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President Erdogan’s re-election in Turkey is a monumental failure of Western pressure. Because of it, it’s time to take our eyes off Ukraine and look at a different theater of World War III with equal if not bigger implications.

Turkey is another in a now long string of failed Economic Hitman operations cum Color Revolutions. The last big one to fail was in Belarus in 2020 following the re-election of Alexander Lukashenko.

Turkey has been the subject of a seven-year campaign to be rid of Erdogan, beginning with the 2016 coup attempt organized out of the NATO airbase at Incerlik. Turkey’s been through a persistent five-year brutal devaluation of its currency, the lira, seeing it drop from less than 2 versus the US dollar to nearly 21 this week in the wake of Erdogan’s victory.

I’ve covered this story in detail (see my Turkey archives here) being one of the lone voices out there trying to parse Erdogan’s monetary policy actions which I’ve argued sought to de-dollarize Turkey’s foreign exchange liabilities and forge an independent path.

Erdogan, wily as a fox, has been deftly playing the US and Russia/China off each other for years, positioning Turkey simultaneously as a member of NATO, the gatekeeper to the Black Sea, and the financial and trade crossroads linking East and West.

The West’s campaign to overthrow President Assad in Syria beginning in 2011 couldn’t have gone forward without Erdogan’s help. He went along with it very willingly having been promised Turkey claiming Idlib province in the West and taking most of the north. Vladimir Putin accepting Assad’s invitation for assistance in fighting ISIS and Erdogan’s pets in Idlib (Hay’at Tahrir al-Sham or HTS) began the unraveling of those plans.

…click on the above link to read the rest…

Greece To Help Tripoli ‘Block Turkish Ships’ As Libyan War Spills Into Mediterranean

December 14, 2019

Greece To Help Tripoli ‘Block Turkish Ships’ As Libyan War Spills Into Mediterranean

The years-long war for post-Gaddafi Libya now threatens to spill over into the Mediterranean as Turkey and Greece line up on either side of the conflict. Each side is now threatening the others’ allied ships in southern waters after a controversial maritime deal expanded Turkish claims off Libya’s coast.

On Thursday Benghazi-based General Kalifa Haftar declared his Libyan National Army has begun its “final decisive battle” to wrest control of the capital of Tripoli from the UN-backed Government of National Accord (GNA).

“Zero hour has come for the broad and total assault expected by every free and honest Libyan,” Haftar said in a televised address, reports Al Jazeera. “Today, we announce the decisive battle and the advancement towards the heart of the capital to set it free… advance now our heroes.” Beginning eight months ago Haftar launched a siege of Tripoli, which has been stalled in recent months.

*Drilling vessel Yavuz is escorted by a Turkish navy frigate in the Eastern Mediterranean off Cyprus, via Daily Sabah.*

Turkey has been the closest military supporter to Tripoli’s GNA, even recently signing a controversial maritime agreement, after providing heavy weaponry to repel Haftar’s assault. Last summer the LNA even attacked Turkish naval ships, in what’s an ongoing declared war with any Turkish vessel or aircraft. This “proxy war” element is now threatening to involve Greece.

Days ago Erdogan confirmed his country signed a bilateral memorandum, finalized on Nov. 27, which would allow Turkish forces to enter Libyan territory or waters at the request of the GNA authorities.

“With this new agreement between Turkey and Libya, we can hold joint exploration operations in these exclusive economic zones that we determined,” Erdogan said. The agreement established a continental shelf and Exclusive Economic Zone (EEZ) boundary line of 18.6 nautical miles between the two countries.

…click on the above link to read the rest of the article…

Turkey: Alarming Crackdown on Journalists, Desperate Appeal to UN

September 19, 2019

Turkey: Alarming Crackdown on Journalists, Desperate Appeal to UN

The Working Group on Arbitrary Detention was held on September 13. Sadly, no one at the meeting addressed the persecution of journalists in Turkey — not José Guevara Bermúdez, Chair-Rapporteur of the Working Group, nor Béla Szombati, who represented the European Union, nor any other participant.
Amnesty International recently tagged Turkey the “world’s largest prison for journalists.”
The United Nations Human Rights Council, if it wishes to change its image from that of a laughing stock, should put at the top of its agenda calling Ankara to task. Meanwhile, however, Erdoğan’s violations of freedom of speech need to be exposed daily and loudly condemned — not only by members of the UN and the media, but by any and all allies of Turkey — and freedom of expression — in the West.

International human-rights and press-freedom organizations recently appealed to the United Nations to take action against the ongoing abuse of journalists by the government of Turkish President Recep Tayyip Erdoğan.

In a letter to the UN Human Rights Council (UNHRC) on September 3, eighteen organizations — led by the group ARTICLE 19, which promotes freedom of expression — called on “all Member and Observer States committed to media freedom, democracy and the rule of law” to “speak out and address the Turkish government’s repressive campaign against freedom of expression” in the forum of the Working Group on Arbitrary Detention during the UNHRC’s 42nd regular session.

The letter reads, in part:

“The right to hold and express dissenting opinions and to access information has been systematically undermined by the Turkish government in an intensive crackdown on journalists and independent media, academics, civil society, oppositional voices and the judiciary. Since 2016, the human rights situation in Turkey has steeply declined, facilitated by the misuse of sweeping emergency powers and the concentration of executive power.

…click on the above link to read the rest of the article…

Turkey Exposes Central Bank Incompetence

September 15, 2019

Turkey Exposes Central Bank Incompetence

Last year I asked whether Turkey would be “City Zero in Global Contagion.” That question was based on the crisis unfolding in the Turkish lira which materially threatened a number of major European banks, especially those in Italy.

This week highlighted something really interesting for me that, I think, sets in motion a similar thesis about Turkey but for much different reasons. The sovereign debt crisis will come about purely because of a failure of confidence in institutions.

Competence is the key to staying at the top of human dominance hierarchies, not force. Those built on competence tend to last and those built on force are, at best, meta-stable for a specific period of time.

The difference between what’s happening in Turkey with President Erdogan taking control of the Turkish central bank and the end of Mario Draghi’s term heading the ECB cuts to the heart of this issue of competence versus force.

The Draghi Put-on

Draghi has projected this aura of the ever-in-control competent manager of Europe’s finances while steadfastly holding to policy ideas which have done nothing but destroy capital formation within the Eurozone.

His last statement and policy decision this week are emblematic of his inflexibility both intellectually and politically. And it’s clear that he’s trapped at whatever negative-bound he’s got in his head, handing off a Europe on the verge of collapse to his sister-in-tyranny, Christine Lagarde.

Draghi just fired his “Cheap Money Bazooka” on his way out the door to kick the can down the road another few months.
He’s setting the stage for the full-blown monetization and collapse of the European banking system under his successor, former IMF chief Christine Lagarde. What hasn’t worked for Europe for the past 11 years was just introduced again as the only way to save the situation.

…click on the above link to read the rest of the article…

Turkey’s Erdogan Vows To “Significantly” Cut Rates As Trump Set To Roll Out Sanctions Over S-400 Purchase

July 15, 2019

Turkey’s Erdogan Vows To “Significantly” Cut Rates As Trump Set To Roll Out Sanctions Over S-400 Purchase

Lately not a week passes without some dismal news involving Turkey hitting the tape, and yet the lira continues to levitate, blissfully ignorant of the storm clouds headed for Ankara, levitating on hopes the Fed will cut rates and sprinkle golden showers on emerging markets. However, in light of the two latest developments, the Mrs Watanabe sellers of USDTRY may finally pay attention.

On Sunday, Turkish President Recep Tayyip Erdogan – who last weekend fired the head of the central bank for not cutting rates fast enough, and who has now become the de facto head of the CBRT – promised “significantly lower interest rates by the end of the year“, Bloomberg reported.

“We aim to reduce inflation to one digit by the end of this year,” Erdogan told journalists in Istanbul, according to the state-run Anadolu news agency. “As we achieve this, we will achieve our year-end interest rate target as well.” Of course, should interest rates drop to one digit, the USDTRY will promptly collapse to two, as the rate differential between the lira and the dollar collapses, removing the main incentive to go long the lira at a time when the Turkish economy remains in crisis.

Having founded the economic school of Erdoganomics, according to which inflation can be achieved only by lowering rates, the Turkish president and his US counterpart have quickly become kindered spirits when it comes to monetary policy. And just as Trump heaps pressure and insults on Fed Chair Powell, Erdogan has frequently accused the central bank of keeping borrowing costs too high. Last month, he complained that while the Fed was moving toward a rate cut, Turkey’s policy rate of 24% “is unacceptable.”

…click on the above link to read the rest of the article…

The Perfect Financial Storm

March 31, 2019

The Perfect Financial Storm

COMMENT: Martin,

Have read the two blogs on the Emerging Markets. Hit like a cold bucket of ice water. Knew something was coming from all your writings and the EMC, but Wow. Right in front of us.

Here is an observation, a thought:
Emerging Markets could turn out to be the Sub-Prime of this new era.
On the periphery. A Liquidity crises. Unplanned for, because Unexpected.

REPLY: This is going to be an extremely interesting WEC. Whatever could go wrong is going wrong in the world. It is becoming the perfect financial storm as we head into the bottom of the Economic Confidence Model. We have politicians only looking at saving their own power who are blind to the implications of their actions on a global scale. There are even rumors now that Recep Tayyip Erdoğan will claim some manipulation of the election by another country in a vast conspiracy. If he loses, he will likely refuse to leave office.

Turkey’s Debt Crisis Deepens, Erdogan Bails out Banks His Way

January 16, 2019

Turkey’s Debt Crisis Deepens, Erdogan Bails out Banks His Way

Shifting bad consumer & business debts from banks to the public, but the way this bank bailout got packaged is pretty nifty.

Turkish President Recep Tayyip Erdoğan has launched a raft of measures ostensibly designed to reanimate the economy, including offering direct financial support for people with credit-card debt. The plan will enable Turkey’s maxed-out consumers to go to the biggest state-run lender, Ziraat Bank, and apply for debt rescheduling at low rates of interest. “Any retail client from any bank can apply,” Erdogan said.

Credit-card debt is a major problem. Since 2010 consumer credit has increased almost five-fold on the back of low interest rates (at least in certain foreign currencies), government incentives, and loose loan standards. By August 2018, when these pillars supporting Erdogan’s debt-fueled economic miracle began to buckle, outstanding non-housing consumer debt, peaked at 532 billion Turkish lira ($97 billion at today’s exchange rate, chart via Trading Economics):

About half of this amount is credit card debt. About one-third of the credit-card debt was considered to be non performing. A good portion of this debt is denominated in foreign currency, such as the euro or dollar, to get access to the low interest rates available in those currencies. And this foreign-currency debt is now, after the lira’s exchange rate has fallen, very hard to service. In other words, the government’s scheme is likely to have plenty of takers.

“The debts of citizens who are having repayment problems will be collected under a single umbrella, via Ziraat Bank,” Erdogan said. “They will pay off their debt with a loan from Ziraat and will pay it back according to the level of their monthly earnings.”

…click on the above link to read the rest of the article…

Turkish Lira Tumbles As Tanks Amass Along Syrian Border

January 11, 2019

Turkish Lira Tumbles As Tanks Amass Along Syrian Border

After an already painful start for the Turkish lira this year, shedding more than 3.5% of its value against the dollar during the first three days of 2019 when it flash crashed after Mrs Watanabe puked on the carry trade after Apple shockingly guided lower, and after early this week the lira slid lower amid renewed tensions between the US and Turkey following hopes that the feuding NATO members might finally be setting aside their differences, dashed after Bolton’s snub heard round the world by President Erdogan, the lira is now tumbling on fears of further military escalation in Syria.

On Friday Turkey’s Anadolu news agency reported Turkey has deployed tanks on the border along Syria’s Idlib province. Turkey’s defense minister further announced preparations for an invasion of Syrian Kurdish enclaves east of the Euphrates “continues intensely”.

“We have Manbij, and the east of Euphrates ahead. Necessary planning was made regarding this. Our preparation continues intensely,” Defense Minister Hulusi Akar said while inspecting troops near the border with Syria, according to Anadolu.

The uncertainty and fears of another major flare-up following last year’s ‘Operation Olive Branch’ sent the lira diving to session lows, and is approaching levels last seen at the start of November.

Turkey has billed its plans as a “counter terror” op, with the defense minister noting dubiously, “We have no problems with our Kurdish brothers, Arab brothers in Syria, Turkmens and other ethnic and religious groups. Our only targets are terrorists Daesh and PKK/YPG.”

Turkey has for months stated plans to eradicate the presence of the Kurdish YPG, which it considers a terror extension of the outlawed PKK, from near Turkey’s borders.

The question is how will the US (and Israel/Iran/Russia) respond once Turkey follows though with the action so many had been expecting and invades, again.

Russian South Stream 2.0 Comes Out of the Shadows

November 27, 2018

Russian South Stream 2.0 Comes Out of the Shadows

Russia and Turkey have announced that the two countries have reached significant progress in reviving the November 2014-shut down South Stream gas pipeline intended to land Russian gas across the Black Sea. The project is the part of the already secured open tender contracts for purchases of gas signed between Gazprom, Bulgaria, Serbia, Hungary, Slovakia and Austria.

Source: Kommersant

The new Black Sea gas pipeline Turkish Stream will run under sea from Krasnodar to a landing hubv just west of Istanbul. On November 19, presidents Vladimir Putin and Recep Tayyip Erdogan met in Istanbul to announce the completion of pipeline’s off-shore section.

Pipeline capacity is for 30 bullion cubic meters, bcm, although initial phase capacity will be closer to 17bcm (the first pipe). Currently, Gazprom supplies the above volume (30bcm) to Turkey (ca 16bcm), Bulgaria, Serbia, Slovakia, Hungary and Austria. Turkish market has been supplied via Blue Stream pipeline, and the other countries are supplied via Ukraine.

Based on reports from Russia’s Kommersant (https://www.kommersant.ru/doc/3806415), Gazprom has managed to achieve two feats:

Gazprom has completed laying two (not one) pipes for Turkish Stream, one intended to supply Turkey and another, to supply Southern Europe,
Gazprom secured tenders for purchases of gas from all EU states to be connected to the South Stream project (Bulgaria’s open tender closes in December 2018, but all other countries have already signed onto supply agreements).

Significantly, the tenders were secured in compliance with the EU Energy Directives. This means that Gazprom latest venture has addressed the main cause of the EU’s original objections to the same pipeline prior to 2014. In the case of open tenders process, Gazprom used exactly the same scheme to secure capacity orders for its Nord Stream 2 pipeline to Germany, Czech Republic and Slovakia back in 2017.

…click on the above link to read the rest of the article…

Forget Nordstream 2, Turkstream is the Prize

November 24, 2018

Forget Nordstream 2, Turkstream is the Prize

While the Trump Administration still thinks it can play enough games to derail the Nordstream 2 pipeline via sanctions and threats, the impotence of its position geopolitically was on display the other day as the final pipe of the first train of the Turkstream pipeline entered the waters of the Black Sea.

The pipe was sanctioned by Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan who shared a public stage and held bilateral talks afterwards. I think it is important for everyone to watch the response to Putin’s speech in its entirety. Because it highlights just how far Russian/Turkish relations have come since the November 24th, 2015 incident where Turkey shot down a Russian SU-24 over Syria.

When you contrast this event with the strained and uninspired interactions between Erdogan and President Trump you realize that the world is moving forward despite the seeming power of the United States to derail events.

And Turkey is the key player in the region, geographically, culturally and politically. Erdogan and Putin know this. And they also know that Turkey being the transit corridor of energy for Eastern Europe opens those countries up to economic and political power they haven’t enjoyed in a long time.

The first train of Turkstream will serve Turkey directly. Over the next couple of years the second train will be built which will serve as a jumping off point for bringing gas to Eastern and Southern Europe.

Countries like Bulgaria, Hungary, Italy, Greece, Serbia and Slovakia are lining up for access to Turkstream’s energy. This, again, is in stark contrast to the insanely expensive Southern Transport Corridor (STC) pipeline set to bring one-third the amount of gas to Italy at five times the initial cost.

…click on the above link to read the rest of the article…

The Khashoggi Extortion Fiasco:

October 16, 2018

The Khashoggi Extortion Fiasco:

A mystifying diplomatic escalation ensued following the disappearance of Saudi Washington Post columnist, Jamal Khashoggi, after visiting the Saudi Consulate in Istanbul, Turkey.

Why would the United States of America make such a fuss over the disappearance of a non-American citizen? Why would America turn a blind eye to the Saudi killing of thousands of Yemeni civilians and the starving of millions others and then make “threats” against Saudi Arabia after one single Saudi journalist disappeared and has presumably been murdered by Saudi authorities?

And since when did Erdogan worry about human rights? After all, this is the same man whose army has committed countless atrocities against Syria and Turkish Kurds.

And the repercussions did not stop at the official level. Even Western business leaders are cancelling trade deals with Saudi Arabia and asking its government for explanations. https://www.cbsnews.com/news/business-leaders-cancel-saudi-events-ask-crown-prince-mohammed-bin-salman-for-info-on-jamal-khashoggi-disappearance/

Let us not forget that America does not only ignore the war on Yemen, but it also assists the Saudis and supplies them with arms and intelligence. What’s behind the sudden U-turn? Why would the President of the United States of America be personally involved in this? https://www.telegraph.co.uk/news/2018/10/11/donald-trump-demands-answers-saudi-arabia-missing-journalistjamalkhashoggi/

Furthermore, Saudi Arabia has a long history of persecuting dissidents and suppressing any opposition. So once again, why was Khashoggi singled out in this instance to become such a person of interest to the USA? His status as a journalist and columnist for Washington Post certainly does not answer this question.

And back to Erdogan, the man who reached the cliff-edge with America on a number of strategic and trade issues, why would he be concerned about the “murder” of a foreign journalist allegedly at the hand of his own government? According to the story, the “murder” was committed at the Saudi Consulate, and technically, Turkey has no jurisdiction within this diplomatic precinct albeit it is within Turkey.

…click on the above link to read the rest of the article…

US-Saudi Relations Enter Unchartered Waters

October 8, 2018

US-Saudi Relations Enter Unchartered Waters

The disappearance of the Saudi dissident Jamal Khashoggi in mysterious circumstances while on a visit to his country’s consulate in Istanbul last Tuesday still remains unexplained. The plot is thickening by the day. The latest reports suggest that he may not even be alive.

The Istanbul Prosecutor has ordered an investigation. President Recep Erdogan has called Khashoggi a “journalist and friend”. Turkey has a troubled relationship with Saudi Arabia, which has a complicated history dating back to the Ottoman era and is entangled with Erdogan’s brand of Islamism. A serious diplomatic rupture may ensue, depending on the outcome of the Turkish investigation.

So far, the Khashoggi affair has been a matter between Saudi Arabia and Turkey. But Khashoggi has influential backers in the Washington Beltway too. A chorus of condemnation of the Saudi regime is building up to a crescendo in the US, portraying Khashoggi as a human rights activist meeting a tragic end.

The US takes a selective approach to human rights. Which way will it act? In the present civil war conditions in the US, President Trump’s opponents will use the Khashoggi issue to draw attention to his erratic behavior – wildly swinging from obsequiousness to the Saudi ruler to rank contempt.

But, there is also a lavishly funded Saudi lobby, which can pull strings among the American elites. Trump chose Riyadh for his visit abroad and son-in-law Jared Koshner is reputed to be a close confidante of Saudi Crown Prince Mohammed bin Salman.

Yet, Trump fired away a stream of sardonic tweets in recent days casting aspersions on Riyadh. Saudi Arabia becomes a celebrated case of the unpredictability of US foreign policies.

…click on the above link to read the rest of the article…

Erdogan Vows To Abandon Dollar, “Doesn’t Need Permission” To Buy Russian Missiles

September 2, 2018

Erdogan Vows To Abandon Dollar, “Doesn’t Need Permission” To Buy Russian Missiles

Another day, another angry rant by Turkish President Recep Tayyip Erdogan aimed at the US, who on Sunday vowed Ankara would abandon the dollar in transactions with Russia and other countries, accusing the US of behaving like “wild wolves.”

“America behaves like wild wolves. Don’t believe them,” Erdogan told a business forum during the Turkey-Kyrgyzstan Business Forum in Kyrgyzstan, according to AFP.

Erdogan also echoed the dedollarization call from Russia’s deputy foreign minister Serkey Ryabkov, saying said that Turkey country was in negotiations with Russia over non-dollar trade.

“Using the dollar only damages us. We will not give up. We will be victorious,” Erdogan told the meeting, attended by Kyrgyz and Turkish businessmen as well as government officials.

On August 24, Moscow said it would respond to Washington’s latest sanctions by accelerating efforts to abandon the American currency in trade transactions: “The time has come when we need to go from words to actions, and get rid of the dollar as a means of mutual settlements, and look for other alternatives,” said Russia’s Deputy Foreign Minister Ryabkov.

“Thank God, this is happening, and we will speed up this work,” Ryabkov said, explaining the move would come in addition to other “retaliatory measures” as a response to a growing list of US sanctions.

Erdogan also said that Ankara doesn’t need permission from anyone to purchase Russian S-400 missile systems, just days after the US once again warned the country against buying the hotly discussed air-defense system.

“We have made S-400 deal with Russia. Someone is offended by it. We don’t need permission from anybody,” the Turkish leader said in Kyrgyzstan.

…click on the above link to read the rest of the article…

Lira Plummets After Turkish Central Bank Deputy Governor Quits

August 30, 2018

Lira Plummets After Turkish Central Bank Deputy Governor Quits

It was already an ugly day for the Turkish Lira, which earlier in the day accelerated its drop for the 4th consecutive session, sending the USDTRY to the highest level since August 14 when the currency crashed over the weekend to the lowest level on record.

Today’s drop was initially precipitated after Erdogan said on Thursday that Turkey “is not without alternatives” and warning that it won’t “back down over threats.”

In his latest attack on the US, Erdogan said that “some do not hesitate openly stating the fact that they are trying to drive us into a corner through the economy. There are surely structural issues in the Turkish economy. We know these issues and are working to fix them.”

Alas, as we noted earlier, judging by the plunge in the lira, the market did not seem convinced by Erdogan’s latest rant, and proceeded to slide further after closing last night down 3.0% at 6.469 which was weaker than where it was on the Friday 3 weeks ago (6.4323) when the panic spread across the market. The only softer closing level was on the following Monday (6.884) but that actually included a big intra-day rally back from the Asian wides. Yesterday was the third day in a row the Lira has weakened (post domestic holidays) while Turkey’s 5yr CDS was also +14.4bps wider and touched 500bps again (recent high was 535.0 on Aug 13).

Meanwhile, the latest attempts by Turkish authorities to shore up the lira in mid-August that led to a three-day rally in the aftermath, now seem to be losing potency now. And the most recent effort, yesterday’s reintroduction of borrowing limits for banks yesterday – an unwind of what took place just two weeks ago – is proving ineffective.

…click on the above link to read the rest of the article…

The Rumors are that Turkey Will Default

August 30, 2018

The Rumors are that Turkey Will Default

The rumors running around is that Turkey will default as Erdogan decides to move to align with Iran and Russia and leave the West behind. While there have been speculative attacks on the Turkish economy and US tariffs and sanctions have been detrimental, the initial causes of this growing monetary problem are really all internal. Erdogan’s management of the economy has been a disaster. He has pretended to borrow too much money from foreign investors to stimulate the economy. It is true that the total debt rose to over $450 billion, about half of GDP. Turkish exports and the current account deficit rose to $50 billion. This has led to rapid inflation that has been at least an annual rate of nearly 7% on average during the last ten years. In truth, Erdogan was really trying to build the economy to fulfill his dream of reestablishing the Ottoman Empire and emerge as at least the dominant power over the Middle East.

Unfortunately, Erdogan is stubborn and he really has no way out. He wants his cake and consumes it all at the same time. The rumors running around the trading desks are that he will pull the plug and turn his back on the West. By doing so, he can then justify defaulting on the debt of the “corrupt” West who wants to subjugate Turkey. That will be the justification spin of things. It looks like this will remain volatile into October.

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