Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
Turkish President Tayyip Erdogan holds a news conference during a NATO summit in Brussels.
Turkey can't afford to pick fights
Turkey has thrown an eleventh-hour spanner into historic bids by Finland and Sweden to join NATO over supposed terrorist presence in the Nordic countries linked to the Kurdistan Workers’ Party, a militant group Ankara regards as a terrorist organization. On Monday, President Recep Tayyip Erdoğan threatened to block the applications. (NATO accession requires approval from all current members of the alliance.)
Erdoğan's tirade aside, NATO's longtime bad boy is expected to ultimately back off without too big a fuss. The Turks will try to get some concessions, and bringing up the Kurds always plays well domestically, but Turkey previously told the Finns and Swedes that it wouldn’t close the door to their NATO membership.
What a turnaround from late 2020, when the notoriously pugnacious Erdoğan was antagonizing several countries at once: the EU by drilling for oil in the eastern Mediterranean; French President Emmanuel Macron over his views on radical Islam; the US and NATO by buying Russian missiles; Russia in Syria; and Saudi Arabia over the Jamal Kashoggi murder, all without breaking a sweat.
So what’s up with the bombastic statements on the one hand, but softer back-channel reassurances on the other? Erdoğan now has a much bigger problem at home: an economy teetering on the brink of collapse.
Turkey simply can't afford to pick fights with anyone. The country’s inflation rate recently hit a whopping 70%, largely driven by the depreciation of the local currency, which lost 44% of its value against the US dollar in 2021.
Yet, Erdoğan continues to defy economic wisdom by keeping interest rates low, which makes the problem worse.
To be fair, the Turkish economy was already in dire straits when the president was in a more confrontational mood almost two years ago. Back then, though, Erdoğan was able to score political points at home by looking tough when he lashed out abroad.
Now, however, he needs (financial) help from foreign friends in order to get Turkey out of its economic mess. The situation has deteriorated so much that a majority of Turks have lost faith in Erdoğan’s ability to fix the economy.
Many of those friends are in Turkey’s neighborhood. That explains recent moves by Erdoğan to patch things up with Egypt, Israel, Saudi Arabia, and the UAE — all of which Ankara is relying on for investment to revitalize the Turkish economy. (Earlier this year, the Emiratis gave Ankara a much-needed assist in the form of a $5 billion currency swap to prop up the lira.)
But Turkey’s needs cannot be met by Gulf cash alone, so the Turks are also walking a tightrope between their Western allies and Russia over the war in Ukraine.
Since Russia invaded Ukraine, Turkey has stepped up as mediator-in-chief, including as a two-time host of Russia-Ukraine peace talks. Ankara is one of a handful of countries that enjoy warm ties with both Russia and Ukraine. Energy-poor Turkey buys 45% of its natural gas imports from Russia but also sells weapons to the Ukrainians — including high-precision drones that are making a difference on the battlefield.
Similarly, although Turkey refused to join Western sanctions against Russia, it agreed to Ukraine’s request to not allow Russian warships to sail through Turkish waters linking the Mediterranean and Black Seas.
But NATO membership has made Turkey’s balancing act harder. Some members of the alliance resent Erdoğan for becoming too cozy with Vladimir Putin since Russia agreed to sell Turkey S-400 missiles — which the Turks won’t give to Ukraine, despite Washington’s request — suspect Turkey will help Russia skirt sanctions, and see Putin’s hand in Erdoğan’s threats to Finland and Sweden.
Still, there are stronger odds that Turkey will ultimately lean West because it is desperate for American and European investment — even more so if the war in Ukraine escalates and Russian sanctions get tougher.
Turkish President Recep Tayyip Erdogan during a meeting with Russian President Vladimir Putin at the Bocharov Ruchei residence.
In Erdogan’s shoes: What is he thinking?
Recep Tayyip Erdogan has held power in Turkey for almost 20 years, first as prime minister, then as president. With inflation soaring and his currency collapsing, Erdogan’s eccentric ideas about economic policy seem to have made a bad situation worse — but what if we saw things from his perspective? We steal a memo on Erdonomics from deep inside the Turkish Presidential Palace.
From: the Desk of His Excellency, Recep Tayyip Erdogan, President of Turkey
My Dear Turks,
I write this with a heavy heart, but a very fine pen.
We have seen large scale public borrowing, a currency crash, runaway inflation, and resignations from the Central Bank because its leaders wanted to lower interest rates.
No, my friends, I am not talking about the past few months, a scene painted by biased Western media, which even doubts that I got a college degree (of course I did, though nobody seems to believe me, but I digress).
Rather, I am referring to the dark days of 1994, when you voted for me as mayor of Istanbul.
The financial crisis which we were experiencing then had crippled us. I drew you out of that mess by throwing everything I could at beautifying Istanbul. I brought you green buses, I built you recycling plants. I even gave you my email address in order to let you have a direct role in governance. Surely, my experiment changed Istanbul, the City of Centuries. Thus, I decided to rule for centuries.
But not without challenges. When you voted me in as prime minister in a 2002 landslide, we were crippled by another financial crisis, thanks to the ineptitude of those I had replaced: the lira was totally out of control, confidence in the economy was so low that almost two-thirds of bank accounts were held in foreign currencies, and allegations of corruption against the former leadership had weakened our great nation. Of course, no such aspersions — whether about corruption, mismanagement or desperate dollarization — can be cast against my current government. I repeat, none!
Let’s travel back to those early days. When I took over, things changed immediately. We bounced back, like the great Ottomans did after their mediocre European campaigns (unfortunately, our own recent European campaigns have been thwarted by continental arrogance and conspiracy). But back to that golden era during my first term: under my watch GDP almost tripled in just four years, foreign direct investment boomed, and unemployment and inflation dropped to record lows.
My dear friends, you didn’t appreciate what a good thing you had going for you.
You were thankless. You protested against progress. So, I pushed back. And when your Western backers didn’t take a hint, and attempted an extra-constitutional coup, I fought back with a constitutional one that made things right, and put me properly in charge.
Now, you and your friends are at it again, doubting my plans for our economic revival.
My dear Turks, as I said at parliament recently, both the Quran and I can assure you: with lower interest rates come fewer worries — and more borrowing and spending! If we shed the evil of usury, you will be self-sufficient and produce more exports. Growth will follow, Inshallah!
I want to put your money where my mouth is: in my personal resolve to cut interest rates, I have even kept every scissor I have ever used on display. After all, my economics are built on family and friends, on liberating our workers, and fighting a war of economic independence.
Trust me, brothers and sisters. My plan, based on theories by economists old and new, now depends on you. I will guarantee a return on your deposits, but only if your deposits are in liras. Things are already in motion for your benefit: price hikes have been offset by an increase in your wages. Foreigners are returning, the lira is already bouncing back, even though I had to sell billions of dollars to intervene.
And what’s a little lira weakness if it helps us to export to the world the wonderful things we make, eh? Wouldn’t our African brothers, also victims of Western predators, be safer with more of our armed drones? Remember, my friends: we are in the midst of the Learned Helplessness Syndrome. The independence of the Central Bank is overrated, and not necessary for those who love their country! Orthodoxy is slavery! We will break these shackles! Cok yaşa Türkiye!
And do not forget, there is such a thing asTurkish exceptionalism. It was Turks who invented the COVID vaccine (even though they were in Germany). It is the Turks who are doing the most to stop Russia from invading Ukraine. It is the Turks who will help stabilize our brothers in Africa. Even Elon Musk — not a Turk but still a nice man who considered it an honor to meet me — has promised to enhance our search for the stars, by putting our satellite into space.
We are a great nation, my friends. We’ve seen these bread lines before. But these Western reports about hunger and desperation are getting old. I am convinced that, after I stop a run on the banks, when all of this is over, we will be a breakout star. I urge you: don’t believe the naysayers. Borrow freely, spend abundantly, enjoy life and don’t forget to vote in 2023!