Turkey | Council on Foreign Relations

Turkey’s Growing Foreign Policy Ambitions

Turkey’s geography and membership in NATO have long given the country an influential voice in foreign policy, but the assertive policies of President Erdogan have complicated its role.

Backgrounder by Kali Robinson Jul 11, 2023

Podcast: The Turkey-Syria Earthquake Aftermath

In this episode, Robert McMahon and Carla Anne Robbins discuss the Turkish and Syrian earthquake response, as well as other developments in Iran and Brazil.

Podcast by Robert McMahon, Carla Anne Robbins, Ester Fang, and Gabrielle Sierra Feb 9, 2023

What Will Erdogan Do to Stay in Power?

Turkish President Tayyip Erdogan could pursue several destabilizing options ahead of an uncertain election, writes Henri Barkey for Foreign Affairs .

A Conversation With Foreign Minister Mevlüt Çavuşoğlu of Türkiye

Ethan Bronner and Turkish Minister Mevlüt Çavuşoğlu examine Turkey's foreign policy and U.S.-Turkish relations in this CFR event.

Event with Mevlüt Çavuşoğlu Sep 23, 2022

Turkey

Framing Turkey’s Financial Vulnerabilites: Some Rhymes with the Asian Crisis, but Not a Repeat

Turkey has some similarities with the Asian crisis countries back in the 1990s, but also important differences. When emerging-market crisis typologies are updated to reflect the events of 2018, Turkey should enter into the pantheon on its own, not just as a sub-category of “Asian-style” crises.

Blog Post by Brad W. Setser August 20, 2018 Follow the Money
Turkey

We wanted Turkey to be a partner. It was never going to work.

This article was originally published here in The Washington Post on August 17, 2018. In July, a deal to release an American minister jailed in Turkey came apart because, a White House official told The Washington Post, Turkey was changing the agreement and “upping the ante.” A few weeks later, President Trump tweeted that he had doubled tariffs on steel and aluminum imports from Turkey, punctuating his thought with: “Our relations with Turkey are not good at this time!” Magdalena Kirchner, an analyst at Conias Risk Intelligence, told Newsweek that this would stop both sides from seeking “consensus for the sake of the alliance.” In March, writing for Foreign Policy in response to outrage after Turkish President Recep Tayyip Erdogan threatened American forces in Syria, former Bush administration officials James F. Jeffrey and Michael Singh soberly declared, “Turkey is a regional geographic and economic giant that stands as a buffer between Europe and the Middle East, and between the Middle East and Russia.” Writing for The Post, the Atlantic Council’s Matthew Bryza argued that “the White House has decided to give up on Turkey as an ally.” American officials have often insisted on seeing Turkey, a NATO ally since 1952, as a close partner, which is why the recent fallout seems so shocking. Don’t these two countries share interests and values? Not really. When you strip away all the happy talk, it’s clear the two nations aren’t really, and have never been, that close. This is a relationship doomed to antipathy. Alliances are never perfect, of course, and there have been moments over the past seven decades that justify Turkey’s image as a close partner of the United States: President Turgut Ozal shut down pipelines carrying Iraqi oil through Turkey during the run-up to the Gulf War, at great cost to the Turkish economy, for instance. A decade later, the Turkish government was among the first to condemn the 9/11 terrorist attacks and quickly committed troops to Afghanistan. Turkey became an important and valued component of the NATO-led International Security Assistance Force in that country. By that time, American officials had become accustomed to seeing Turkey as a partner, like their closest allies in Europe and East Asia. The country’s failure to live up to this role reveals more about our own desperation for Turkey to be something it isn’t, and about Cold War strategies, than about Turkish shortcomings. Except for Turkey’s 1974 incursion in Cyprus, which led Congress to punish Ankara with an arms embargo, conflicts and problems in the bilateral relationship could be swept aside for decades because of the overarching threat Moscow posed to both nations. In 1978, a year and a half after his inauguration, President Jimmy Carter and Congress lifted the embargo out of fear that a rift with NATO would imperil the West’s position in the eastern Mediterranean: Turkey was a physical and strategic buffer between the Soviet Union and the rest of Europe. In the decades since the Cold War ended, problems between the United States and Turkey have piled up, but Washington and Ankara no longer share a threat that mitigates these differences. After the Persian Gulf War, which Turkey supported, it grew exasperated at sanctions on Iraq that, it believed, hindered its own economy. So it began turning a blind eye to Iraqi oil exports crossing its border. When Turkey pledged to aid the mission in Afghanistan, its troops didn’t engage in combat. Turks opposed the later Iraq War on principle, which was their right, but also repeatedly threatened to undermine the stability of northern Iraq, the one region of the country that welcomed the American occupation, because it housed a separatist movement that advocated for Turkey’s oppressed Kurds. Elsewhere in the Middle East, Turkey became a champion of Hamas, supporting the organization diplomatically in its periodic conflicts with Israel and welcoming its operatives in Istanbul. In Syria, Ankara enabled extremists who used Turkish territory as a rear area in the fight against the Assad regime. And the Turkish government has stirred up unrest at Jerusalem’s holy sites. When it comes to Iran, the Turkish government (along with Brazil) negotiated a separate nuclear agreement with Tehran that ran at cross purposes to Washington’s; intentionally blew the cover on an Israeli intelligence operation in Istanbul gathering information on Iran’s nuclear program; and opposed the Obama administration’s effort to impose new U.N. sanctions on Tehran, then helped the Iranians evade those sanctions. Turkey’s incursions into northern Syria have complicated the fight against the Islamic State, for a time drawing Washington’s Syrian Kurdish allies away from the front line to face the Turks and their allies. In 2016, Erdogan threatened to allow tens of thousands of refugees to enter Europe, apparently because of suspended talks on Turkey’s European Union membership. “You did not keep your word,” he said in a speech in Istanbul. The threat, repeated months later by Turkey’s interior minister, stoked fears in Europe and the United States that such a move — intended or otherwise — would help further empower populist, nationalist and racist political forces already roiling the politics and potentially the stability of the E.U., a core strategic interest of the United States. In long-running disputes over small islands, the Turkish military has sought to intimidate Greece through repeated, needlessly provocative violations of Greek airspace. The danger from Moscow no longer justifies overlooking these significant differences in priorities. In fact, the Turkish government is buying an air defense system from the Russians that could provide Moscow with information about the American F-35 fighter jet, the newest high-tech plane in the U.S. arsenal, which Turkey also plans to fly. Under these circumstances, lamenting the end of our partnership with Turkey seems absurd. To be fair, from the Turkish perspective, the United States is not much of an ally, either. A staggering number of Turks believe that Washington was complicit in the attempted 2016 coup d’etat. One poll conducted online in 2016 by a Turkish newspaper found that almost 7 in 10 Turks blamed the CIA. This patently false idea (which Erdogan and other officials have nurtured) along with Trump’s tweet makes Erdogan’s latest accusation that the United States is attempting an economic coup all the more plausible to the Turkish public. Meanwhile, Washington’s Syrian Kurdish allies are directly linked to a Turkish Kurdish terrorist organization, the Kurdistan Workers’ Party, that has carried out a violent campaign against Turkey since the mid-1980s. So it’s easy to understand why U.S. approval ratings in Turkey hover between the low and high teens. The speed with which relations deteriorated after the deal to free the clergyman imploded highlights a relationship marked by frustration and mistrust, not common aims. It is no wonder the Turks seldom, if ever, defend their relationship with Washington. They believe America seeks to do them harm. In an address to Turkey’s parliament in 2009, President Barack Obama said: “The United States and Turkey have not always agreed on every issue, and that’s to be expected — no two nations do. But we have stood together through many challenges over the last 60 years.” Even with the hopeful gloss, that’s closer to reality than the standard characterization of the two nations as close partners. With the current tensions, expect the debate over who “lost Turkey,” and calls to protect the alliance, to grow louder. But it is hard to really lose an ally when it was not much of one to begin with.

Blog Post by Steven A. Cook August 17, 2018 From the Potomac to the Euphrates
Turkey

A Trade War Won't Fix Turkey

President Trump is loving his trade wars. He hits Iran with sanctions, and European companies as well as American ones obediently cut ties with the country. He goes toe-to-toe with China, and the Chinese stock market falls. He takes a whack at Turkey, and the country descends into a full-blown currency crisis. Through all this, the U.S. economy is humming. “Tariffs are working big time,” Trump tweetedrecently. The president is discovering that the United States has some extraordinary advantages when it comes to economic war. It has the world’s largest economy, to which all other nations want access. It runs a huge trade deficit, meaning that it has more imports — and hence more opportunities to impose tariffs or sanctions — than any other nation. It is wide-open to foreign investment, with the result that all major global companies have large U.S. operations and therefore cannot alienate the White House. It manages the world’s reserve currency, which means it can freeze adversaries out of the international payments system. On top of those structural advantages, Trump has created a cyclical one. Like President Ronald Reagan in the early 1980s, Trump has put other nations on the defensive with his irresponsible budget policy. Aggressive tax cuts and a ballooning deficit stimulate U.S. growth in the short term, insulating Americans from fallout from global trade tensions. At the same time, the stimulus forces the Federal Reserve to raise interest rates, which drives up the value of the dollar; as a result, foreigners with dollar debts get slammed twice over — by higher interest rates on the one hand, by the mismatch between flat local-currency earnings and expensive dollar repayments on the other. Given this lopsided playing field, trade confrontations between the United States and others have wildly asymmetric outcomes. Americans barely notice; Turks hit the wall. Indeed, for reasons that Trump might not find flattering, Turkey presents an extreme example of vulnerability. Like Trump, Turkish President Recep Tayyip Erdogan draws his support from conservative voters in his country’s heartland, who have long resented ungodly cosmopolitan elites. Like Trump, Erdogan believes in using the classic populist formula to power his economy: reckless borrowing, a hot real estate market, a willingness to risk inflation. And, also like Trump, Erdogan has elevated his inexperienced son-in-law to a high-level post, but he has gone one better by inflicting this nepotism on Turkey’s key economic ministry. The upshot is that Turkey has foreign-currency debt amounting to more than 50 percent of gross domestic product, a giddy real estate market, 16 percentinflation and no credibility with foreign investors. Even before Trump hit Turkey with sanctions, the economy was primed for a fall. Since Trump began raising the pressure this month, Turkey’s currency has declined by a bit more than 20 percent, bringing this year’s cumulative slide to about 40 percent and raising the specter of broader contagion. History suggests we should be worried: The strong dollar and high interest rates of the early Reagan period triggered a Mexican default that spread panic through Latin America; Thailand’s currency collapse in 1997 sparked a wider conflagration in East Asia, Russia and Brazil. The Russian collapse brought the panic to U.S. markets, triggering the implosion of a major hedge fund and driving the Fed to cut interest rates three times. Today, emerging markets are generally far better managed. Most have flexible exchange rates rather than unrealistic dollar pegs that snap under pressure. Most have fortified themselves by accumulating foreign-currency reserves. And most run more-or-less responsible budget policies. But the big vulnerability lies in dollar borrowing. The long period of extremely low U.S. interest rates following the 2008 financial crisis made cheap dollar-denominated loans irresistible. Yet few countries are as much in hock as Turkey. Among significant emerging economies, South Africa is the next-most-vulnerable, with foreign-currency debt approaching 50 percent of GDP. After that come Mexico and Argentina, with external debt ratios in the high 30s. Sure enough, all three countries have experienced market jitters in the past week. But if the fire spreads, it would be wrong to blame sanctions. The unsustainable borrowing began long before Trump’s election. At worst, Trump provided the match. The real worry about Trump’s trade wars is not so much that they will cause a financial crisis but rather that they will fail in political terms. It is easy for the United States to inflict economic pain on other countries; it is harder to make them change their behavior. Iran is suffering under the impact of Trump’s sanctions, but there are signs that President Hassan Rouhani will respond by drawing closer to the hard-line Revolutionary Guard Corps. China’s stock market is down by more than 15 percent this year, but the trade pressure might only redouble the regime’s determination to barge past the United States in strategic technologies. How will Trump’s sanctions on Turkey affect its actions? The jury is out, but Erdogan is making nice with Russia. Americans might not worry much about the fate of Turkey’s currency, but they should care about the solidity of NATO.

Article by Sebastian Mallaby August 15, 2018

Turkey

The West Must Face Reality in Turkey

We are witnessing the gradual but steady demise of a relationship that is already an alliance in name only.

Article by Richard Haass August 15, 2018
Turkey

Trump Is the First President to Get Turkey Right

Last Friday, Turkish President Recep Tayyip Erdogan published an op-ed in the New York Times outlining his country’s grievances toward the United States. The Turkish leader raised valid concerns about U.S. policy that genuinely vex Turkish leaders and citizens alike. Yet Erdogan only told half the story, leaving his readers to believe that Washington has victimized a reliable ally and partner. The United States has long had its own list of grievances, however—and it’s to the Trump administration’s credit that, unlike its predecessors, it finally seems to be doing something about it. U.S. grievances include Ankara’s plans to buy the S-400 advanced air-defense system from Russia; because Turkey will both operate the F-35, the newest high-tech jet in the American military inventory, and depend on Russia for maintenance and spare parts for the S-400, Moscow will be in a position to glean valuable intelligence on how to detect the plane. The Turks have also complicated the U.S. fight against the self-declared Islamic State, first by forcing the United States to negotiate for a year over the use of Incirlik Air Base, and then through their incursion into northern Syria, targeting Washington’s Kurdish allies. Against this backdrop, President Erdogan himself threatened U.S. troops in Syria. When it comes to Iran, Ankara has done everything possible to undermine U.S. policy, whether by negotiating a separate nuclear agreement or opposing and then helping Iran evade sanctions. Then there is the detention of Pastor Andrew Brunson in Turkey since October 2016. This has become a flashpoint between the two countries this summer, especially after Ankara seemed to renege on a deal for his release. But Turkey is also holding between 15 and 20 U.S.-Turkish dual citizens—including a NASA scientist—on trumped-up terrorism charges. Three Turkish employees of the U.S. Embassy have also been arrested. They are being used as bargaining chips to force the United States to hand over Fethullah Gulen, a green card holder who Ankara accuses of masterminding the failed July 2016 coup, and/or to secure the release of a Turkish banker convicted in a New York court of aiding the elaborate scheme to help Tehran get around multilateral sanctions. The sharp deterioration of relations between Washington and Ankara in the last week is only one of two crises enveloping Turkey at the moment. The Turkish lira is in a free fall as investors sell it off over concerns about economic mismanagement and uncertainty caused by the strain between the United States and Turkey. No doubt there are a lot of people in Washington busy developing three, five, and 10-point plans to save the Turkish economy and the U.S.-Turkey relationship. They are wasting their time; there is nothing for the United States to do. Of course, the United States has an interest in a healthy Turkish economy, if only to prevent the meltdown of the lira from affecting other emerging markets’ currencies. That threat is somewhat diminished right now because investors are on vacation, but August will soon become September. To head off a deepening of their economic woes next month, the Turks have to want to help themselves, and it is not at all clear that’s the case—or that Erdogan’s political interests will let them. The president’s son-in-law, Berat Albayrak, who also happens to be Turkey’s minister of finance and treasury, has unveiled a plan that is fairly responsible. According to Bloomberg, Albayrak plans to pursue fiscal discipline, help companies most affected by the lira’s slide, and, contrary to rumors, the government will not seize foreign exchange deposits—good news for foreign investors. At the same, the minister stated that the volatility of the lira was unsupported by the underlying economic data, thus it is clear Turkey is under “attack by the biggest player of the global financial system.” He means the United States. No one should be surprised by the accusation that the United States is responsible for Turkey’s currency crisis. Since at least 2013, Erdogan has been telling Turks that when the day of reckoning comes for the Turkish economy, it will be someone else’s fault. If Turks are suffering, then it could not possibly be the responsibility of a government led by someone who believes high interest rates cause inflation (which is exactly backward), but rather the result of the nefarious machinations of the “interest lobby,” Zionists, and the always useful “foreign forces.” Because Erdogan has made the economy a nationalist issue, seeking help from the IMF is politically risky. Instead, all of the Turkish president’s incentives are to do exactly what he has been doing: hang tough, blame Washington, appeal to God, and encourage his constituents to exchange dollars and euros into lira. So why should anyone believe Albayrak when he announces how he is going to rescue the lira? On the relationship with the United States, Erdogan’s declaration that Washington is waging “economic war” on Turkey reflects just how toxic relations between the two countries have become over the last five years. In certain offices at the State Department, Pentagon, and among a dwindling number of foreign-policy analysts who want to give Ankara the benefit of the doubt, there is much anxiety about the end of the “strategic relationship” and the need to save it. But why? It should be clear by now that there is no strategic relationship. Turkey and the United States have different interests and priorities. The lists of grievances on both sides reflects that fact. The fallout is not a function of the unique personalities and worldviews of the American and Turkish presidents, but rather at a fundamental level is the result of a changing world in which Washington and Ankara no longer share a common threat. No doubt the White House poured gas on a fire with the announcement of tariffs as the lira was sliding—a gratuitous move that smacks of Trumpian chest-thumping in anger over pastor Andrew Brunson that only helps Erdogan’s narrative that everything is Washington’s fault. Still, the pressure that the Trump administration has brought to bear on Turkey is a welcome change from the passivity of the last two administrations, which preferred to overlook Turkey’s malign policies, either in an effort to try cajole Ankara to support the United States or because they did not want to risk a rift with a “strategic partner.” Not only did this approach not work, but it also sent the message to Ankara that it was so valuable an ally that there would be no consequences for its actions. Applying pressure on Ankara may not work either, but the stakes are pretty low. Turkey’s importance to Washington has been waning for some time. The Turkish government is ambivalent about the Atlantic alliance, has found common cause with extremist groups, and stirred up trouble in the Gulf, Jerusalem, and the Red Sea. Even the value of Incirlik has diminished as the threat of the Islamic State has receded. Besides, with Ankara developing ties to Moscow it seems unlikely that the base will be as useful in the coming great-power competition as it was during the Cold War. What else is there? Not much. For the longest time, the legacy of the Cold War and the NATO alliance have framed the discussion of Turkey in Washington and Europe. Perhaps the controversy over Pastor Brunson and the way the Turkish government has responded to the lira crisis will be a clarifying moment, highlighting what should be clear by now: Turkey is no longer an ally or partner.

Blog Post by Steven A. Cook August 13, 2018 From the Potomac to the Euphrates
Turkey

Strongmen Die, but Authoritarianism Is Forever

This article first appeared here on ForeignPolicy.com on July 5, 2018 A few summers ago, a Turkish military officer stopped me to chat after a lecture I gave at a conference in Washington. During our conversation, he observed that Western analysts tend to exaggerate the importance of Turkish President Recep Tayyip Erdogan, insisting that “He is just a man, but we [the armed forces] have been around for a long time and will still be here when he is gone.” The suggestion was that the military can wait out Erdogan — this was before the failed July 2016 coup — and when the Turkish leader does finally leave office, Turkey will revert to something resembling a pre-Justice and Development Party (AKP) status quo. This idea — that if Erdogan were to lose an election, retire, or die, Turkish politics would automatically change — is not limited to the officer I met. Any number of Turkish academics, journalists, and policymakers have expressed their belief that Turkey would return to a system that was democratic enough to inspire hope that one day Turkey could join the club of democracies. Their conviction has more to do with hope and faith than analytic judgment. Erdogan and his party have irrevocably altered Turkey; there is no going back. Turkey’s political trajectory is an exemplary case of a country permanently rolling back democratizing reforms, but it’s not the only one. Hungary’s Viktor Orban and Jaroslaw Kaczynski’s Law and Justice party in Poland are undermining the rule of law, democratic values, and human rights in the service of what they define as authenticity and security. These are developments that predate the migrant crisis that is buffeting Europe, though the large number of people from Africa and the Middle East seeking refuge in the European Union has made Orban’s and Kaczynski’s message more politically potent, and thus the undoing of democratic institutions and liberal values politically acceptable, for large numbers of Hungarians and Poles. Observers often describe the way these leaders — including Erdogan — have forged illiberal democracies, or in Turkey’s case, an elected autocracy, as demonstrations of power politics. But these pejoratives are meaningless outside the imprecisions of newspaper editorials. Orban, Kaczynski, and Erdogan have articulated a vision of the future of their societies that appeals to and makes sense for large numbers of people. The Hungarian and Polish leadership have done so basically in opposition to the liberal principles upon which the EU was built. In the Turkish case, the AKP’s program can best be summed up as piety, prosperity, and power. Voters in all three countries have justly rewarded these leaders. Yet for all their apparent success, the Turkish, Hungarian, and Polish leaders have opposition. Over the last 15 years, about half of Turkey’s electorate has consistently opposed the AKP and Erdogan. In 2016, Orban staged a referendum aimed at preventing migrants from entering Hungary. The proposed measure received 98 percent support of the people who voted, but in a political blow, it fell well short of the 50 percent voter turnout needed to become binding. In Poland, the Law and Justice party’s turn away from the West produced the Committee for the Defense of Democracy that has been able to bring large numbers of people into the streets at various times to protest Kaczynski’s worldview. But what’s important is how, in response to opposition, leaders in Turkey, Hungary, and Poland have established new institutions, manipulated existing ones, and hollowed out others to confront political challenges or to close off their possibility. Formal institutions come in the form of laws, rules, regulations, and decrees; their origins are found in political contestation and often reflect the interests of the winners in those conflicts. Informal institutions are uncodified, but that doesn’t mean they are less powerful than formal institutions. Sometimes these norms, which are based on the way things have long been done, are more powerful than written rules. The old boys’ network that has sustained elite, white, male privilege in the United States has often trumped legislative and administrative measures created to level the playing field for women and minorities. One of the best examples of institutional manipulation is the way in which Turkey’s AKP used its majority in the Grand National Assembly to whitewash a 2014 parliamentary investigation into corruption charges against four government ministers that threatened to ensnare Erdogan and his family. The process rendered the idea of parliamentary oversight essentially meaningless and gave the Turkish leader an opportunity to argue — credibly for his constituents — that the original allegations were an attempted coup. Since the corruption allegation, Erdogan has manipulated institutions to reverse the outcome of an election he did not like in 2015, tried his opponents in courts packed with his supporters, and debased Turkey’s electoral laws to ensure the passage of a referendum on constitutional amendments that would grant the presidency extraordinary powers. The AKP has used the legal system to jail journalists — most often on spurious terrorism-related charges — and force ownership changes in the media industry. These attacks on the press, along with the transformation of the state-owned broadcaster and state-run news service into an arm of the AKP, have crowded out independent newsgathering. In the recent elections, the state-owned Anadolu Agency called the presidential election for Erdogan well before the Supreme Electoral Council — made up of AKP appointees — could count the vast majority of ballot boxes. This prompted Erdogan to appear on television graciously accepting another presidential term, making it impossible for the election board to contradict Anadolu’s projection and thus rendering the board a mere prop in AKP’s electoral theater. The institutional manipulations and innovations during the AKP era that have been employed to serve Erdogan’s goals will endure after he is gone. This is because institutions tend to be sticky — they remain long after the moment when they are needed, often leveraged by a new cohort of politicians to advance their agendas. This does not imply that institutional change is impossible. It is just that revisions take place in the context of existing institutions and previous innovations. For example, the origins of Egypt’s current repressive laws concerning the press and civil society organizations can be traced back through any number of revisions to the 1950s and 1960s. In this way, authoritarianism tends to build on itself. It may eventually give out, but short of a revolution that undermines a mutually reinforcing political and social order, institutions will have a lasting impact on society. Despite all the apparent change in Egypt since early 2011, the country’s politics still revolve around a system that Gamal Abdel Nasser and the Free Officers founded in the 1950s. The data social scientists have generated indicate that transitions to democracy often fail: Some countries lose their democracy, and those that do only get it back in rare and very specific circumstances. France became democratic again after the defeat of the Vichy government and Nazi Germany. Hungary and Poland were supposed to be shining examples of transitions to democracy. Those countries may yet live up to democratic ideals that as EU members they ostensibly share with other democracies, but because of what Orban and Kaczynski have done, the path to that goal will be long and hard. As for Turkey, no doubt the military will outlast Erdogan, but it is unclear if it will outlast Erdoganism.

Blog Post by Steven A. Cook July 23, 2018 From the Potomac to the Euphrates

Turkey

What Erdogan's Victory Means for Turkey, the Kurds, and Syria

On Sunday, June 23, 2018, Turkish President Recep Tayyip Erdogan was re-elected to the Turkish presidency and secured a parliamentary victory. The Center for Preventive Action (CPA) interviewed CFR’s Senior Fellow for Middle East Studies Henri J. Barkey to discuss what this victory means for Turkish foreign policy in Syria and, domestically, what it means for Turkey’s Kurds.

Blog Post by Center for Preventive Action and Henri J. Barkey June 29, 2018 Strength Through Peace
Middle East and North Africa

Turkish Presidential Elections with Henri Barkey and Steven Cook

Henri Barkey, senior fellow for Middle East studies at CFR and former member of the State Department Policy Planning Staff, and Steven Cook, the Eni Enrico Mattei senior fellow for Middle East and Africa studies at CFR, join James Lindsay to discuss Turkish President Recep Tayyip Erdoğan and the result of Turkey’s recent election.

Podcast with James M. Lindsay , Steven A. Cook and Henri J. Barkey June 29, 2018 The President’s Inbox
Turkey

Turkey’s Elections: Partially Free, Fair, and Fake

It should not be a surprise except to the most hopeful that Recep Tayyip Erdogan is once again president of Turkey and his Justice and Development Party (AKP) will enjoy an effective parliamentary majority with its partner, the Nationalist Movement Party (MHP). Erdogan supporters are rejoicing while his opposition, which many Turks believe was revitalized even in defeat, licks its wounds. It is an outcome that sounds familiar and was likely never in doubt. President Erdogan has worked hard over seven long years to get to this point; he can now put what Turks refer to as the “executive presidency” into action. As a result, he will enjoy significant new powers with little oversight, allowing Erdogan to pursue the transformation of Turkey into a powerful, prosperous, and pious society unencumbered. The extraordinary aspect of Turkey’s elections was obviously not the outcome, but rather the way it was conducted. The entire process was somewhere on the spectrum between free and unfree and fair and unfair, bewildering participants and observers alike. The confusion helped Erdogan win with a veneer of democratic legitimacy. It seems to be the perfect template for future elections in Turkey and other countries with populist and authoritarian leaders. When the polling stations closed and the ballots were counted, Erdogan won 52.5 percent of the vote, soundly defeating his closest competitor, Muharrem Ince of the Republican Peoples’ Party (CHP) who garnered 30.7 percent of the vote after a spirited campaign. In the parliamentary elections, the AKP lost 7 percent of its vote total from the controversial November 2015 election. Even though it can claim 42.5 percent electoral support, it lost its parliamentary majority. However, its partner, the MHP, won 11 percent of the vote, meaning that as long as the two parties stick together they will effectively control the parliament. The CHP won 22.6 percent of the vote while a new party called Iyi (Good) Party attracted 9.95 percent of Turkish voters. The Kurdish-based People’s Democratic Party (HDP) won the requisite minimum 11.7 percent to earn mandates in the Grand National Assembly. For Erdogan and the AKP there is no reason to question these results. Erdogan has a strong record of accomplishments and has remained popular; Ince drew huge crowds leading up to Sunday’s vote without interference from the government; the HDP, whose leader is in jail with most of the rest of the party’s senior officials, made it into parliament; and the AKP actually lost its parliamentary majority. This is all entirely accurate, but the opposition has many legitimate concerns about the government’s conduct prior to and during the elections. For example, like the 2017 constitutional referendum that paved the way for the executive presidency, Erdogan and the AKP dominated the media. According to Reuters, in May Erdogan enjoyed almost ten times as much airtime as Ince on TRT—Turkey’s state broadcaster. The Iyi Party’s presidential candidate, Meral Aksener, got a measly twelve minutes of airtime. These huge disparities are compounded by the fact that after fifteen long years of AKP rule most of Turkey’s privately held media outlets mindlessly recycle Erdogan talking point out of either ideological conviction or fear. Then there is the question of the MHP’s results. This is a party that split in 2017, that had become a wholly owned subsidiary of the AKP, that never held a campaign rally, and in only one poll did it come close to the 10 percent threshold to enter parliament, but it nevertheless garnered 11 percent of the vote. How did this happen? One line of analysis suggests that Iyi, which Aksener carved out of the MHP, drew votes away from CHP, not her former party. It is a plausible scenario, but the result is so at variance with almost every poll that it deserves scrutiny, especially since the implications of an AKP-MHP majority in parliament for Turkish politics are so important. Under the new system, if the president is a member of the party that controls the Grand National Assembly, his or her powers are largely unchecked. The alliance gives Erdogan and AKP that effective majority. Their supporters argue that the difference between the MHP’s results and its poll numbers is the result of unprofessional pollsters rather than manipulation. In fairness, Turkey’s polling agencies do not have a sterling record. After the polling stations closed, the state run news service, Anadolu Agency, behaved less like a news organization than an arm of the AKP. Anadolu’s early projections of an Erdogan win with support in the mid-50 percent range seemed intended only to sow confusion at a moment when there was a cascade of exit polls that are notoriously inaccurate. Ince intimated as much when he declared that Anadolu was projecting results based on a relatively small number of returns from smaller cities and towns that were known AKP strongholds. The Supreme Election Council (YSK) is supposed to have the first and final word on results, yet Erdogan declared victory before it was finished counting ballots from what the opposition believed were vote rich districts in Ankara and Istanbul. It turns out that Anadolu’s projections and the CHP’s own vote tracker eventually converged, but the aggressive and early call of the presidential election raises serious questions whether it was employed to establish a fait accompli. Finally, there is the composition of the YSK, which is supposed to be an independent body, but its officials are all AKP appointees. It is the government’s prerogative to appoint to this agency whomever Turkey’s leaders would like. Yet given the way in which the AKP has politicized, manipulated, and hollowed out Turkey’s institutions, it seems unlikely that the YSK would defy Erdogan. Midway through the the 2017 constitutional referendum, its officials ruled that ballots without the required official seals would nevertheless be counted as valid, a decision that opponents believe lifted supporters of the executive presidency to victory. This is why Ince’s supporters were so fearful that once Anadolu declared Erdogan the victor, the YSK would just rubber stamp the result. Then again, there is no evidence that Erdogan’s victory is fraudulent. Sunday’s Turkish election is a perfect example of post-truth politics. There are two competing narratives that partisans on both sides believe in fiercely. They respond ferociously to any effort to question their particular truth even if there are good reasons to do so. The unfortunate result is more anger, greater polarization, further instability, and a deepening of authoritarianism. This is Turkey’s present, but it is the wave of the future.

Blog Post by Steven A. Cook June 25, 2018 From the Potomac to the Euphrates
Turkey

Trump Backtracks on Family Separation and Crucial Presidential Election Held in Turkey

Contentious OPEC meetings continue in Vienna, nationwide elections take place in Turkey, and outrage grows over the Trump administration’s family-separation policy.

Podcast with James M. Lindsay and Robert McMahon June 21, 2018 The World Next Week
Syria

Northern Syria: The United States, Turkey, and the Kurds

Panelists discuss the ongoing conflict in Northern Syria and how the United States should handle its relationships with the affected parties, including Turkey and the Kurds.

Event with Henri J. Barkey , Max Hoffman, Gayle Tzemach Lemmon, Amanda Sloat and Douglas Ollivant June 5, 2018 What to Do About...
Turkey

Turkey Could Use a Few More Reserves, and a Somewhat Less Creative Banking System

Turkey’s currency initially rallied after the central bank raised interest rates yesterday. Perhaps a bit more orthodoxy is all it will take to restore a modicum of stability to Turkey’s markets. Then again, the lira’s rally didn’t last long. Even if Turkey firmly commits to a somewhat more orthodox monetary policy, Turkey retains substantial vulnerabilities: Turkey’s current account deficit was quite large even before oil rose to $80, and Turkey imports a ton of oil (and natural gas). Turkey has a dollarized financial system and trades heavily with Europe. It thus doesn’t benefit much from the rise in imports that Trump’s fiscal stimulus has generated, but gets hurt by higher interest rates on its dollar borrowing. Turkey has a decent stock of external debt, and much of that is denominated in foreign currency. Turkey’s banks lend domestic dollar deposits to Turkey’s firms, who have more foreign currency debt than they have external debt. And, Turkey could use a few more reserves. Turkey's reserves fall far short of covering its external financing need over the next year. There are three important things to know about Turkey’s foreign exchange reserves. A lot of Turkey’s reserves are in gold and thus not in dollars or euro. Turkey’s debts though don’t settle in gold. A lot of Turkey’s reserves are borrowed from the domestic banks, who can meet their reserve requirement on lira deposits by posting either gold or foreign exchange to the central bank. Most of the gold, and a decent chunk of the foreign exchange, is effectively borrowed. That limits the pool of funds available to intervene directly in the foreign exchange market (though it also provides the banks with a bit of a buffer). Turkey’s reserves don’t come close to covering its maturing external debt, let alone its external financing need, no matter how you cut it. Turkey has about $180 billion in external debt coming due (around $100b from the banks, $65b from firms).* It has a $50 billion (give or take) current account deficit. That’s a one-year external financing need of close to 30 percent of Turkey’s pre-depreciation GDP, against 12 percent in total reserves and about 10 percent of GDP in foreign exchange reserves. And the bulk of Turkey’s maturing external debt is denominated in a foreign currency—it thus is a claim on reserves that cannot be depreciated away. On classic measures of external vulnerability, Turkey—like Argentina–– is much more under-reserved than the IMF’s reserve metric would suggest (M2 and exports aren’t large versus GDP, so they pull the reserves Turkey’s needs to meet the IMF's standard well below maturing short-run debt). And even if it is graded on the IMF’s generous curve, Turkey falls short (See paragraph 19 of the IMF’s latest staff report). These vulnerabilities aren’t new. Turkey has long looked vulnerable to an Asian style financial crisis—one triggered by a loss of access to bank funding and a bank-corporate doom loop from the private sector’s foreign currency debts. And it has some of Argentina’s old vulnerabilities too, with roughly $200 billion in domestic foreign currency deposits (data from Turkish Central bank)) in addition to $400 billion plus in external debt (see this classic book on emerging market crises for background on the Asian and Argentine crises). These long-standing vulnerabilities haven’t triggered a full-on crisis yet. Turkey’s domestic deposit base and its external funding has historically been fairly sticky. It has been surprisingly resilient in the past. Yet there are reasons to think Turkey faces a more difficult challenge now. U.S. rates are rising when oil is going up, and that’s a bad combination for an oil importer with lots of dollar debt. While Turkey has long looked bad on classic indicators of external vulnerability, it now is starting to look really bad—short-term debt has jumped a bit relative to GDP (thanks mostly to a surge in corporate borrowing, which shows up in the “trade credit” line) and the external funding need is now close to three times liquid (non-gold) foreign exchange reserves. Turkey though differs from Argentina in one critical respect. Its government hasn’t been the biggest external borrower, and it doesn’t have the biggest stock of foreign currency debt in the economy. That honor goes to Turkey’s firms, who have almost $340 billion in foreign currency denominated debt ($185 billion is owed to domestic creditors, and $150 to external creditors—$110 in loans and $40 in trade credit [source]). The quality of their hedges will be tested: I never have been convinced all foreign currency debt is really backed by export receipts. What really makes Turkey interesting, though, is its banks. They have a rather fascinating balance sheet and engage in some fairly creative forms of financial intermediation, with a bit of regulatory help. The core problem Turkey’s banks face is simple. Turks want to hold a large chunk of their savings in dollars. And foreigners want to lend to Turkey in dollars (or euros). But Turkish households want to borrow in lira (in fact the banks cannot lend to households in foreign currency—a sensible prudential regulation). So the Turkish banking system has a surplus of foreign currency funding—and a shortfall in lira funding. There is an easy way to see this. Look at the loan to deposit ratio in foreign currency. It’s clearly below 1, about 0.8. And then look at loan to deposit ratio in lira. It is well above 1—it is now about 1.4. (See the IMF’s 2016 staff report [Paragraph 46], or the most recent financial stability report of the Central Bank of Turkey, starting on p. 50. Chart III.2.4 on p. 51 has the loan to deposit ratio by currency).** So how do the banks transform dollars into lira? A couple of tricks: They swap a lot of dollars into lira. Fair enough. But the tenor of the swaps is fairly short (see box III.2.1 of the central bank’s financial stability report . The “lira” can run even if the dollars raised by selling longer-dated bonds cannot.) And the central bank lets the banks meet their reserve requirement in lira by posting foreign exchange or gold at the central bank (so gold deposits in effect fund lira lending, indirectly). This means the banks have a decent buffer of foreign exchange—which they can draw on if their creditors start to withdraw funding. One secret source of strength of the system is that the banks themselves have a fairly large stockpile of foreign exchange deposits that matches their large short-term external debts.*** Makes for a strange system. So long as the domestic hard currency deposits don’t run, the banks ultimate funding need is in lira. In addition to transforming foreign exchange funding into lira lending, the banks do a lot of classic intermediation—borrowing short-term (there aren’t lots of sources of long-term lira funding) to fund lira denominated installment loans and mortgages. The banks consequently are exposed to an interest rate shock—in much the same way the U.S. savings and loans were back in the 1970s (they funded long-term mortgages with short-term deposits). This has a plus—raising domestic interest rates sharply would quickly slow bank lending and reduce demand, helping to close the current account deficit. But it also encourages a lot of creativity on the part of the central bank, which knows—I think—that the banks ultimately rely on it for lira funding and are vulnerable to an interest rate shock. And historically at least, the regulators have often preferred to use macroprudential limits to cool the economy rather than rate hikes, though it isn’t clear if that would be enough right now. Bottom line: Turkey cannot really use its reserves to try to defend the lira. Selling off some of its already limited reserves to cover an ongoing current account deficit would create the perfect conditions for a run on the banks’ foreign currency liquidity to develop. A free fall in the lira would cause corporate distress, even if it would take a lot to really threaten the government’s solvency. And raising rates sharply would squeeze the banks ability to lend—slowing the economy, but helping to close the current account deficit. Pick your poison. * Thanks to $120 billion or so in short-term external debt and the scheduled roll off of a fraction of its long-term claims. ** The CBRT (emphasis added): “Depositors’ FX deposit preferences and the change in favor of the TL in the loan composition of banks led to a widening in the gap between the TL and FX L/D ratios. The difference between TL and FX L/D ratios indicates that banks need TL liquidity. As a result of depositors’ FX deposit preferences and banks’ TL liquidity needs increased FX swap transactions with foreign residents. Therefore, the amount, maturity, cost and counterparty structure of FX swap transactions have recently become important with respect to monitoring the liquidity risk of banks.” *** It helps that domestic depositors tend to switch out of lira and into domestic foreign currency deposits in periods of stress. The banks can absorb a loss of external funding for a while (they likely have something like $50 billion in liquid assets at the central bank, and presumably could borrow against their gold too) but not a simultaneous loss of external funding and a run on their domestic dollar deposits.

Blog Post by Brad W. Setser May 24, 2018 Follow the Money
Turkey

General Erdogan’s First War

Turkey’s Islamist president is the first civilian with control over his country’s military—and you can tell by the results.

Blog Post by Steven A. Cook February 8, 2018 From the Potomac to the Euphrates
Turkey

The Entirely Rational Basis for Turkey's Move Into Syria

Nearly a century of mistrust of America and an obsession with defeating the Kurds sparked its operation in Afrin.

Blog Post by Steven A. Cook January 24, 2018 From the Potomac to the Euphrates
Turkey

A Look Inside Turkey

Speakers provide an update on Turkey's domestic politics, the challenges the country faces after the coup, and the likely future of Turkey's foreign and economic polices with the United States.

Event with Henri J. Barkey , James F. Jeffrey, Jennifer Miel and William M. Drozdiak January 11, 2018 Middle East Program