Turkey's Struggle To Reach Its Geopolitical Potential

 

I recently attended a briefing in London from a former senior Turkish official during which he, probably unintentionally, highlighted many of the contradictions in modern Turkey. The country is truly the poster child of the ‘on the one hand and on the other hand’ conundrum that drives its friends and enemies to distraction.

 With its location in the middle of some of the world’s most sensitive areas, its military strength, growing defence industry, strong private sector companies and geo-political outreach Turkey should sit at the top table of global/regional powers with a key role to play.

 It is a large country with a population of more than 80 million. It has close ties with the EU, the Balkans, Russia, Caucasus, Central Asia, Middle East, and, increasingly, Africa. Turkey has more diplomatic missions than all countries except the US and China. It can play a critical role in rebuilding Syria and possibly in Gaza. In Africa alone the number of Turkish diplomatic missions has increased from 12 in 2002 to 44 today.

 Turkish Airlines flies to 350 global destinations in 130 countries. Turkish companies have invested billions of dollars in several countries around the world including Egypt, the US, and many EU countries. I wonder how many customers in the UK realize that the popular white-goods company Beko is actually a brand of Arçelik that itself is part of the enormous Koç group of companies. The Turkish army is the second largest in NATO and its defence industry exports are growing rapidly to more than $8 billion this year. Many EU countries as well as the UK want Turkey to be a key component of the emerging European defence architecture.

Europe would love to have this force join its defence

 Despite these impressive figures and brute power, Turkey’s long-term quest to be considered a major international player is bogged down in the domestic quagmire of its own making. Rule of law with a truly independent judiciary, transparency and real democracy remain a mirage in the wasteland of one-man rule, crony-capitalism and widespread corruption. President Tayyip Erdoǧan has been in power for more than 20 years, and, despite articles in his own party’s founding document and the national constitution prohibiting another term, he seeks to circumvent these prohibitions by relying on friendly courts and a compliant parliament to simply change the law.

 The Turkish people understand real democracy very well, and hundreds of thousands of them have protested all over the country against the arbitrary arrest and detention of Erdoǧan’s main political opponent, the popular mayor of Istanbul Ekrem Imamoǧlu, on what appear to be ludicrous charges including corruption and espionage. It’s a miracle that the carefully chosen prosecutors could even mention Imamoǧlu’s alleged corruption without deeply blushing. But the ordinary people face at least two major challenges in their efforts to change Turkey’s domestic situation.

 Erdoǧan is a strong campaigner with almost total control of the media and is a master of cynical political manipulation. Another major obstacle is that in his long time in power he has helped certain favoured business groups amass immense fortunes that could disappear quickly if the opposition were by some miracle to win the presidency. These groups will support Erdoǧan with everything they have because they recognize that without the protection of his charisma and power their economic well-being could shatter.

 The Kurds are another possible, unexpected source of support for Erdoǧan. The much-vaunted peace process with the violent guerrilla group PKK is well underway and there is even talk of releasing the head of the Kurdish political party from his long imprisonment. Erdoǧan could easily condition concessions on Kurdish rights and the release of Selahattin Demirtaș on support from the Kurdish party for his claim to another term as president. Demirtaș has been in prison for eight years and it could be very difficult for him to turn down the offer of release even if it were part of a distasteful deal.

 One issue that could cause serious problems for Erdoǧan is the sorry state of an economy burdened with high inflation and high interest rates. Ordinary people and many companies are suffering as prices continue to rise, and high interest rates make loans – even if you can get them – very expensive for most people. Nominal interest rates are about 40% and many people believe the currency is highly overvalued. In addition to making Turkey a very expensive tourist destination this dangerous combination of high inflation/constantly increasing prices and overvalued currency puts a real squeeze on Turkey’s large export sector.  

The people are angered by increasing food prices

Many people had once hoped that external pressure from the EU would help improve conditions in Turkey as the country struggled to meet the EU entry criteria. But when that application door was slammed shut several years ago Erdoǧan was relieved of any pressure to change his autocratic rule. Now, the radically changed European and Middle Eastern security calculus has eased any external pressure on Turkey’s domestic policies. Many EU members and the UK seem perfectly willing to put up with Turkey’s democratic and judicial shortcomings in the rush to have Turkey join the new defence architecture. And the United States, especially under Trump, has always placed Turkey’s geopolitical role in an unstable region over any concern for the country’s internal affairs.

 The Turkish people, like people in most countries, don’t respond well to pressure from the outside telling them how to behave. Any lasting change in Turkey will have to come from within. And it remains to be seen if the political opposition is clever enough to overcome its internal feuding and mobilize the general popular discontent to overcome Erdoǧan’s built-in advantage of controlling all the levers of power.

Is It 'All Change' in the Middle East -- Again?

 

The Middle East has long been the place where well ordered, ‘reasonable’, plans conceived in the comfortable, air-conditioned rooms in Washington, London or other capitals of Europe go to die. Such has been the fate of all plans since the post-World War I divisions, the disastrous British or French mandates, military coups, clumsy attempts at ‘regime change’, recurring Israeli/Palestinian hostilities, western intervention, and on, and on, and on.

  But the situation on the ground has changed with the sudden Iranian weakness, withdrawal of Russia, powerful Israeli aggression and determination to re-shape the region, the near destruction of Hamas and Hezbollah, and the unending plight of Palestinians once again mere pawns in a vicious game they can’t possibly win.

 Now there is a great deal of chatter about possible new outcomes., new shape of the Middle East. Will the Iranian regime change? If so, will that change come internally or be imposed by military might?  Will Iran continue with its nuclear program? Will the nationalist/religious zealots in Israel achieve their goal of ripping all the Palestinians from their now-diminished homeland and expelling them to distant lands? Who will fill the apparent vacuum in Syria? What role, if any, will Trump’s America play in the re-configuration of the region? And what will happen in Israel itself?

Pre-WW I Middle East

 There is nothing new about turmoil in the region, however, something is different this time. Strong regional players like Saudi Arabia, the UAE, Qatar and Turkey seem unwilling to let outside forces determine the shape of the region. According to conversations I have had with people who know the region well there is a new, strong desire and ability to take matters into their own hands. Doubt they could do much worse than the Western economic/political/military interventions for the last 100 years.

Current Middle East 

 Included in these discussions is speculation about whether the hard-line, uncompromising nationalists in Iran could yield to more pragmatic forces – still very nationalistic but willing to make certain difficult compromises to bring Iran in from the cold. Reconstruction of the Iranian economy will require large infusions of cash and talent. In addition to Western companies that may have a role to play, it is also possible that Turkey and the Gulf countries could supply the required talent and money. What price would Iran be willing to pay to achieve this? Iran would probably have to give up its nuclear weapons goal and remove support for forces like Hezbollah and Hamas. Unlikely? Improbable? Perhaps. But at least such possibilities are on the table.

 The same goes for reconstruction of Syria. None of the regional players would like see groups like ISIS fill the vacuum created by the collapse of the Assad regime. And no one wants a repeat of the chaos that followed the downfall of Saddam Hussein in Iraq. Very difficult to see any serious reconstruction in Syria going forward without a large Turkish presence. One extremely knowledgeable friend said discussions between Turkey and Saudi on the reconstruction of Syria are already underway. Turkey’s involvement in Syria becomes easier now that the Kurdish guerilla group PKK has surrendered its arms and vowed to give up hostilities against Turkey launched from Syria or Iraq.

 What could any rapprochement between the Arab states and Iran mean for Israel, especially an Israel controlled by Netanyahu and his nationalist allies? Such a rapprochement is probably something they would not like to see because it would present a more unified and stronger counterforce than the country has ever faced. It is difficult to see this new configuration in the region willing to have much to do with an Israel that has larger regional aspirations and that has driven millions of Palestinians out of their homeland. The current Israeli policy of making Palestinian life so miserable that they would welcome expulsion to countries like Libya or South Sudan does not help any possible reconciliation between Israel and its Arab neighbours. In some way, the deportations of immigrants from the United States to South Sudan can be seen as a test run for any later Palestinian ‘relocation.’

Will Israel re-claim the Palestinian West Bank and Gaza?

 There’s not much the Arabs can do to stop such an expulsion – similar to the Nazi effort to find a new homeland – some place like Madagascar - for German Jews before the Holocaust. Arab states are unable and unwilling to intervene militarily. But they can freeze whatever relations they have now, effectively isolate Israel and await developments within Israel. The internal divisions in Israel are deep and who knows how the political struggle will play out. Will Netanyahu stay in power? Will his many opponents compromise with each other create a realistic alternative? There is a great deal of noise inside Israel right now but not much clarity.

 What role, if any, will the United States play? Is it willing to stand aside and let the Arabs and Iranians determine their own fate? Again, very hard to say. The Trump administration’s general ambivalence toward international relations in general and the fear of getting dragged into another no-win Middle Eastern quagmire suggest that Trump would be happy to pass the torch to regional powers. But he is nothing if not mercurial. And only the very foolhardy would attempt to predict anything.

 All one can safely say now is that the situation is more fluid than ever and that the major powers like Russia and United States have reduced influence. It remains to be seen if the local players can indeed shape a new Middle East, one that finally after more than 100 years determines its own course.

Sometimes Reality Really Is Stranger Than Fiction

 

The recent Israeli attacks on Iran and the continuing brutal war against the in Gaza demonstrate that sometimes truth really is stranger than fiction.

 I recently published what the trade calls a ‘thriller’ set in Syria, Israel, Cyprus and Greece. The plot revolves around an attempt by the former Syrian dictator Bashir al-Assad to create a deadly bio-chemical weapon in a massive Crusader fortress. The sub-plot involves shadowy groups within Israel and the United States who want to use this weapon to create a larger regional war. While some of the characters are based on people I have encountered during my years in the region the plot is complete fiction.

 

The book is called Deniable and is available on either the publisher’s website https://troubador.co.uk/bookshop/crime-and-thrillers/deniable or as an ebook or paperback on Amazon:

https://www.amazon.co.uk/Deniable-David-Edgerly/dp/1836283601/ref=sr_1_2?crid=3KBPZ27NGOB78&dib=eyJ2IjoiMSJ9.b5vsX61BiHbLYCopPG5x4-u2t9a_Z74nZ9vokNeI3sFEQF0C9hCwN9O94RW2YiP8441wloEdmEp44A0ynzTgGPo8SJnAK-Jp3a4kA8I9IwMFZDWxlQHdlvyDdSKgRDu4lvXrwKdttegCcCp84yDVpaoGzY4ivroQ-Dhin_xmyngUX1VRaGbb2u3ySLsssEQ1gxZQ3q2ZNWR78Glqafqqiid8VVIgHQ4zslY90U8o62Q.OLRHKn1IGu26Mu_cgQqQDE5qaBBbp6HLktidFoioLe4&dib_tag=se&keywords=deniable&qid=1749883399&sprefix=deniable%2Caps%2C166&sr=8-2

 If I had included a hypothetical attack on Iran or ill-disguised efforts to dislodge Palestinians from the West Bank and Gaza the editor would most likely have thrown the manuscript right back at me with snarky remarks about pushing fantasy theories.

Leaving aside questions of fantasy or reality these attacks do raise the question of Israel’s endgame. What exactly does it want to accomplish with the Iranian attacks or attempts to expel Palestinians from Gaza and the West Bank? Taken at face value – something people with any experience in the Middle East find very hard to do – Israel wanted to destroy Iran’s ability to make nuclear weapons and to decapitate the Revolutionary Guard. Or is the ultimate aim something much more ambitious, hitherto unthinkable, -- regime change in Tehran? Or did Israel merely wish to send a deadly message: ‘We can do this anytime we want. If you continue with the nuclear weapons program or using proxies to attack Israel, we will hit you time and time again until you get the message.’ While the attacks certainly took out the leader of the Revolutionary Guards and did indeed damage Iran’s nuclear facilities it remains to be seen if the damage is permanent or temporary.

 Other militant leaders can be found who might be a bit more careful about their personal security. Early reports indicate that the nuclear facilities were damaged but not destroyed. Most of them are apparently deep underground and it’s not clear how far Iran’s nuclear program was set back. As for regime change – I believe it is much harder than anyone thinks. Iranians may not love the Islamic regime but from what I have experienced they are very proud of Iran’s glorious history and would rather choke on sand before bowing to external pressure – especially from what they consider an upstart like Israel.

 The route that the Israeli jets took to get to Iran provides an interesting commentary on just how far the Middle East has changed in the last two years. The Israelis apparently flew over Syria and northern Iraq to reach Iran – very careful to avoid embarrassing Jordan or Saudi Arabia by using their air space. When Assad was in power and the Russians were firmly entrenched in Syria it would have been unthinkable for Israel to violate Syrian airspace with such impunity. The new regime in Syria is in no position – yet - to threaten Israel, and Russia is a non-factor after beating a hasty retreat from the region. Iraq is, well, Iraq, still beset with sectarian feuds. It cannot challenge Israeli jets momentarily violating its air space in the far north of the country where the central government has limited authority. The Israelis also took care to avoid Turkish air space. The Turks have a serious air force and would have strongly resisted any violation of their air space.

 The Iranian attacks momentarily shifted the attention from Gaza and the West Bank. Here, again, it is fair to ask about Israel’s end game. Israel is now almost impregnable with the strongest military in the region. It really has created the Iron Wall envisaged by one of the state’s early leaders Ze’ev Jabotinsky. No Arab state has the ability or desire to attack Israel. Iran is another matter, but Iran is not Arab and its ability to match action with its bellicose rhetoric currently is limited. Non-state actors like Hamas or Hezbollah – or their followers – will always be a threat. But perhaps the Israeli intelligence services will be better prepared than they were on Oct. 7, 2023.

 What sort of Israel do the religious/nationalist supporters of Prime Minister Netanyahu plan when the shooting is over? They have made no secret of their desire to annex both the West Bank and Gaza. Then what? What happens to the five million Palestinians living in those areas? The far right in Israel would like to encourage or force the Palestinians to leave. The open warfare in Gaza is one such form of ‘encouragement’. The relentless pressure of ever-expanding Jewish settlements in the West Bank and the sporadic violence against Palestinian residents can be seen as another attempt to squeeze the Palestinians out by creating unbearable conditions on the ground.

 There is one major problem with that plan. Where, exactly, will the Palestinians go? Neighbours like Jordan and Egypt have made it clear they will not accept millions of additional Palestinians in their country for fear of creating internal instability. Syria? Lebanon? Sudan? Libya? Not too likely. I wonder if the far right in Israel is aware of the tragic irony with this issue. It was the Nazis in the 1930s who searched hard for someplace to deport the Jews in Germany. Failing in that effort they resorted to extermination.

 Assuming a two-state solution is no longer feasible, annexation of the West Bank and Gaza with most of the resident Palestinians creates a major problem for Israel. The Palestinians and Moslems who are Israeli citizens will then outnumber the Jewish population of Israel. What then? Will Israel become a heavily armed, isolated, apartheid state to protect its identity? Or will some as-yet unknown genius develop a workable, loose system of cantons where Palestinians are guaranteed security and some form of self-government in return for leaving foreign relations and external security to the Israelis? This problem has festered for more than a century as numerous statesmen, countless ‘white papers’, conferences and UN resolutions have failed to find an answer. Is it possible that the current military cataclysm will cause both sides to recognize that continued conflict solves nothing at all and perhaps the time has come for serious negotiation? It is far too early to tell. But one can at least hope.

Mediterranean Standoff Shows Little Sign Of Resolution

 

So far Greece has played a masterful hand against Turkey in the Eastern Mediterranean standoff. It has collected an impressive list of allies against Turkish attempts to claim a larger slice of the maritime territory and has used this tension to build up its armed forces.

 

            It has also been extremely fortunate in its opponent. Turkish President Tayyip Erdoğan is extremely unpopular outside Turkey and has diplomatically isolated his country. I have found only one country, Azerbaijan, that half-heartedly supports Turkish claims over maritime sovereignty. He has not only alienated most of the European Union members but has also alienated the vast majority of Arab countries who are happy to align themselves with Greece. Erdogan was furious when the United Arab Emirates and Bahrain recognized Israel. But, as usual, he glosses over inconvenient facts. Turkey was one of the first countries to recognize Israel and still has several daily flights to Tel Aviv. He has always portrayed himself as the leader of the Muslim Middle East but those claims have now drifted into fantasy land.

 

            Even the loudly trumpeted maritime pact with the UN-recognized part of Libya remains stillborn. In order to become effective the pact had to be ratified by parliaments in both countries. The Turkish parliament quickly ratified it but so far the Libyan parliament has rejected it. Therefore that agreement has no legal standing and is just another baseless claim by Erdoğan.

 

            Beyond these various maritime agreements Erdoğan has other problems that limit his options. Turkey is bogged down with military adventures in Syria and Libya with no end in sight. Keeping a large part of its army in Syria and supporting mercenaries in Libya is an expensive exercise – one the country really cannot afford. After years of mismanagement the Turkish economy is in tatters and the currency keeps sinking to one record low after another. Unemployment is rising and inflation is running well above the Central Bank’s benchmark interest rate. Erdoğan has a pathological hatred of interest and rebuffs every attempt by the Central Bank to counter currency weakness by increasing interest rates. According to his logic the currency is not sinking because of his own mismanagement but because of machinations by the so-called interest rate lobby, the Free Masons, George Soros (he of the infamous anti-Turkish Jewish lobby), the Knights Templar and other assorted malign foreign forces.

 

            But beneath the bellicose language Turkey does have a point in all these discussions about maritime boundaries. The sad thing is that if the Turkish position were presented by someone other than Erdoğan people might actually pay attention and try to solve the problem intelligently. But no one is inclined to give the swaggering neighbourhood bully such consideration.

           

            The Greek position may be within the strict letter of the law but often seems unnecessarily provocative. When you look at a map of the Aegean there is a string of islands extending along the Turkish coast from Mytilene in the north all the way down to the tiny (12 square kilometres) island of Kastellorizo in the south. Then, of course, there’s Cyprus off Turkey’s southern coast. But that’s another long, complicated story. These islands enable Greece and Cyprus (at least the internationally-recognized part of the island) to claim sovereignty over a large part of the Aegean and much of the  eastern Mediterranean.

           

            Understandably these claims infuriate Turkey, which has a long coast line of its own stretching from the northern Aegean all the way around to the eastern edge of the Mediterranean, because it feels hemmed in and denied access to potential maritime riches by a chain of relatively small islands. The various laws and treaties governing maritime rights can fill at least one very large bookcase. Suffice it to say that Greece and Turkey have conflicting views on the application of these laws and treaties. Just one example – Greece has signed the United Nations Convention On The Law Of The Seas which states that Greece is entitled to an Exclusive Economic Zone around the islands. Turkey has not signed this convention and says that convention applies only to the countries that signed it.  In fact Turkey does not recognize a legal continental shelf and EEZ around the Greek islands. As far as Turkey is concerned the continental shelf should be measured from mainland Turkey and not the adjacent Greek islands.

 

            Beyond these migraine-inducing legal arguments there is the even more fundamental question about the size of the resources under the sea. While significant gas fields have been discovered in the indisputably Israeli and Egyptian zones there is serious question about resources near Cyprus. Exploration off Cyprus has so far yielded disappointing results. And nothing has yet been found in the Aegean. But let’s say a major field is discovered. What exactly do you do with it? Some people talk grandly about an undersea pipeline extending from the waters off Cyprus to Crete or Rhodes and then somehow to the Greek mainland and onto Italy. Such a pipeline is astronomically expensive and at today’s natural gas prices completely unrealistic. Ah, you say, send it to Cyprus where it will be converted into LNG (liquified natural gas) and sent on its way in ships. Too bad no such LNG facility exists on Cyprus. And it’s doubtful anyone would build one unless a major field is discovered and gas prices increase sharply.

 

            Looking at a map and ignoring politics for a minute the obvious solution is a pipeline through neighbouring Turkey, a country with multiple pipelines and only 40 miles from Cyprus. Logical? Perhaps. But this is the Aegean/Mediterranean region that has a much longer history of conflict than of logic and cooperation. One might hope for a breakthrough but that would require more statesmanship than is visible right now.

           

This Is A Very Old Turkish Film With Perhaps A Different Ending

The Turkish people should be familiar with the currency crisis now rocking their country. It is not as if they haven’t seen this film before – lots of times. During the un-lamented 1990s the country was plagued with serial economically illiterate and incompetent governments while inflation soared and the currency melted like ice cream in July. After each bout of near-100% inflation whatever government was in charge – and there were many -- would sheepishly head for the IMF to arrange a bail-out. After pledging absolute obedience to the IMF rules the government would take the money, quickly forget its earlier pledges, and the merry-go-round would start again.

            Turkish merchants and businessmen are very clever indeed, and they quickly adapted their operations to the economic realities they faced. Many merchants and hotels simply gave up on the Turkish Lira and began pricing in dollars and Euros. This is still true. The standing joke was that the busiest person in a supermarket was the employee who had to run around the aisles adjusting prices.  Tourists used to marvel at becoming instant millionaires when they exchanged their hard currency for the pillow-soft Turkish Lira.

            This merry-go-round ended abruptly in 2001 when the currency and interest rates exploded out of control. By this time the people were well and truly fed up with the situation.  As soon as they got the chance they voted overwhelmingly for the Justice and Development Party (AKP) by itself to replace the hapless coalition governments that had disastrously mismanaged the economy.

Unfortunately, this chart of the USD/TL tells a very old story

             Now, after almost 17 years of relative stability under a single-party government the country finds itself paying the price for economic follies that had been covered up for years by the global environment of ultra-low interest rates and generous liquidity. Turkish companies loaded up on what was then cheap foreign currency debt, the country benefitted from low oil prices, and relatively cheaper imports began to replace domestic goods. Despite worries about a widening current account deficit the country did not have much trouble rolling over the roughly $250 billion in annual debt re-payments.

            That has all changed within the last year. Suddenly cracks appeared in what once seemed like Turkey’s strong economic foundation. Voices of concern about the country’s debt load grew louder, the current account deficit increased, oil prices began to rise (bad news for a country that has to import every drop of oil and every cubic meter of natural gas), inflation crept back into double digits, foreign direct investment dried up. The once-stable currency began to weaken, and those voices of concern grew louder. Finally, the hapless Central Bank screwed up the courage to raise interest rates. But not enough to support the currency.

            Just like the 1990s you say. Surely the IMF will ride to the rescue and save Turkey from the consequences of its government’s policies. Not at all. This time is truly different. Foreign commentators regularly opine on what the Turkish government should or must do to stem the rout of the currency. Using those words should or must - dripping with righteous condescension – with this particular Turkish government is like waving a red flag in front of a bull. What, you ask, is so different this time? Plenty.

            For openers, the structure of the Turkish government has changed from a parliamentary democracy to a presidential system where the president has supreme – and I mean supreme power. He alone makes all decisions. Ministers may have the power to order their own lunch, but that’s about all. And this president, Tayyip Erdoğan, is a supremely stubborn man with deep-seated – if very bizarre – views about the economy. For one thing, he hates interest rates and only very reluctantly allows the Central Bank to increase them. He has convinced himself – if no one else – that high interest rates create inflation. So much for classical economic theory. It’s also true that higher interest rates would hurt his heavily indebted economic allies in the construction business. But that’s another topic.

The son-in-law, and Finance Minister, tries to explain the unexplainable

            Furthermore, because Erdoğan or his henchmen control virtually every media outlet in Turkey there is very little – if anything -- in the local media about the seriousness of the economic crisis. Erdoğan has successfully changed the narrative from his economic incompetence to the insidious attempts by foreign interests, a.k.a. Americans and ‘Zionists’, to undermine Turkey. Local media love to report how their glorious leader is standing up to American pressure to release the unfortunate American pastor now incarcerated on unspecified, unverified charges of helping the 2016 coup plotters. Trump has played right into Erdoğan’s narrative by slapping additional sanctions on Turkey for failure to release Pastor Brunson who – not incidentally – belongs to the same evangelical wing of the church as Vice President Pence. Furthermore, Trump needs the evangelicals to stay with him for the upcoming mid-term elections.

Whatever happened to this once-cozy relationship?

            In short, it is inconceivable that Erdoğan would resort to the IMF for help in this crisis. To do so would mean admitting his earlier policy errors and undermine his narrative about foreign plots against Turkey. This would amount to an unbearable humiliation. In addition, the IMF would undoubtedly impose conditions that are an anathema to Erdoğan’s  ‘unique’ economic theories.

            So what happens now? First, he will thrash around and plead with the Russians, Chinese, Qatar and anyone else who will listen for assistance. The Russians can’t – or won’t -- do anything. The Chinese are much too intelligent to get caught in that mess. And I’m not sure that even Qatar wants to get that deeply entangled. Then he could print money and ignore the ensuing inflation. Or he could impose capital controls and/or force conversion of the foreign currency bank accounts into Turkish Lira. Both of these steps would cripple the economy and send it back to pre-1980s when the Turkish economy was essentially closed. But Erdoğan could justify these moves by saying the country is in an ‘economic war’ and he has to impose these measures for national defence. Enough people would buy that rationale to keep him in power. Just look at how long Maduro has remained in power in Venezuela despite the economic disaster there.

            Unlike 2001 there is not even the glimmer of political opposition to Erdoğan. The main opposition party CHP is busy eviscerating itself with internal feuds, and the nationalists are rallying around the flag. That leaves the Kurds, who are torn in several different directions. So Erdoğan is pretty much free to do what he wants. Unfortunately, the main losers will be the Turkish people who will suffer severe declines in income. But as long as Erdoğan can maintain the ‘evil foreigners’ narrative national pride will trump (as it were) economic realities.

Turkey's Already Difficult Path Just Got More Difficult

The only surprising thing about the outcome of yesterday’s Turkish referendum was just how close the result was. Given his total domination of the media, use of thuggish gangs to intimidate opposition rallies, jailing political opponents and journalists Turkish President Tayyip Erdoğan should have won his power grab by 20 points or more. Reflecting the complete split and sharp divisions of Turkish society he won by less than 3 percentage points. And the opposition is claiming that at least 2.5 million invalid votes were cast in favour of the constitutional changes. Because Erdoğan and his cronies control every branch of government it is very doubtful that those claims will get anywhere.

The map shows the huge problem Erdoğan faces. All the big cities, the Aegean coast and Kurdish areas
voted against him.

            A leader genuinely interested in representing the entire country would pay close attention to this vote, especially the fact that all major cities voted against the constitutional changes. This was the first time ever that Istanbul, for example, had voted against Erdoğan. But introspection and course alteration to meet the demands of 50% of the population are not on Erdoğan’s agenda. He is now free to move Turkey even further from the ideals of Europe and closer to the dictators and petty despots of Central Asia he admires so much.

            He never liked the European Union with all its emphasis on thorny issues like human rights, freedom of speech, or independent judiciary. He loved to whip up the crowds by railing against any European leader who had the temerity to criticize him. He promised to replace the EU’s Copenhagen criteria with his co-called Ankara criteria, which most likely include stiff jail sentences for any of those pesky EU leaders who set foot in Turkey.

Erdoğan votes in the referendum

            One would like to think that the better-than-usual results achieved by the opposition would encourage them to capitalize on this showing by getting better organized and broadening their appeal to all segments of Turkish society.

On one level, Turkish voters continued their vain search for a strong leader a Man on a White Horse who can solve all their problems with the flick of his wrist. This part of the society refuses to accept that the complicated process of improving the country starts with themselves and includes truly independent institutions like the judiciary, the press, the Central Bank, and above all else a quality education system. But that’s hard work. Much easier to rely on the strong man. However, it was encouraging to see that almost 50% of the population rejected this simplistic notion and demonstrated – against all odds – that they valued a real representative democracy, with all its faults. Perhaps they can keep the flame of democracy alive in Turkey.

            His cynical tirades against Europe paid off for him as the referendum results showed most of the Turks who voted in Germany or the Netherlands voted in favour of the constitutional changes. In fact, without these votes Erdoğan may well have lost the referendum. Most of these Turks may have no intention of returning to Turkey, but they told a German journalist friend of mine that Erdoğan made them ‘feel proud to be Turkish.’ It’s a pity that they don’t realize they were just useful tools for Erdoğan and are much better off in Germany or the Netherlands – where they enjoy the full spectrum of rights and economic opportunities -- than they ever would be back in Turkey.

            In all his push to resemble his Central Asia idols, Erdoğan faces one enormous problem – a problem he can’t solve with a jail sentence. The economy now resembles Venezuela-without-the-oil, and is eroding like sand under his feet. The budget deficit is increasing rapidly, unemployment is climbing, inflation is back in double digits, and inward investment has dropped sharply. To add insult to injury, Iran is now the favored destination for many European companies. It is becoming increasingly difficult to fund Erdoğan’s massive public spending projects, projects that have enriched his family and several of his close associates over the last several years. Many people have spoken about this ‘charmed circle’, but a recent analysis by Rainer Hermann in the Frankfurter Allgemeine Zeitung described it in great detail. But now, funding them has become a real problem. Money is disappearing from the Treasury. Erdoğan has had to resort to such desperate tactics as issuing government guarantees of profitability for the favored contractors or demanding the state banks lend to these projects when private banks refuse. He has also forced state companies into a so-called Wealth Fund which will enable him to re-direct the cash flow and borrowing capabilities of those companies into ever-increasing public works projects to keep the ‘charmed circle’ happy and rich – at the state’s expense.

            What comes next? Will massive statues of Tayyip Erdoğan begin to dot the landscape of Turkey?  Will his likeness be sculpted onto a cliff, like Mount Rushmore in America? Will he change his name to something like Türkbaşɩ, Chief Turk? Who knows? And more important, how will he react when faced with serious economic, international or military problems of his own making? He has already reduced the number of Turkey’s friends to such a level that they can hold their annual convention in a phone booth. Who will he call? Donald Trump? Vladimir Putin?

            For the immediate future the Turks can only wait nervously while Erdoğan determines just how to play his narrow win. Will he snuff out Turkish democracy completely or will he uncharacteristically reach out to the millions of Turks who actually like their democracy?

Turkey Is Very Hard To Fit Into Anyone's Rigid Mold

Turkey was the subject of two separate talks in London last week. One conference in Whitehall with noted speakers from academia and diplomatic circles covered the usual ‘wither Turkey and the West’ question that has been plaguing Western statesmen for several hundred years. It was interesting to hear the same sort of concerns that must have resonated in the same halls more than 150 years ago when what was left of the Ottoman Empire was regarded as something necessary – but not quite what you would bring into the front parlor.

            “However disagreeable its rulers may be, we cannot afford to let Turkey and the straits fall into the hands of the Russians. We must continue our efforts to bring Turkey onside and not let the Russians grab everything.”

           

           Talks in last week’s conference weren’t much different. “We know that President Tayyip Erdoğan is difficult to deal with and not quite anyone’s idea of a real democrat. But we simply must carry on with some sort of dialogue. We don’t want to wake up one morning and find that the country has jettisoned the West in favour of Putin.”

            True enough. But treating Turkey as a distant, dyspeptic relative who shows up uninvited for a long weekend in the Cotswolds obscures the powerful social, political and economic forces driving the country today. It is those forces, not the temporary rule of Tayyip Erdoğan, that will determine the future of Turkey. With all the headlines and outbursts surrounding Erdoğan it is sometimes easy to forget that the country is much, much more complex than the bombast of its leader.

The reality of modern Turkey belies the simplistic, one-dimensional characterization that Erdoğan and many outside observers love. Terms like ally, enemy, religious, secular, democrat, autocrat have absolutely no meaning by themselves. Turkey can, at the same time, be one or all of these things. Trends like rising education levels, the growing middle class, deepening interaction with the global economy, sharp social and political divisions make it impossible to slot Turkey into a rigid mold. Anyone who thinks he begins to understand modern Turkey would be well advised to stop and think again.

            It was the internationally-acclaimed author Elif Şafak who took us beneath the dry diplomatic concerns about Turkey and offered a clear-eyed, sympathetic view of that reality. The talk at one of London’s leading bookstores ostensibly was to discuss her most recent novel, Three Daughters of Eve. The book discusses the lives of three Moslem women – one pious, one hostile to Islam, and one unsure where she stands on religion -- studying at Oxford.

Elif  Şafak

             Şafak also shared her concerns and frustrations that the vibrant intellectual and social life that once dominated big cities like Istanbul and Ankara is becoming stifled under the rigid vision of Erdoğan. Conversations at dinner parties and other gatherings are stilted because people feel extremely nervous about expressing their real thoughts. “Let someone hear you say the wrong thing, and you could wind up in prison” seems to be ruling fear. No one is allowed to have ‘doubts’ any more. To be seen or heard ‘doubting’ Erdoğan’s version of reality is to invite close scrutiny by your neighbors or the authorities. Forget about humor. Jokes or cartoons about Erdoğan are just a one-way ticket to a jail cell.

            She also bemoaned the tendency of Turkey’s current rulers to present the country in simplistic nationalistic, religious and social terms. The Turkey she described, and one I experienced in more than two decades in the country, is not the un-differentiated, homogeneous mass that Erdoğan and his acolytes would have people believe. Turkey is in fact a rich, heterogeneous mixture of people and religion. Yes, most of the people are Moslem, but there are several shades and varieties of Islam within the country. Even the subject of nationality is not straightforward. The question of who, exactly, is a Turk becomes even more complex when you consider the question of the millions of Turkey’s Kurdish citizens.

            While people are proud to call themselves citizens of the Turkish Republic they are equally quick to point out their unique family histories. Some are indeed direct descendants of the Turks who swarmed out of the Altai mountains more than 1,000 years ago. Some of these families proudly claim direct links to the non-Ottoman tribes that controlled different parts of Anatolia. Others claim their heritage from the far-flung regions of the Ottoman Empire: the Balkans, Crete, Yemen, Egypt, mainland Greece. Many of the villages along the Aegean coast that were vacated during the population exchange with Greece in the 1920s were re-populated with Turks driven out of their homes in the Balkans.

 

Modern Turks trace their roots from all over the Ottoman Empire

            Erdoğan also ignores the complex reality of the modern Turkish economy and how much it is intertwined with the global economy. Under his mis-management the economy may be sliding fast, but it remains closely tied to the wider world in critical areas like finance and trade – including trade in those very basic raw and intermediate materials that keep Turkish factories working.

            Given Erdoğan’s overwhelming control of almost all political discourse in Turkey today it is revealing that estimates about the outcome of the referendum giving him total control are as close as they are. But perhaps the very complexities he ignores in his quest for this control could result in his unexpected defeat. Even he is learning that ‘one-size-fits-all’ does not really apply to Turkey.

Economic Realities Begin To Hit Home

Forget the usual loud-mouthed bleating from Turkish President Tayyip Erdoğan about Turkey’s exclusion from the coalition fighting to retake the Iraqi city of Mosul from the sadistic Islamic State. Even if he is right, almost everyone outside Turkey has become sick and tired of his bombast about Iraq and several other topics. Simply put, other leaders and diplomats are no longer willing to separate the message from the messenger.

But the real news out of Turkey has nothing to with Erdoğan’s bruised amour-propre, coups and counter-coups. No, the real news as discussed recently by two well-known journalists is the widening fault line in Turkey’s economy.

Ahu Özyurt, notes in a recent column that the proverbial man-in-the-street is suffering.

“In the most historic shopping mall of all, namely the Grand Bazaar in Istanbul, 600 shops have been closed because of an ‘unspoken’ economic crisis. Four decades ago such news toppled a shah in Iran.”

Hundreds of shops in the Grand Bazaar have closed

She notes that others from hairdressers, to landlords, to posh restaurants on the hills overlooking the Bosphorus are also suffering from a lack of customers.

A respected jeweller with shops in the Grand Bazaar and an up-market shopping center complained that “There are no Western tourists coming, no Western businessmen, no Japanese either. We are off the cruise calendar until 2018. The only shoppers here are Arabs that stay in the hotel and use the gift cards given by the hotel to buy clothing. There is no light at the end of the tunnel.”

In another column she quotes the founder of a menswear clothing line as saying that shopping-mall driven consumption has plunged drastically. In an attempt to ease the high consumer debt burden the government said debt could be restructured into 70 installments – albeit at high interest rates. But a young banker notes that such steps are not enough. “So many people have applied for debt restructuring because they know they will never be able to pay it even if it was 140 months,” a young banker said.

One tell-tale cause of this consumer distress is that the unemployment rate has reached double digits, and Özyurt notes that the unemployment rate among university-educated youth has risen to 13%.

Economist Güven Sak writes that at a time when the Turkish government is countering a myriad of real or perceived enemies it is making itself even more vulnerable to outside influence.

“Turkey’s domestic savings rate was around 14% for the latest year on record. It’s around 50% in China, 30% in Russia, 20 % in Poland and South Africa. So 14% is a low number, even for a developing country, and it is declining. We all know that living on other people’s money makes Turkey more vulnerable, yet we plan to go ahead with it.”

Sak continues by noting that Turkey’s growth rate has slowed and its current account deficit has increased. “The global financial crisis has made Turkey a more vulnerable country.”

“So is there any wonder why the Turkish Lira has been depreciating rapidly again this week? Forget about President Erdoğan’s Mosul remarks or the Moody’s downgrade for a minute. . . . Look at the high risk strategy of low growth and less savings. It is bad driving that is pulling the lira down.”

Sadly, none of this economic reality has so far penetrated Erdoğan’s virtual world dominated by foreign (read American, Israeli and European) conspiracies aimed at thwarting Turkey’s growth, grandiose regional dreams, and his long-standing desire to create a ‘Turkish style’ executive presidency – in other words one without any of the checks and balances that define a modern democracy. Finance Minister Mehmet Şimşek, a rare voice of economic rationality in the government, appears to have lost whatever small degree of influence he may have once had. His challenge now seems to be keeping a straight face when telling sceptical Western bankers that black is white.

Erdoğan and the ruling Justice and Development Party (AKP) have no serious domestic political opposition, and are pretty much free to make whatever changes they want in the country’s political structure regardless of any external pressure or criticism. The economy is a different matter. Ignoring financial realities and global volatility sooner rather than later will lead directly and quickly to economic pain for ordinary citizens.

What Comes Next -- Loyalty Oaths?

The real damage of last week’s abortive coup in Turkey is only now becoming apparent. Using the excuse of the coup, Turkish President Tayyip Erdoğan has moved to implement political and administrative changes he could not get through the normal political process. Key to this move is purging thousands of civil servants, educators, judges, army officers who just might hold an opinion he doesn’t like. Then he declares a state of emergency.

The ‘cleansing’ was so swift and so thorough that very few people doubt these lists had been prepared long before the coup attempt. Now the state of emergency will give him unprecedented and unchecked powers to transform the country any way he likes. It would not be surprising if a new condition of military or civil service employment is swearing an oath of loyalty to Tayyip Erdoğan.

Could it get this bad in Turkey?

While the political damage is bad enough, the real long-term damage is to the country’s educational system. Erdoğan simply is not comfortable around very well educated, well-travelled people – people who tend to ask awkward questions. Thousands of teachers have been fired, university rectors forced to resign, and anyone identified as an ‘academic’ – formerly a title of some pride – has been banned from leaving the country. Erdoğan considers universities as breeding grounds for opposition to his grand ideas of a reformed Turkey. The only problem is that his vision of reform doesn’t include things like dissent, innovation, creativity, or – God forbid – smoking and drinking. Oh, and by the way, in Erdoğan’s Turkey, each bride would produce at least three children.

He gave lip service to the idea of more universities and then failed to staff them or staffed them mainly with his henchmen whose idea of a ‘proper’ student was someone who kept his mouth shut and did what he was told. A vice-rector of one of these new universities was quoted as saying how much more he preferred the company of illiterate peasants to his educated colleagues.

Turkey used to have a university system that proudly stood out in the region. Universities like the Middle East Technical University, the private Koç and Sabancı universities, Bosphorus University and others were centres of real scholarship. Now their very independence, the independence without which real scholarship and research do not exist, is under threat. Erdoğan cannot stand dissent or free thinking in any form. And can you think of any self-respecting university where dissent and free thinking are not critical parts of the entire process? He has yet to grasp the fact that some pretty good ideas emerge from just such messy dissent.

Erdoğan doesn’t care much about cultural creativity because such creativity is by definition messy and rebellious. One gets the impression that he and his followers much prefer the traditional sound of the Janissary band to the rebellious and defiant notes of Beethoven’s 5^th Symphony.

But Erdoğan should care a great deal about economic creativity and innovation – without which the country will remain buried in the Third Division. His loud chorus of supporters loves the statistics that Turkey is so much better off now than when the ruling party took power in 2002. True enough, but completely irrelevant. When the ruling Justice and Development Party took over the country was in a deep depression with a ruined financial system. By comparison, anything would look good. But the main reason for the improvement is that the government’s economic team followed the International Monetary Fund’s recovery prescription to the letter. By about 2010, Erdoğan got tired of those constraints and thought he could run things better. Big mistake.

The current trend is not healthy. Inflation is creeping back up, the currency is depreciating rapidly, unemployment is up, investment is down, growth has slowed, and the private sector is heavily indebted in foreign currency. Not a recipe for strong performance.

But more than the raw numbers, the very structure of the economy should concern any serious official. The Turkish economy is filled with yesterday’s businesses -- businesses like construction, cement, bottling, simple metal bashing, or assembly of someone else’s products. None of these produce much value added. Turkey has a strong food processing industry, but take a look at the equipment all those companies use. You will have a very hard time finding any part that is Made in Turkey.

Where is the innovation? Where is the investment? Where are the new, ground-breaking industries – industries that didn’t exist a few years ago and will lead the way into the future? Part of the answer is that Turkish businessmen tend to prefer construction – with a fairly definite payoff – to the potential, if unsure, rewards of investing in innovation.

Beyond investment, such innovation requires the very messy, creative, free-thinking environment that Erdoğan hates. Can you imagine that icon of free thinking, Steve Jobs, flourishing in an environment where dissent and free speech are crushed? Or just imagine Einstein with his radical theory of how the world really works flourishing in the oppressive Turkish environment.

Turkey does not lack for brilliant, talented people. But it is very hard to see them sticking around in such a stifling cultural, academic and economic environment. It is much easier to see that brilliance and talent flourishing in other countries.