- Trump’s trade war is driving Turkey into the arms of Iran and Qatar.
- Russia and China won’t mind that at all.
- What does the US gain from all this?
- Trump might get that preacher back.
- And, er … that’s it.
LONDON – Late on Thursday night, the White House threatened further economic sanctions against Turkey if it fails to release detained American pastor Andrew Brunson.
Brunson has been under house arrest for almost two years in Turkey for his alleged links to a banned Turkish political movement. Efforts to free him are at the heart of the current economic and diplomatic spat between the US and Turkey.
The Turkish lira fell nearly 5% on Friday in reaction to the fresh US sanctions. US President Donald Trump probably thinks he is winning his trade war against Turkey. His “cherished DOLLAR” is “very strong.”
The reality, however, is that Trump is strengthening alliances between countries that don’t have America or the West’s best interest’s at heart. By punishing Turkey with sanctions, he is only pushing the country closer to other nations who see the strategic importance of having Turkey on their side.
There were two clues to that last week:
- IRAN: Turkish finance and treasury minister Berat Alkayrak told investors on a conference call that “We don’t expect fines on Halkbank.” Those six words will be meaningless to most people outside Turkey. But they are hugely significant. Halkbank violated economic sanctions against Iran.One of its executives was sent to prison in the US. The implication is obvious: Turkey will be siding with Iran on this issue. Iran, obviously, is a historic sponsor of terrorism.
- QATAR: The kingdom gave a $US15 billion rescue loan to Turkey last week. Qatar also sponsors terrorism. Qatar is so corrupt it’s comical: This is the country that paid bribes to host the 2022 World Cup in the desert.
This map says it all. Trump’s trade war is solidifying Turkey’s ties to Iran and Qatar.
— Carl R. Tannenbaum (@NT_CTannenbaum) August 16, 2018
To get an idea of how big a loss this is to the West, consider that just eight years ago Turkey was on the verge of gaining full membership of the European Union. It was a democratic nation that abolished the death penalty. It was finally ready to turn away from the dictatorships of the Middle East and join the alliance of North American and European nations who believe in democracy, the rule of law, and civil rights.
There were many steps in the undoing of that alliance, not least Germany balking at the idea of 80 million Muslims suddenly getting the right to live wherever they want. That fed the paranoia of Turkish President Recep Tayyip Erdoğan, an Islamist autocrat, that Europe was basically for white Christians not brown Muslims.
Regardless of how we got here, the reality is NATO’s largest standing army in Europe is now cozying up to Iran and indebted to Qatar. Trump should be trying to get Turkey back on side with the West rather than levying huge punishments to secure the release of one man.
The Turkish economy will continue to need all the trade it can get and right now Qatar and Iran look like less burdensome partners. Russia and China are waiting in the wings too, according to Reva Goujon, the VP of Global Analysis at Stratfor. Turkey already has a defence cooperation agreement with Russia and China has Erdogan on board for its massive Belt and Road infrastructure initiative.
Much of Turkey’s pain is self-inflicted. Erdogan’s mismanagement of the Turkish central bank may further devalue the lira. This, after all, is the man who sincerely believes that “When you look at the cause and effect relationship, the interest rate is the cause and inflation is the result. The lower the interest rate is, the lower inflation will be.” (Literally, the opposite is true.)
The endgame – if it comes to a balance of payments crisis – may involve a rescue package from the IMF. From the perspective of London and Washington, that might look like a mechanism to bring Turkey back into the fold. Surely the Turks will be grateful for the largesse of our interest-bearing credit!
To Erdogan, that credit will look like the kind of debt-load that crushed Greece. Erdogan continues to suspect that the machinations of the West are merely callbacks to the 1920 Treaty of Sevres, through which the Western nations dismembered the Ottoman Empire.
What will the US get out of this? The rising dollar may well crush the feeble lira, but it’s hard to see how that benefits Americans. (Some inside the Trump Administration seem to think the dollar is already too strong.) Maybe America will get Andrew Brunson back. But he’s just one guy, caught preaching in the wrong place at the wrong time.
The price of those “victories” will be the strengthening of ties between Turkey, Russia, China, Iran and Qatar, and Turkey’s further alienation from the West.
More on the Turkish lira crisis:
- The crisis in Turkey is being caused by the US Fed, and we are only at the beginning
- UBS: Turkey could be heading into a balance-of-payments crisis
- The reason Turkey’s economic collapse is so scary is that Iran, Russia, and Syria are waiting in the wings
- The lira’s crash ‘looks certain to push the Turkish economy into recession and may well trigger a banking crisis’
- Turkey’s lira crisis may be down to Erdogan’s fundamental misunderstanding of how ‘evil’ interest rates work
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