both cases showed that military budgets were adjusted according as economic performance demanded but in both countries, the main motive of defense expenditure is external security consideration while the tendency of mutual reinforcement supports theory of an arms race.

Strategic Objectives and Modernization

The military strategies of Greece and Turkey are shaped not only by their bilateral disputes but also by their roles within NATO and broader regional security dynamics. Both nations occupy strategic positions at NATO’s southeastern flank, and their military postures are influenced by their desire to safeguard their national interests while contributing to the alliance’s security objectives.

Both Greece and Turkey have consistently allocated substantial portions of their GDP to defense spending, reflecting the security concerns arising from their rivalry. Their military expenditures often exceed NATO guidelines, indicating the importance each country places on maintaining military readiness in the face of perceived threats. This high level of defense spending has significant implications for their economies, as it diverts resources from other vital sectors such as education, healthcare, and infrastructure development.

In his work, “The Military Balance of Power Between Greece and Turkey: Tactical and Strategic Objectives,” Andre Gerolymatos investigates how past conflicts — in particular, the Turkish invasion of Cyprus in 1974 — have defined the defense policy of both states. Up to the present, both Greece and Turkey have implemented comprehensive military modernization programs, focused primarily on developments in air, naval, and missile systems. These growing pressures are based on a need or urge to balance one another’s military advancements and dominance over the Aegean and greater Eastern Mediterranean.

Both have invested heavily in cutting-edge military hardware, from fighter jets to submarines and missile defense systems. Their dispute over the Aegean has kept them in continuing rivalries, but that was also compounded with the discovery of hydrocarbon deposits in the Eastern Mediterranean, making them further escalate their rivalry. While Turkey follows a defense policy of self-reliance, based on national arms production and modernization, Greece draws more on NATO and the EU for its defense upgrade.

The above efforts also brought out that such costs increase regional instability rather than alleviating long-term conflicts. The military balance is pretty unstable within the region as all of them enter into the ‘vicious cycle’ of military build-ups that burden their economies without solving the political factors of their disputes.

The Arms Race: Evidence and Theoretical Perspectives

The issue of the arms race between Greece and Turkey has been one of the most debated issues in scholarly literature. Several studies have tried to ascertain the exact extent to which military spending by one nation is actually dependent on that of its neighbor. The results vary.

In the study by Kollias and Paleologou, “The Greek-Turkish Rivalry: A Bayesian VAR Approach” (2016), the Bayesian Vector Autoregression model was conducted in an effort to find out if there does exist, between Greece and Turkey, a mutual arms race. What they finally get leads them to reject traditional notions of arms races, according to which increased military spending by one nation would automatically bring responses by the other nation. This means that financial commitments by the two countries are not exactly entirely reactive to nature but a function of a set of wider strategic drivers: alliances, geopolitical risk, and domestic security concerns.

Other studies, however, have supported the hypothesis of the arms race, focusing on the two-way causality between the defense spending in Greece and Turkey, especially by Dritsakis and Adamopoulos in 2004. It is also supported by other studies that actually mention that the military spending in Greece and Turkey is interdependent, where both countries try to react against the perceived threats from each other.

However, even if evidence for the arms race is conflicting, set within a context of long-standing geopolitical rivalries — which might complicate military expenditure — some may contain elements of interdependent spending; such other factors as economic constraints, domestic security threats, and foreign alliances become substantive major forces shaping defense policy development.

Revisiting SIPRI’s Analysis

The paper, entitled “Some Exercises with SIPRI’s Military Expenditure Alpha Data: Same Story for Greece and Turkey?” by Gunluk-Senesen (2016), addresses the consistency of the reporting in military expenditure data by the Stockholm International Peace Research Institute. In other words, SIPRI off-budget military-related activities were checked against the national defense budget numbers in its own military expenditure alpha dataset for both Turkey and Greece.

This compares SIPRI estimates with national budget statistics. The former are therefore judged to provide a broader perspective on the size of the military expenditure actually. Inconsistencies remain marked in the case of Turkey; military expenditures outside the official budget, which include arms acquisitions and paramilitary forces, have not been entirely covered within the national budget estimates. The SIPRI-adjusted data put it in better perspective, reinforcing the bottom line that comes from the need for greater transparency of the defense economics of both countries.

Gunluk-Senesen’s work also raises serious questions about the economic viability of such high-level defense spending by both Greece and Turkey. As long as national security is held at the forefront, high levels of financing for defense may limit the potentials of the countries to liberate resources for other key fields of economic development, namely education, health, and infrastructure.

Toward Stability and Cooperation?

That relation is between Greece and Turkey based on a complex mixture of legal disputes, strategic interests, and military competition. The issue of the Aegean Sea continues to be another core one where well-known positions existed on both sides and were unlikely to be reconciled if serious diplomatic effort were not exerted. At the same time, defense spending became one of the key dimensions of their rivalry, driven by both external security threats and internal strategic determinants.

It might be that military spending is high, but it is very different if there is truly an arms race between Greece and Turkey. General geopolitical factors and budgetary constraints bear down no less on defense policy. The high defense budgets have centrally imposed a burden on the economies of the two countries such that their military postures are problematic in terms of sustainability.

Legal and diplomatic efforts would not have overcome such tensions alone because each country had its deep-seated economic and security underpinning for military spending.

Things can truly open towards a more settled and serene future in the Aegean and Eastern Mediterranean with more cooperation, transparency, and dialogue on how things could be. It presupposes though that both Greece and Turkey should eventually leave behind the historical grievances and head toward the future together with a shared vision of regional stability.

References

• Aegean Disputes Between Turkey and Greece: Turkish and Greek Claims and Motivations in the Framework of Legal and Political Perspectives (n.d.). [Document file].
• Dritsakis, N., & Adamopoulos, A. (2004). Defense spending and economic growth: An empirical investigation for Greece and Turkey. Journal of Policy Modeling, 26(2), 249–264.
• Gerolymatos, A. (2000). The military balance of power between Greece and Turkey: Tactical and strategic objectives. Palgrave Macmillan.
• Gunluk-Senesen, G. (2016). Some exercises with SIPRI’s military expenditure alpha (α) data: Same story for Greece and Turkey? The Economics of Peace and Security Journal, 11(2), 14–19.
• Kollias, C. (1997). Defence spending and growth in Turkey 1954–1993: A causal analysis. Defence and Peace Economics, 8(2), 189–204.
• Kollias, C., & Paleologou, S. M. (2016). The Greek-Turkish rivalry: A Bayesian VAR approach. Economics of Peace and Security Journal, 11(2), 14–19.