Turkey’s President Recep Tayyip Erdogan has set himself up for a collision course with Washington that could have serious political and economic implications for the relationship between Ankara and the West.
Turkey’s allegiance to NATO can no longer be seen as unconditional as Ankara has become increasingly vocal and open about exploring options that go beyond its Euro-Atlantic partners, and would include deepening its relations with Russia, Iran, and China. Such choices can no longer be treated as populist outbursts of little significance. The growing animosity between Turkey and the US presents a challenge that could transform the Euro-Atlantic security landscape.
The Turkish economy, which was running at 7.4% in the first quarter of 2018, could fall on hard times if Erdogan continues down a belligerent approach towards his relations with both the US and EU.
Turkish economic policy is ambitious, with a clear political objective to emerge as a $2 trillion economy by 2023, reaching $500 billion in exports. Ankara will struggle to meet this objective if it continues testing the limits of its aspiration, vis-a-vis its relationship with the West, which could lead to the collapse of the economy.
Economic collision with Washington escalates
The Turkish Lira reached a new low on August 6 as Washington moved to impose sanctions related to the trial of an American Protestant pastor Andrew Brunson who has been accused of being a terrorist by Erdogan’s government.
Since Jan. 1, the lira has depreciated 27% against the US dollar and 35% against the Euro.
The depreciating currency adds to inflationary pressure; which was at a whopping 16% in July. Erdogan has made it clear that he wants lower interest rates to maintain fast growth. Interest rates in Turkey are currently at 17.75%, while Ankara’s political interference regarding monetary policy has become a major concern, especially following the appointment of Erdogan’s son-in-law, Berat Albayrak, as head the ministry of finance.
The Turkish economy is heavily exposed to dollarised debt, which is becoming increasingly burdensome due to surging interest rates. Debt denominated in reserves currencies amounts to over 50% of Turkey’s GDP, according to the IMF.
There are other vulnerabilities that the Turkish economy faces, picked up both by the IMF and international investment analysts: sizable external financing needs, limited foreign exchange reserves, increased reliance on short-term capital inflows. Sovereign bond yields reached 20% on Monday.
However, Turkey has weathered hard times before. The Turkish private sector has the critical mass to seek creative solutions, including plans to create an industrial zone in the United States, that is, a market in which it exports goods worth just under $12 billion in 2017. But, creativity alone will not suffice.
The dangers stemming from a culture of political bravado present both in Washington and Ankara is that the economy will suffer.
Ankara has made clear that it will not stop importing oil from Iran by November 4, 2018, thereby opening a second front in its confrontation with Washington. Iran is Turkey’s biggest supplier of crude oil, with a 50% share of imports in the first half of 2018.
Furthermore, Turkey is now proposing an independent credit-rating agency to challenge the US-based big three: Moody’s, Standard and Poor’s, and Fitch. Turkey is offering a partnership with Brazil, Russia, India, China, and South Africa (BRICS), which account for 20% of the global economy.
According to statements by the President of the Turkish banking association to the pro-Erdogan government Anadolu Agency, this would challenge the “arbitrariness” of Turkish credit ratings.
The rift between NATO and Turkey is deepening
The confrontation could soon acquire strategic dimensions.
Less than a month after the July 2016 attempted coup, Rear Admiral Cem Gurdeniz gave an interview to Hurriyet in which he cited a “Eurasian camp” in the Turkish military that questioned Turkey’s allegiance to NATO.
According to Gurdeniz, a number of officers saw the alliance between Washington and the Kurdish YPG militia in Syria and ongoing negotiations for the reunification of Cyprus as proof of a Western conspiracy against Turkey. In that interview, there was little reference to the Philadelphia-based cleric, Fethullah Gulen.
The argument made by Gurdeniz was that NATO no longer serves Turkey’s interests. He questioned, for example, whether it was wise for Ankara to participate in NATO’s Ballistic Missile Defense program.
In the meantime, the Turkish military was purging itself of the cream of the crop of the army, navy, and air force, going after the overwhelming majority of NATO officers in Brussels. Ankara was furious after Belgium, the Netherlands, Germany, Greece and the United States moved to grand political asylum rather than extradite career officers wanted by the Turkish authorities.
This eventually led to Ankara obstructing the work of NATO allies at Turkey’s Incirlik Airbase and the forced relocation of Germany’s air force units supporting operations in Syria from Incirlik to Jordan’s al-Asrak Airbase.
In a speech delivered in Brussels in July, Turkey’s Foreign Minister Mevlüt Çavuşoğlu confirmed that Ankara is committed to the purchase of the Russian S-400 missile defence system, which he insists poses no threat to the alliance. One of the concerns for Washington is that the deployment of the Russian missile system in Turkey – which has also bought fifth generation F-35 fighter jets as a NATO member — would expose the aircrafts’ top secret capabilities to Russia.
Ankara sets sights on Chinese cooperation
In a speech delivered in Ankara’s Chinese Embassy on July 28, Brigadier General Chen Qingsong hailed a new era of strategic cooperation, noting that Ankara’s “central corridor strategy” – which is designed to link Europe with Afghanistan, Pakistan, and China – matches Beijing’s One Belt, One Road initiative.
These rival strategic visions have provided some scope for military cooperation, and the two parties are planning to cooperate in sectors such as professional military education, military training, the defence industry, terrorism, intelligence sharing, robotic systems, artificial intelligence and cyberwarfare.
Seeking military cooperation in Russia and China, while scaling up the confrontation with Washington and, often, Brussels, suggests that Turkey does not want to be taken for granted. More often than not, allies take each other for granted.