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On last Friday, Turkish Lira has fallen to a record low against the dollar suffering its worst one-day lost. At the wee hours Turkish lira has traded at the exchange rate of 6.30 Dollar and 7.22 Euro.
“We will not lose the economic war.” Erdogan stated, adding “Turkey will fight economic hitmen just as it fought the coup plotters.”
Erdogan’s pledged economic war is apparently a war waged on U.S ignited with the detention of U.S Pastor Andrew Brunson. Pastor Brunson has been accused by Turkish authorities of having links with terror groups and namely Fethullah Gulen known as the mastermind of 2016 failed coup attempt.
Detention of U.S Pastor Brunson created a snowball effect for Turkey–United States relations. Trump’s demands to release Pastor Brunson has been explicitly rejected by Erdogan in face of economic sanctions.
“They cannot make Turkey back down with sanctions,” Erdogan told Turkish media signalling Turkey will not step back. He declared U.S threat as a wrong step as adding “You exchange your strategic ally in NATO to a preacher.”
Erdogan’s speech has been followed by the U.S decision to impose sanctions on Turkish Justice Abdullah Gul and Interior Minister Suleyman Soylu. White House spokesman Sarah Sanders made the decision public:
“We’ve seen no evidence that Pastor Brunson has done anything wrong, and we believe he’s a victim of unfair and unjust attention by the government of Turkey. At the president’s direction, the Department of the Treasury is sanctioning Turkey’s minister of justice and minister of interior”
The sanctions against aforesaid Ministers should be evaluated regarding their role in the detention of Pastor Brunson.
Turkey opted for a tit-for-tat strategy for respective U. S Ministers. The effects of sanctions on names stayed symbolically however Turkish economy has suffered as Turkish lira plummets under the shadow of deadlocked Turkey-US relations.
Continuing slide of Turkish currency brought Ankara the necessity to ease US tensions. Turkish diplomatic delegation visited Washington on Wednesday. Even though the news on the visit might signalled a Turkish appeasement policy at the first glance, Turkish lira couldn’t recover of its heavy loses respectively.
Escalated tension and the deadlocked talks afterwards seem to attribute Pastor Brunson a symbolic importance beyond the worth of the issue in the first place.
Turkish lira has faced a steep fall each time respective leaders of speaks. Neither the speech of President Erdogan nor the announcement of a new economic model by Turkey’s Finance Minister Berat Albayrak could relieve the markets.
A nasty blow came as Trump takes tariff action. Trump raised the pressure with his Tweets on Friday.
“I have just authorised a doubling of Tariffs on Steel and Aluminium with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminium will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”
Trump administration get into the habit of imposing sanctions as a foreign policy tool. Uncompromising attitude of respective authorities particularly U.S administration deepened the split between the two longstanding NATO allies.
Erdogan’s urge Turkish people to defend their currency found a broad repercussion in media. “If there is anyone who has dollars, euros or gold under the pillow, he should go and convert this at the bank,” Erdogan said.
Whether it can be a curative action to convert the foreign savings of Turkish individuals in the absence of drastic measure can be debatable. However, it is true the troubles relations between two strategic partners caused a mass hysteria on the side of Turkish nation.
Once allies and strategic partners engaged in an eye for an eye contest through which Turkish lira has been melting. Depreciation of Turkish lira against the U.S dollar has been associated to manipulative actions by many progovernment sources. This is because key moments in the decade-long decline of Turkish lira should be re-evaluated prior to the detention of Pastor Brunson.
The topic on the boil is irreducible to a one dimension and should be evaluated beyond the frame of the detention of Pastor Brunson.
Turkish economy counts one of the fastest growing economies with a 2.00 actual GDP Growth in January 2018. Infrasutructe project such as Istanbul’s new airport and Canal Istanbul are vast projects to name a few. The new airport is known to cost nearly 12 billion dollars and Canal Istanbul similarly between $10–20 billion dollars.
Without doubt the vast projects are ambitious ones within the framework of the Istanbul 2023 vision. When it is completed new airport is expected to transport 200 million passengers a year making it the busiest airport in the Word. Respectively, Erdogan calls 28 miles Canal Project linking the Black Sea to the Sea of Marmara cannot be compared to the Panama or Suez canals.
So how these magnificent projects might have turned to be a burden rather than an asset amid the heavy turbulence Turkish lira has been going through? Simply put it is due to foreign borrowing. $245 billion foreign debt in an equivalent value of one-third of Turkey’s overall economy takes a turn for worse as Turkish lira depreciates.
Whether the sharp depreciation ongoing is due to the speculations can be debatable. Prior to the detention of U.S Pastor Brunson Turkish lira has been crystallized. Therefore, the current Lira depreciation might have beforehand signalled its undesired outcome of today. Independently of Pastor Brunson crisis, a clear plan to establish relief for investors and an advanced democracy are proposed as sole remedies for many experts to damp down dollar against Turkish lira in the long run.
Prior to Pastor Brunson’s imprisonment Turkey-US relations went into a tailspin due to the U.S support for Kurdish forces in Syria and Turkey’s failed demands to extradite Gulen hold responsible for the coup attempt.
Turkey-Russia affiliation and plans to purchase S-400 missile defence systems from Russia furthermore stretched so tight ties between two allies. U.S interpreted Turkey-Russia affiliation and debated missiles as a threat to compromise NATO systems.
It is to say Turkey-US relations have always been troubled. For that reason, that strategic partnership of two countries are named as a “troubled partnership” in 1970s.It is non-negligible both countries has the historical experience to deal with the process they are going through. Turkey hosts Incirlik air base used by U.S forces at critical importance for U.S involvement in Middle East.
Referring to their partnership since the 1950s, Turkish part continue to stress the U.S. runs the risk of losing Turkey” as an ally.
“The entire Turkish public is against U.S. policies that disregard Turkey’s legitimate security demands. Threats, sanctions and bullying against Turkey will not work,”
stated Ibrahim Kalın, Erdogan’s spokesman Ibrahim Kalin.
In an atmosphere of uncertainty, another important date markets are waiting is August 15. It was put forward by Financial Times that Wednesday is mentioned as the release date for Pastor Brunson at the ultimatum sent by U.S.
As it is understood from the language chosen by respective leaders it is a remote possibility. A consensus should be formed for the sake of national interests. At the end of the day, it may not be as easy as it seems to subordinate strategic interests to the language of threats.
