Troubles In Turkey

[BansheeOne]

Apparently a deal had been in place for Brunson's release against a lenient fine for Turkish Halkbank over violating US sanctions against Iran, transfer of convicted banker Mehmet Hakan Atilla from American and release of a Turkish Hamas supporter from Israeli custody, but Turkey made extra demands after the latter happened and didn't take the sanctions threat serious.

 

U.S. Prepares List of Sanctions Targets in Turkey

By Benjamin Harvey

1. August 2018, 17:51 MESZ

Updated on 1. August 2018, 18:38 MESZ

 

 

The U.S. has prepared a list of Turkish entities and individuals to target should it decide to impose sanctions on Recep Tayyip Erdogan’s government for imprisoning U.S. citizens and employees of its diplomatic mission, according to two people with knowledge of the matter. The lira slid.

 

[...]

 

‘Hostages’

 

Within the State Department, Brunson and other prisoners including NASA scientist Serkan Golge and three Turkish employees of the U.S. mission to Turkey are referred to as “hostages." The U.S. says they’re innocent and being held by Turkey for the sole purpose of extracting concessions on other points of tension in the U.S.-relationship.

 

The two countries have quarreled over a panoply of foreign policy issues that have driven the onetime allies to outright hostility. Foremost among them are differences over policy in Syria and Iran, Turkish suspicions about the U.S. response to a 2016 coup attempt against Erdogan, and the Turkish leadership’s budding friendship with Putin.

 

The Magnitsky sanctions under consideration could be just the start of what would look like a U.S. assault on Turkey’s vulnerable economy. The U.S. is also considering a hefty fine on state-run lender Turkiye Halk Bankasi AS for its role in evading U.S. sanctions targeting Iran’s nuclear program, and it would impose sanctions on Turkey when it receives delivery of a missile defense system from Russia, expected in 2019.

 

Deal Fails

 

As of last week, the Americans thought they had a deal that would bring Brunson home, according to accounts by officials on both sides of the matter. In return for the release of evangelical pastor, who’s been imprisoned for almost two years on charges including involvement in the failed coup, the U.S. administration would recommend a lenient fine on Halkbank. The U.S. also offered to send Mehmet Hakan Atilla, a former executive at the bank who’s been jailed in the U.S., back to Turkey to serve out the rest of his term.

 

As a final sweetener to the Turks, U.S. President Donald Trump said he’d get Israeli Prime Minister Benjamin Netanyahu to release a Turkish citizen, Ebru Ozkan, who’d been arrested in Israel on accusations of abetting Hamas. Netanyahu did it, and Ozkan was sent back to Turkey on July 16.

The Americans waited for Erdogan to deliver on his side of the deal: Brunson was to be released and then deported at a hearing on July 18. Instead, Turkey changed the conditions of the agreement at the last minute, with Foreign Minister Mevlut Cavusoglu interjecting to demand that any probe of Halkbank be dropped, according to Turkish and U.S. officials. The deal fell apart and Brunson was moved to house arrest.

 

The Americans had been carrying out the negotiations through a backchannel with a person close to Erdogan, according to people familiar with the matter. But they have had a difficult time gauging whether or not the Turkish side fully comprehends the possible consequences of U.S. sanctions on Turkey’s economy.

 

[...]

 

https://www.bloomberg.com/news/articles/2018-08-01/u-s-said-to-prepare-list-of-turkey-economic-sanctions-targets

[Markus Becker]

:)

[Josh]

and Tillerson got fired for it...

Wait and see if AsSultan gets another invite

That is almost certainly not why Tillerson got fired. The day before he condemned the Russians for using nerve agent in the UK, when the rest of the administration refused to post any blame to a specific country. There's also this tidbit:

 

https://theintercept.com/2018/08/01/rex-tillerson-qatar-saudi-uae/

 

The fact is, Trump was on good terms with the Sultan and liked the guy until he figured out there was an evagelical in captivity, at which point he started playing to his base. Which I'm fine with; I hope he throws the book at the Sultan. But at the time of his arrival in Washington the administration had nothing but good things to say about Just The Tayyip.

[Josh]

Like how one hard sanctions shove in 2014, coupled with oil prices falling, was supposed to break the Russian economy, right?

First, I don't think anyone thought the sanctions would 'break' Russia. I don't think anyone realistically thought they would even change Russia's course of action; at most maybe someone thought they would pull out of the Ukraine and just stick to Crimea. So strawman argument; I challenge you to find statement by anyone on this board or any elected EU or US official that Russia would be break or even change its Crimea calculus. In point of fact, they did go through a recession post sanction, though I suspect that had at least as much to do with the oil price crash as sanctions.

 

Second, Turkey is not remotely Russia. They are a much smaller economy, they have much lower foreign reserves, and they have huge foreign debt that keeps getting bigger all the time because the lira is steadily losing value. US sanctions against Turkey would force the lira down much further and probably push a lot of Turk companies into bankruptcy. So yes, I think one hard shove by the US would push the Turks into recession.

[Mistral]

Best quote I heard at work today: Bying Turkish Lira now is like trying to catch a falling knife with your bare hand.

 

Second best, sell Lira now think later.

[glenn239]

 

Like how one hard sanctions shove in 2014, coupled with oil prices falling, was supposed to break the Russian economy, right?

First, I don't think anyone thought the sanctions would 'break' Russia. I don't think anyone realistically thought they would even change Russia's course of action; at most maybe someone thought they would pull out of the Ukraine and just stick to Crimea. So strawman argument; I challenge you to find statement by anyone on this board or any elected EU or US official that Russia would be break or even change its Crimea calculus. In point of fact, they did go through a recession post sanction, though I suspect that had at least as much to do with the oil price crash as sanctions.

 

 

 

Easier these days with Google, that's for sure. Soros, for example. Sputnik covers it here,

 

https://sputniknews.com/analysis/201712071059799832-soros-russia-prognosis/

 

Second, Turkey is not remotely Russia. They are a much smaller economy, they have much lower foreign reserves, and they have huge foreign debt that keeps getting bigger all the time because the lira is steadily losing value. US sanctions against Turkey would force the lira down much further and probably push a lot of Turk companies into bankruptcy. So yes, I think one hard shove by the US would push the Turks into recession.

 

You said they could "break" the Turkish economy with one hard shove. I thought that was a little much. Here, you revise downwards to "push into recession" which I think is more in balance. I deal with a Turkish company and their people strike me as very patriotic, very cohesive, not at all likely to be subject to internal strife due to a recession. I think this whole economic pressure thing on Ergodan is a bit of wishful thinking and that if NATO is cut out of the Black Sea it's a bad thing for NATO's Balkans posture. Erdogan must know that the Straights are a whip hand surely, and that US sanctions might lead to no US, British, French, warships being allowed to enter the Black Sea until sanctions are dropped?

[Mistral]

Glenn,

They have an inflation of 15.5% going up (Natural gas distributor just raised prices by 50%), base interest rate of 17.5% which honestly should be at least 5-8% higher if not for the Sultan fighting the so called interest lobby, and a current account deficit of what 7% of GDP.

So they have a GDP growth of 7%, a current account deficit of 7% and inflation double that at 15%. Like I said before only the blind do not see the wall.

If the Americans push them it will only make the train wreck come faster.

The signs are there like in every economic wreck, its the politicians who choose to ignore them.

[Roman Alymov]

Glenn,

They have an inflation of 15.5% going up (Natural gas distributor just raised prices by 50%), base interest rate of 17.5% which honestly should be at least 5-8% higher if not for the Sultan fighting the so called interest lobby, and a current account deficit of what 7% of GDP.

So they have a GDP growth of 7%, a current account deficit of 7% and inflation double that at 15%. Like I said before only the blind do not see the wall.

If the Americans push them it will only make the train wreck come faster.

The signs are there like in every economic wreck, its the politicians who choose to ignore them.

On another side pof the problem, Turkey got good production based economy with both industry and agriculture, plus inflow of money from foreign tourism. They could survive hard times, especially if having no troubles with regional neighbors.

[Josh]

Easier these days with Google, that's for sure. Soros, for example. Sputnik covers it here,

 

You said they could "break" the Turkish economy with one hard shove. I thought that was a little much. Here, you revise downwards to "push into recession" which I think is more in balance. I deal with a Turkish company and their people strike me as very patriotic, very cohesive, not at all likely to be subject to internal strife due to a recession. I think this whole economic pressure thing on Ergodan is a bit of wishful thinking and that if NATO is cut out of the Black Sea it's a bad thing for NATO's Balkans posture. Erdogan must know that the Straights are a whip hand surely, and that US sanctions might lead to no US, British, French, warships being allowed to enter the Black Sea until sanctions are dropped?

Soros? Really? Ignoring how ridiculous that is as a reference point, if you reread my statement he doesn't fall into either category I stipulated.

 

Perhaps 'break' was a strong word, but I think 'recession' would also be a light word if the US were to undertake broad sanctions. Specifically, if the US were to lock Turkey out of its banking systems as it presumably will Iran, I think 'break' is closer than 'recession'. The lira would go into free fall. I don't think that's amongst the sanctions proposed, but that would be the hard shove that I think would break them. Any sanctions should put huge downward pressure on the lira regardless though.

 

As for locking out the black sea, that would be against the convention as I understand it unless The US, UK, and France were at war with Turkey. End of the day, it would probably involve firing on a NATO ship if they wanted to enforce it. That would be an interesting turn of events.

 

In any case it doesn't appear that the administration will go that far; the list of sanctions proposed seems like bluff or warning shot.

Edited August 3, 2018 by Josh

[Mistral]

​

 

 

Glenn,

They have an inflation of 15.5% going up (Natural gas distributor just raised prices by 50%), base interest rate of 17.5% which honestly should be at least 5-8% higher if not for the Sultan fighting the so called interest lobby, and a current account deficit of what 7% of GDP.

So they have a GDP growth of 7%, a current account deficit of 7% and inflation double that at 15%. Like I said before only the blind do not see the wall.

If the Americans push them it will only make the train wreck come faster.

The signs are there like in every economic wreck, its the politicians who choose to ignore them.

On another side pof the problem, Turkey got good production based economy with both industry and agriculture, plus inflow of money from foreign tourism. They could survive hard times, especially if having no troubles with regional neighbors.

 

 

And that is a perfect example where people read the numbers but always have a rebuttal. Roman, it does not matter what they have, what they have produces those numbers I quoted. Country financials are the product of its economy not the other way around and the quoted numbers are just as sustainable as for example the growth Greece had for 10 years before the collapse. If you borrow just to fuel consumption (imported in this case) , its coming down at some point.

 

Mind you Russia was in a similar position 2-3 years ago BUT it had a central bank with the independence and authority to do the right thing for the country and it worked marvels, well that and having a significant current account surplus. Here its not the case.

 

Anyway personally I am all for the Sultan, between him, Brexit and another US - China trade war in the future to cause turmoil in FX markets I will be able to retire in a couple of years.

[glenn239]

 

Josh Soros? Really? Ignoring how ridiculous that is as a reference point, if you reread my statement he doesn't fall into either category I stipulated.‹

 

Where in my original statement did I say that I – (ie, not you) was talking about the comments of, “any elected EU or US official”? Given that fact, why would I go look for your criteria that wasn’t mine? For that matter, what elected 'EU or US official' has yet stated that Turkey will collapse to potential US sanctions?

 

Perhaps 'break' was a strong word, but I think 'recession' would also be a light word if the US were to undertake broad sanctions. Specifically, if the US were to lock Turkey out of its banking systems as it presumably will Iran, I think 'break' is closer than 'recession'. The lira would go into free fall. I don't think that's amongst the sanctions proposed, but that would be the hard shove that I think would break them. Any sanctions should put huge downward pressure on the lira regardless though.

 

 

All true, (if you'd said 'recession' I wouldn't have posted) but I doubt any of it will break Turkey or bring Erdogan to heel. What I fear it will do is undermine NATO, advantage Russia and China, and cause more friction between Germany and the US. As for knocking countries off SWIFT, the reason why the US does not do that is that the Chinese will create their own SWIFT, (they are doing so now and I think they can ramp it up at any time). Putin would get a big chuckle out of that arrow being knocked from the US quiver in a NATO squabble!

 

As for locking out the Black sea, that would be against the convention as I understand it unless The US, UK, and France were at war with Turkey.

 

 

An interesting enough idea to check the treaty. Article 20 states,

 

In time of war, Turkey being belligerent, the provisions of Articles 10 to 18 shall not be applicable; the passage of warships shall be left entirely to the discretion of the Turkish Government.

 

So Erdogan states that the situation with the Kurds, or in Syria, is a “time of war” under Article 20 of the convention and bars all non-Black Sea Powers from passing through. The US protests to the UN, and the Russians veto it.

 

In any case it doesn't appear that the administration will go that far; the list of sanctions proposed seems like bluff or warning shot.

 

 

Hopefully they work it out. Trump’s being a bit too much of a loose cannon on too many international fronts, IMO.

Edited August 3, 2018 by glenn239

[Josh]

If you're going to disprove my statement in your response, you have to use MY criteria. Otherwise, it's rather pointless to respond to my statement and you might as well post it separately. You implied that there was some kind of sentiment that Russia would be brought to heel by sanctions; I pointed that no one of any importance ever said that and it was ridiculous to imply so.

 

If Turkey wants to declare itself in a war, I guess they can. I still have a hard time believing they'd fire on a USN ship no matter what they say. THAT definitely would bring all the sanctions the US could bring to bear, if not other reactions.

 

I suppose I should have defined 'break' in that context: I think it will break Turkey's economy. Would it achieve its intended goal and force Erdogan to repatriate the American priest he's holding? IE, 'break' Erdogan? I dare say yes it would. I wouldn't mind it happening either way because I consider Turkey under the current leadership an antagonist under a pseudo dictatorship regime, but given all the other regional politics in play involving the US and Turkey it seems odd to use that kind of leverage for one hostage. I write it off as Trump playing to his base.

Edited August 3, 2018 by Josh

[Markus Becker]

 

Glenn,

They have an inflation of 15.5% going up (Natural gas distributor just raised prices by 50%), base interest rate of 17.5% which honestly should be at least 5-8% higher if not for the Sultan fighting the so called interest lobby, and a current account deficit of what 7% of GDP.

So they have a GDP growth of 7%, a current account deficit of 7% and inflation double that at 15%. Like I said before only the blind do not see the wall.

If the Americans push them it will only make the train wreck come faster.

The signs are there like in every economic wreck, its the politicians who choose to ignore them.

On another side pof the problem, Turkey got good production based economy with both industry and agriculture, plus inflow of money from foreign tourism. They could survive hard times, especially if having no troubles with regional neighbors.

 

 

It's Erdogan. Who hasn't he alienated so far? Iran but they have problems of their own. And while the tourism benefits from the weak Lira, the tourists are but one arrest from avoiding the country.

[glenn239]

​

If you're going to disprove my statement in your response, you have to use MY criteria. Otherwise, it's rather pointless to respond to my statement and you might as well post it separately. You implied that there was some kind of sentiment that Russia would be brought to heel by sanctions; I pointed that no one of any importance ever said that and it was ridiculous to imply so.

If Turkey wants to declare itself in a war, I guess they can. I still have a hard time believing they'd fire on a USN ship no matter what they say. THAT definitely would bring all the sanctions the US could bring to bear, if not other reactions.

I suppose I should have defined 'break' in that context: I think it will break Turkey's economy. Would it achieve its intended goal and force Erdogan to repatriate the American priest he's holding? IE, 'break' Erdogan? I dare say yes it would. I wouldn't mind it happening either way because I consider Turkey under the current leadership an antagonist under a pseudo dictatorship regime, but given all the other regional politics in play involving the US and Turkey it seems odd to use that kind of leverage for one hostage. I write it off as Trump playing to his base.

 

Here's a reference to a 2015 Stratfor report predicting the immenent collapse of Russia,

 

https://worldview.stratfor.com/forecast/decade-forecast-2015-2025

 

"we do not think the Russian Federation can exist in its current form for the entire decade."

 

Funny story. Turns out the Russian Federation survived just fine in its current form.

Edited August 3, 2018 by glenn239

[Roman Alymov]

 

On another side pof the problem, Turkey got good production based economy with both industry and agriculture, plus inflow of money from foreign tourism. They could survive hard times, especially if having no troubles with regional neighbors.

 

 

 

 

It's Erdogan. Who hasn't he alienated so far? Iran but they have problems of their own. And while the tourism benefits from the weak Lira, the tourists are but one arrest from avoiding the country.

 

"Alienated" is not the word in policy, at least here in Asia. From Russian point of view, Erdogan political line (with all twists and turns) is nothing special, just return to Turkey how it was for centuries, endless war-alliance-war-alliance cycle.

We have seen alliance-war(proxy)-alliance part in recent years, next stage is “war” but we know it will be followed by “alliance”. The same with Iran to some extent. The more pressure applied on Turkey and Iran from US side - the less likely they are to confront Russia.

Edited August 3, 2018 by Roman Alymov

[Roman Alymov]

​

 

 

Glenn,

They have an inflation of 15.5% going up (Natural gas distributor just raised prices by 50%), base interest rate of 17.5% which honestly should be at least 5-8% higher if not for the Sultan fighting the so called interest lobby, and a current account deficit of what 7% of GDP.

So they have a GDP growth of 7%, a current account deficit of 7% and inflation double that at 15%. Like I said before only the blind do not see the wall.

If the Americans push them it will only make the train wreck come faster.

The signs are there like in every economic wreck, its the politicians who choose to ignore them.

On another side pof the problem, Turkey got good production based economy with both industry and agriculture, plus inflow of money from foreign tourism. They could survive hard times, especially if having no troubles with regional neighbors.

 

 

And that is a perfect example where people read the numbers but always have a rebuttal. Roman, it does not matter what they have, what they have produces those numbers I quoted. Country financials are the product of its economy not the other way around and the quoted numbers are just as sustainable as for example the growth Greece had for 10 years before the collapse. If you borrow just to fuel consumption (imported in this case) , its coming down at some point.

 

Mind you Russia was in a similar position 2-3 years ago BUT it had a central bank with the independence and authority to do the right thing for the country and it worked marvels, well that and having a significant current account surplus. Here its not the case.

 

Anyway personally I am all for the Sultan, between him, Brexit and another US - China trade war in the future to cause turmoil in FX markets I will be able to retire in a couple of years.

I’m afraid my understanding of “survive” is different from yours. For me survival is sort of Russia’s 1990th or USSR 1940th, when problem is physical availability of food and basic goods (to the extent of people growing up own food on kitchen gardens in backyards of apartment blocks. Turkey got very good position to “survive” in this definition. What about economy figures – I’m afraid I am not educated enough to challenge you here. But as USSR collapse survivor I know it is not figures people eat, but food. If country got own food and basic products – every crisis is survivable.

[Josh]

Here's a reference to a 2015 Stratfor report predicting the immenent collapse of Russia,

 

https://worldview.stratfor.com/forecast/decade-forecast-2015-2025

 

"we do not think the Russian Federation can exist in its current form for the entire decade." [/size]

 

Funny story. Turns out the Russian Federation survived just fine in its current form.

Nothing in that analysis so much as mentions the word 'sanctions', and furthermore their estimate goes out to 2025. So while I don't agree with their assessment, the jury is still out. Either way, their argument had nothing to do with Western sanctions motivating Russia and more to do with demographic decline, whether you agree or disagree.

 

Straw man argument, comrade Glenn.

Edited August 7, 2018 by Josh

[Josh]

Lira drops 13% more against the dollar. This is *without* sanctions having been used yet, outside sanctions on a few individuals in the government. Remember most of their debt is in dollars and euros.

 

https://twitter.com/business/status/1027801460946419712

[Josh]

....and now real sanctions have been enacted an hour ago. Let's see what breaks.

 

https://www.cnbc.com/2018/08/10/trump.html

[Mistral]

So rumours are that the US gave an ultimatum to release the pastor until tomorrow and the Sultan rejected it.

 

Half the deposits in Turkey are in USD and EUR as a way to protect from inflation, now it seems banks have to buy hard currency abroad at a premium and ship it by planes for Monday. People are withdrawing their hard currency deposits out of fear of an Argentina switch ala 1990s. Fear rules.

 

Its going to be an interesting Monday morning. Saw the Sultans finance minister / son in law speach on Friday, it was painful to watch.

[EchoFiveMike]

Give us Peticaris alive...or the Razuli dead. S/F....Ken M

[Jeff]

If the reporting is true, a deal was made and agreed to. One side fulfilled their end and Turkey reneged and is now looking to renegotiate. Trump's telling them to fulfill the original deal or drop dead. Turkey shouldn't benefit from being a backstabbing cheat. If Erdogan thinks his new BFF Putin is going to give him better terms than the US and the EU, he's a bigger fool than I thought. Though, if he's planning on going full despot them Putin may be his only play.

[Mistral]

If the reporting is true, a deal was made and agreed to. One side fulfilled their end and Turkey reneged and is now looking to renegotiate. Trump's telling them to fulfill the original deal or drop dead. Turkey shouldn't benefit from being a backstabbing cheat. If Erdogan thinks his new BFF Putin is going to give him better terms than the US and the EU, he's a bigger fool than I thought. Though, if he's planning on going full despot them Putin may be his only play.

Heard that too, some deal about Manbij and the release of. a Turkish female by Israel who was caught for some dealings with hamas in exchange for the Pastor.

 

Then the Turks said thay also want Gullen.

[Panzermann]

Lira drops 13% more against the dollar. This is *without* sanctions having been used yet, outside sanctions on a few individuals in the government. Remember most of their debt is in dollars and euros.

 

https://twitter.com/business/status/1027801460946419712

 

 

The turkish lira has been dropping forthe last decade, this current hubbub accelerates it. The economy growth has been funded by mostly foreign currency loans and inflation (hence the drop over the decade), weeeell that is not going to end well. But I am sure Erdogan is going to invoke allah and the prophet and all will be good.

[Mistral]

Actually he already did yesterday saying "they have their dollars we have our allah".

 

No kidding.