The US has made the waters murkier. President Recep Tayyip Erdogan of Turkey will have to countenance a deepening economic crisis that will almost certainly compound the persistent ethnic cauldron and the fragile political stability.
The latest ferment was ignited on Friday when Donald Trump announced that he was doubling import tariffs on Turkish steel and aluminium, a move that has jolted the currency’s freefall and rattled the financial markets to their foundations.
At the core of the kerfuffle between Washington and Ankara is the imprisonment in Turkey of the US pastor, Andrew Brunson, on charges of espionage and terror-related activity linked to a failed coup attempt in the country two years ago. President Trump made an understatement when he said, “Our relations with Turkey are not good at this time!” It is a measure of the economic blight that even before Trump’s tweet, the lira had plunged 14 per cent as investors rushed for the exit route as it were, choosing to buy the dollar, yen and other assets that are regarded as safe havens during times of financial market volatility.
The lira has been under sustained pressure on foreign exchanges, dropping by almost 50 per cent against the dollar in the past 12 months and hitting a succession of record lows this week. Inflation reached an annual rate of 15.9 per cent in July ~ more than five times the average rate for wealthy nations ~ and government borrowing in foreign currencies has risen to a dangerously high level. Palpably enough, President Erdogan has his back to the wall, not the least because the US President has struck at a sensitive juncture of the country’s economic and political narrative.
Having secured sweeping new powers in presidential elections a couple of months back, he desperately tried to restore confidence in the currency on Friday in a speech that had an overdose of nationalist rhetoric. He offered little to calm the international currency markets, however. Without going into details quite yet, he raised the spectre of shadowy forces influencing the currency. He urged the Turks to use “gold under the pillow” to support the lira, saying: “Don’t forget, if they have their dollars, we have our people, our God.”
The dispute could have broader implications for geopolitics and the situation in Syria and the Middle East, if Turkey moves closer to Russia as a result of the change in equation between Ankara and Washington. The Erdogan government has implored President Trump to return to the negotiating table ~ “This can and should be resolved through dialogue and cooperation.” Mr Trump’s move is bound to have an impact on banking in Europe generally.
None of the conditions that have influenced the hike in US tariffs are applicable to Turkey. Profound are the geostrategic and economic implications ~ altogether a testament to Mr Trump’s reckless foreign policy.