Turkey’s deepening rift with the US

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TURKEY’S president Recep Tayyip Erdogan has embarked upon a risky confrontation with Washington. Following the arrest of the US consulate worker who is a Turkish national for alleged links to Fethullah Gulen and last year’s failed coup, the Americans suspended their visa service in Ankara and Istanbul. Ankara’s reaction was to do precisely the same in Washington, New York, Chicago, Boston, Houston and Los Angeles, even to the extent of using precisely the same wording as the US announcement, save changing the place names.

The risks for Turkey are economic as well as political. When the spat emerged the Turkish lira lost six percent against the dollar. It later recovered. But even allowing the activity of speculators who “shorted” the lira and then took their profit, such a big fall still demonstrates the economic consequences of a full-blown confrontation with the Trump White House.

The remarkable international growth of Turkish manufacturing industry in the last 20 years has seen its integration in global markets. The once rackety banking system has undergone some reform. But even, so the ratings agency Moody last year warned that it was heavily dependent on outside borrowing, the cost of which was rising. The state still controls too large a part of economic activity. Often badly-run, poorly audited and over-staffed State Economic Enterprises continue to be a drain on the tax payer and regular privatization plans are honored in the breach.

Turkey thus needs direct and indirect foreign investment to continue its economic growth, which despite a strong start this year, is starting to stutter. Europe has heavily invested in Turkey but so too, directly and indirectly, are the Americans. A showdown in which an angry president Trump even threatened some level of sanctions, will inflict immediate market and medium-term economic damage.

The political risk is no less obvious. Erdogan now seems every bit as trigger-fingered as Donald Trump. The Turkish president’s new best-friend, Russia’s Vladimir Putin, will be delighted at a new row between Ankara and Washington following Moscow’s coup in selling one of its advanced missile systems to a country that is supposed to be a key member of the US-led NATO alliance. The next target for Erdogan’s ire may be the American presence at the Incirlik airbase outside Adana which the US built as long ago as 1955. Were he to throw out the US military, the satisfaction in the Kremlin would be immense.

There would also be some satisfaction among many Turks because for too long Washington has taken Ankara’s slavish support for granted. In the first two years of the Nazi German invasion of the then-Soviet Union up until the end of 1942, Stalin was deeply concerned that Turkey would succumb to pressure from Berlin and join the Axis power of Germany, Italy and Japan. This would have allowed a Germany-led attack through Armenia and Georgia, to link up with the German thrust south past Stalingrad. But Turkey stayed neutral.

Now however, Erdogan is giving clear signs that he is changing sides, which would involve Turkey’s departure from NATO. But how far ahead has he planned this seismic shift in his country’s political and, no less important, economic position? The region is markedly unstable already. Adding new uncertainty to the current devil’s brew would be a high-risk strategy.


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