Turkey experienced a strong economic recovery after a financial and currency crisis in 2001 that led to severe economic contraction. During 2005, Turkey's real gross domestic product (GDP) grew by 7.4 percent, down somewhat from the 2004 rate of 8.9 percent. For 2006, real GDP growth is forecast to ease to 4.6 percent, reflecting a number of factors that have slowed Turkish economic growth. These include depreciation of the Turkish new lira, a decline in Turkey’s stock market, rising inflation, and the country’s growing current account deficit.

On October 3, 2005, the European Union (EU) began the formal accession framework for Turkey to become a full member of the EU, although this process is likely to take some time. Turkey will be required to undergo further economic reform and liberalization in order to meet EU membership requirements (for more information on Turkey’s accession framework with the EU, see the EU enlargement page ).

Turkey lacks significant domestic energy resources. However, its location makes the country an important energy transit country, with the Bosporus Straits, through which Caspian oil passes en route to European markets; the Baku-Tbilisi-Ceyhan (BTC) Pipeline, the first transnational pipeline that transports Caspian oil without crossing Russian soil; and Turkey’s port of Ceyhan, which is the primary terminal through which Iraq’s northern oil exports pass (for more information, please see the Caspian Sea Brief , the Bosporus Oil Transport Chokepoint Brief , and the Iraq Country Analysis Brief ). In addition, Turkey’s relatively large population and growing economy have made the country a significant regional energy consumer in its own right.