The Turkish lira plunged to a new historic low after Erdoğan had won the second round of the presidential election, according to the Spanish daily newspaper La Vanguardia (today the dollar is worth 20 lira, but Western analysts predict that there will be another 40% drop, with the dollar equaling 28 lira). With inflation skyrocketing, Turkey’s president is pursuing a low-rate monetary policy (8.5%), which contradicts the theory of most economists.
Why the Turkish lira is plummeting against the dollar as a result of the election is obviously not difficult to say. The reason is simple – the United States and the world financial institutions (stock markets) under its control reacted critically to the choice made by the Turkish voter in favor of Erdoğan, a conservative (nationalist and Islamist) who has so far not been put under control. Erdoğan’s supporters (e.g., Interior Minister Süleyman Soylu) have also not helped the situation by calling the US and the IMF responsible for all of Turkey’s sins and problems.
At the same time, supporters of Turkey’s large pro-Western capital who backed Erdoğan’s main opponent Kemal Kılıçdaroğlu, leader of the Republican People’s Party, in Istanbul and Ankara, apparently decided to boycott in such a way the results of the election lost by their candidate. Still, while in the first case external forces have the right to independently determine their financial and credit policy with regard to the so far formally allied Turkey, domestic Turkey-based capitalists are not particularly free in their financial manipulations. The law enforcement agencies, at President Erdoğan’s discretion, can start asking harsh questions, and financial speculators and loan sharks can be conservatively punished.
Naturally, such a crackdown will in no way lessen Turkey’s financial and other socio-economic problems, which are also complicated by the aftermath of the devastating earthquake and two rounds of hard-fought election. What should Erdoğan do about credit rates if he won’t lower them yet? Otherwise, an increase in the credit rate can lead to the opposite processes in the social life of ordinary citizens who supported their leader in such difficult times. Simply put, businesses with high lending rates will raise the price of goods, the export opportunities of Turkish products will decrease, Turkey will lose its place in foreign competitive markets, and the population (especially in the areas affected by the earthquake) will find themselves in a dire situation. Turkey’s economy could stagnate in the absence of foreign cheap credit, which is why Erdoğan does not want to squeeze domestic producers.
The President of Turkey, using authoritarian management methods, has effectively obliged his Central Bank to keep the lending rate low. In fact, the Turkish Central Bank is giving away money to its businesses at a token price to invest in any business that generates a relative profit. Such protectionism over domestic entrepreneurship allowed Erdoğan to maintain industrial production and increase exports, resulting in increased foreign exchange earnings. However, big corporations, oriented towards and associated with Europe and the US, remain unhappy with Erdoğan’s policy, because of their lost profits.
In such a disposition, how difficult would it be for the same Western speculators and masters of the security services to initiate a wave of large-scale “spontaneous” acts of disobedience and anti-government protests? And if young people (especially students on summer vacation) start taking to the streets, Erdoğan will have as many problems as one of his predecessors, Adnan Menderes, did.
Menderes, too, first achieved an economic breakthrough, then bet on strengthening his authoritarian power, populism and nationalism, and began to rebel against the Americans and play the game of independence. As a result, the spilled blood of protesting students catalyzed a military coup led by General Cemal Gürsel, followed by the arrest of the prime minister and his foreign affairs, finance and healthcare ministers, accusations of treason and violation of the Constitution, and finally execution.
Yes, times have changed. What Erdoğan’s predecessors (e.g., Suleyman Demirel, Turgut Özal, Necamettin Erbakan) failed to achieve in terms of reducing the influence of the military and intelligence services in Turkish political life (and accordingly, minimizing the CIA’s ability to conduct regular coups and Gladio-style operations in Turkey to remove and neutralize leaders unwanted by Washington), Erdoğan has seemingly succeeded in through reforms, personnel purges and large-scale repression after a failed coup in July 2016. Today, Turkish Defense Minister Hulusi Akar and General Yaşar Güler, the current Chief of the General Staff, would hardly dare to go against Recep Tayyip Erdoğan, while Hakan Fidan, the irreplaceable head of Turkey’s National Intelligence Agency MIT is a man loyal to the president. Still, what should the president do if the balance falls and the opposition brings the masses out to protest?
Naturally, modern Turkey needs serious financial assistance from external partners to stabilize the national currency and force the construction five-year plan in the earthquake zone. Although in his pre-election promises to residents of the disaster-hit areas Erdoğan pledged to restore everything within a year, the scale of destruction makes the well-intentioned wishes of the revered president very difficult to implement.
How much money (both for-profit investment and free aid) does Turkey need today? This is a complicated question (in this author’s opinion, the more the better). At the very least, Erdoğan needs $100 billion. While definitely not small, this is still a doable figure. So, who and which institutions can become donors to the Turkish economy today?
First of all, the rich and fat Europe. The European media, on the one hand, is unabashedly not happy with the success of Erdoğan, whom the French Monde called “unsinkable,” the Swiss Temps – “indestructible,” the German Zeit – “culprit of economic crisis,” etc., while, on the other, it believes that the Turkish choice has buried, at least for now and possibly even forever, Turkey’s hopes for European integration, and Ankara will remain an inconvenient yet important partner for the EU. The Old World believes that Erdoğan will many more times seek monetary assistance from Europe in order to lead the country out of the crisis. However, Turkey under Erdoğan will continue to drift toward a partnership with Russia and China.
What is there to say to European analysts? First, the importance of Turkey as a trading partner is determined by its geography. Second, Turkey over the past two decades has made a major breakthrough in creating a new international transit logistics and energy infrastructure, on which Europe itself will depend to a large extent. Third, Turkey gets from Russia, its advantageous partner, yet another unique megaproject of a gas hub, which will definitely be of interest for the EU countries. Fourth, the EU’s agreement with Azerbaijan on the gas deal, signed by Frau Ursula von der Leyen, with the expectation of some kind of gas compensation for the rejection of Russian gas, again can only take place with transit through Turkey. Fifth, given the ongoing Russian-Ukrainian military-political crisis, the grain deal only survives through the flexible diplomacy of Erdoğan, who, while most inconvenient for the West, still gets Ukrainian bread to Europe. Meanwhile, Sweden, in its efforts to join NATO, obviously not only has to put up with Erdoğan’s conditions regarding the fight against terrorism, but may even have to pay Turkey for some of the political and moral damage the latter has suffered. It is probably not difficult to find other arguments for the strengthening of Turkey’s leverage and influence on the EU. What all of this means is Brussels and other European important capitals (e.g., Berlin, London, Rome, Bern, Madrid, Stockholm) must still contribute their share to the “$100 billion” crisis package for Turkey.
Another important and rather unreliable source of financial support for Turkey could be some resource-rich and financially promising allied countries from the Organization of Turkic States (OTS), in particular, Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan. Baku owes much to Erdoğan for his consistent support in the second Karabakh war. Ilham Aliyev is Recep Erdoğan’s best friend; Azerbaijan was among the first to provide charitable and humanitarian assistance in the disaster zone; Baku has already announced a $100 million project to build housing, educational institutions, clinics and other social infrastructure in the earthquake-hit area in Turkey. But perhaps the OTS countries will come up with new consolidated initiatives for financial and material assistance to Turkey (and that is not one billion dollars).
Important participants in the financial (investment) support of Turkey can be its reliable external partners in the Middle East (and the topic of restoration of Turkish-Syrian relations with the assistance of Russia and Iran can only accelerate such a process on the part of the KSA, the UAE, Bahrain, Qatar and other monarchies of the Persian Gulf), Iran, China and Russia.
Russia has already done too much to strengthen the economic sustainability of modern Turkey (two gas pipelines, possibly already two nuclear power plants – with completion in Mersin and beginning in Sinop, the gas hub project, no opposition to new oil and gas pipelines from Azerbaijan to Turkey, the Black Sea grain deal). Collectively, it’s tens of billions of dollars. Russia’s technological cooperation with China may in the near future consider the Turkish market as an expansion of quality goods. At the same time, if Erdoğan is more loyal to the geopolitical and regional (especially in the post-Soviet space) interests of Russia, Moscow will obviously be ready to find new opportunities and forms of profitable financial lending to friendly Turkey.
For example, why allow foreign observers and peacekeepers under the UN or NATO (OSCE) banner into the Transcaucasia in relation to the settlement of Armenian-Azerbaijani relations over Nagorno-Karabakh, if there is already a Russian peacekeeping contingent (RPC) stationed there? Why would Armenians and Azerbaijanis want to repeat the fate of the Kosovo Serbs and Albanians? Therefore, both Baku and Yerevan, with the agreement of Presidents Putin and Erdoğan, should incline to extend the terms of stay of the RPC in Karabakh and strengthen the geopolitical presence of Russia as the guarantor of security of the region, the two peoples and countries. Similar and other themes persist with regard to the re-activation of new communications in the same region and adjacent Central Asia. Accordingly, Erdoğan’s Turkey’s loyalty to Russia will be rewarded both politically and economically.
To summarize this article, it can be said that, of course, today Russia’s neighbor Turkey is going through a difficult time. But difficulties tend to help find new reserves for development. The same goes for Russia, given the special military operation and the sanctions imposed on it. However, the urgency of the moment leads to new areas for effective cooperation and friendship, refuting the envious hopes of both countries’ mutual detractors.
Aleksandr SVARANTS, PhD in political science, professor, exclusively for the online magazine “New Eastern Outlook.”
