Moon of Alabama Brecht quote
August 10, 2018

How Turkey's Currency Crisis Came To Pass

Updated below

President Erdogan of Turkey often asserts that 'foreign powers' (meaning the U.S.) want to bring him down. He says that the 'interest lobby' (meaning (Jewish) bankers), wants to damage Turkey. He is somewhat right on both points.

Since last week the Turkish lira is on an extended down-slide. Today alone it lost nearly 20% of its value. It will likely take the Turkish economy with it and Erdogan need someone to blame for it.

But while foreign powers and banks surely use the crisis for their own aims, it its Erdogan's economic policy that is foremost to blame. The long boom he created with borrowed foreign money is finally turning into a bust.

Here is a recap of how it came to this.

The larger political picture:

During the U.S. induced 'Arab Spring' U.S. President Obama joined with Qatar and Turkey in an attempt to install Muslim Brotherhood governments throughout the Middle East. When Hillary Clinton left the position of Secretary of State and John Kerry took over, the Obama administration changed its position. It endorsed the coup against the elected Egyptian President Morsi and it refrained from actively using the U.S. military to bring the Syrian government down.

Especially with regards to Syria Turkey was left holding the bag. Erdogan had bet on the U.S. plan to overthrow the Syrian government. His invitation of Syrian refugees and support of radical Islamists fighting in Syria had cost a significant amount of money and brought a lot of trouble with it. The Turkish trade route through Syria to the Gulf countries was closed. Economic relations with Iran suffered. Erdogan needed to get something out of it.

But U.S. policies had turned against him. The Gezi protests in 2013 had all the signs of a  U.S. color revolution attempt. They failed. In 2014 the Obama administration began to support the Kurdish PKK/YPG forces in Kobane, east Syria. The PKK is a terrorist organization which tries to create its own country in the eastern part of Turkey, north Syria and north Iraq. The U.S. alliance with and arming of the Kurds created a PKK/YPG dagger pointed at Turkey's underbelly.

In response to a Turkish led attack on Latakia and Idleb in mid 2015 Russia deployed its forces to Syria. In hindsight it was the point where Erdogan's game in Syria was over. The U.S. would not launch a war against the nuclear armed Russia. Syria would not fall. But Erdogan played on.

In November 2015 the Turkish air defense ambushed and shot down a Russian jet. Russia responded with a total stop of all economic exchanges with Turkey.  These were not the needle prick sanctions the U.S. often uses, but a total abrupt end of all trade relations including millions of Russian tourist visits in Turkey. The economic damage for Turkey was huge. Erdogan had to submit to Russia. Putin was gracious and allowed Erdogan to save his face. The Russian government offered a lucrative pipeline deal and other sweeteners. In mid 2016 the CIA arranged for a hard coup against Erdogan but Russian intelligence warned Erdogan and the coup failed. Turkey is asking the U.S. to hand over Fethullah Gulen which it accuses of instigating the coup. Gulen is a Turkish preacher with a large following and a long time CIA asset who resides in Pennsylvania.

Flipping Turkey from the "western" to the "eastern" camp can be seen as part of Russia's Black Sea strategy. It is repeat of a mid 19th-century plan executed under Tzar Nicholas I. The current plan is so far successful. But it collides with the U.S. plans to revive NATO for another lucrative Cold War. Thus the current U.S. plan is to use Turkey's economy problems to finally bring Erdogan down.

The larger economic picture:

Outside of his country Erdogan is much disliked. His arrogance and autocratic style do not leave a good impression. But within Turkey he had a very successful career and continues to be supported by a majority of his people. The reason behind this is the long economic boom he created.

In 2002, when Erdogan became prime minister, Turkey was recovering from a recession. Erdogan's predecessor Kemal Derviş had implemented some significant reforms.  Erdogan took credit for the results. He additionally discarded a number of cumbersome regulations and cleaned up the bureaucracy. He invited foreign investment. The program worked well. The economy grew at a fast pace and many Turks were pulled from poverty. A few became rich. The early years of economic success under his rule are remembered well. Inflation was steady at a relatively low rate even while money was freely available and the economy grew. But Erdogan's expansive economic program also made Turkey more vulnerable.

Turkey has a chronic current account deficit. It imports more goods and services than it exports and has to borrow foreign money to pay for the difference. In the early Erdogan years a lot of money flowed into Turkey. But it was invested in unproductive matters. New housing expanded a booming Istanbul. New splendid bridges and airports, lots of shopping malls and more than 10,000 new mosques were build as well as a 1,000 room palace for Erdogan to use. His cronies in the building industry got very rich.

But productive industries that create products to export to other markets are harder to build than mosques. Erdogan never made them a priority.  Thus Turkey's current account deficits grew from 1% of its GDP to about 6% of GDP. This was clearly unsustainable.

During the boom the Turkish central bank interests rates came down from earlier heights but were still kept higher than elsewhere. The industries and banks borrowed in euros or dollars which carried less interests but this also meant that they took on a high currency risk. If the Turkish lira was to fall the loans would have to be paid back in hard currencies from revenue made in a diminishing lira.

Under normal circumstances Turkey's central bank would have engineered one or more mild recession during the 16 year long boom. Some of the accumulated waste and bad loans would have been discarded. Consumption of foreign goods and the current account deficit would have come down. But Erdogan has a curious understanding of economic theory. He believes that high interest rates cause inflation.

Every time the Turkish central bank increased its interest rate to keep inflation in check and to stop the lira from falling Erdogan found harsh words against it and threatened its independence. The relatively cheap money kept flowing, the Erdogan boom kept going, but the structural problems became worse.

Since early 2017 inflation in Turkey picked up. It since increased from 8% to now 15%. The currency went down. The value of 1 lira fell from US $0.30 in 2016 to US $0.20 a week ago. During the last few days it crashed another 25% to US $0.15. It now takes more than 2,000 lira to pay back the principal of a 1,000 lira loan taken out in U.S. dollars in 2016. The Turkish industries and banks have borrowed some $150 billion in foreign currencies. Only those who export most of their products in hard currencies will be able to pay back their loans. The others are practically bankrupt.

The bill for the long boom is coming through. The Turkish lira is crashing. No foreigners want to loan Turkey more money. For taking such a high risk they demand extremely hight interest. Turkey will soon be unable to pay for its imports, especially for the hydrocarbon energy it needs. Unfriendly relations with the United States will make it difficult to ask the International Monetary Fund (IMF) for an emergency loan. It would come with very harsh conditions such as demands to 'reform', i.e. end, the benefits Erdogan has channeled to his followers.

The current escalation:

The escalation of the currency crisis during the last week coincided with the escalation of a minor conflict with the United States.

After the 2016 coup attempt Turkey imprisoned U.S. pastor Andrew Brunson, who had long worked in the country, and charged him with terrorism. Last week a deal was arranged to exchange Brunson for a Turkish person held in Israel on terrorism charges. Turkey had expected more from the deal. It wants to free Mehmet Hakan Atilla, a Turkish banker, who the U.S. imprisoned for having breached U.S. sanctions on Iran. (He indeed did so by arranging a gold for oil trade with Iran. A trade from which Turkey, and especially Erdogan's immediate family, profited.)

Last week the U.S. side says that Erdogan went back on the exchange deal:

The deal was a carom shot, personally sealed by Trump, to trade a Turkish citizen imprisoned on terrorism charges in Israel for Brunson’s release. But it apparently fell apart on Wednesday, when a Turkish court, rather than sending the pastor home, ordered that he be transferred to house arrest while his trial continues.

Trump and the evangelical vice president Pence went berserk:

Thursday morning, after a rancorous phone call with Erdogan, Trump struck back. The United States “will impose large sanctions” on Turkey, he tweeted. “This innocent man of faith should be released immediately.”

Vice President Pence chimed in, saying in a speech at a religious conference that Turkey must free Brunson now “or be prepared to face the consequences.” Secretary of State Mike Pompeo called his counterpart in Ankara.

The U.S. went on to sanction two cabinet ministers of its long time NATO ally. But Erdogan would not give in. The markets reacted to the public sanctions and counter-sanctions threats. The lira began to crash from 4.80 lira per dollar to 5.20 per dollar. On Wednesday a Turkish delegation traveled to Washington to further negotiate the issue but the talks failed. The lira went to 5.50 per dollar. The financial markets became alarmed. The fall out of the spat threatens to impact European banks.

This morning Erdogan held a speech in which he dismissed fears of a lira crash:

“There are various campaigns being carried out. Don’t heed them,” Erdogan said.

“Don’t forget, if they have their dollars, we have our people, our God. We are working hard. Look at what we were 16 years ago and look at us now,” he said.

Erdogan said he would not "surrender to economic hitmen". The banks which have loaned a lot of money to Turkey might understand that as a threat to default on Turkey's debt.

At noon the lira was falling minute by minute at a 20% per day rate. Erdogan's son in law Berat Albayrak, who was recently made finance minister, held a planned speech on the economy. He was expected to give some numbers on the deficits and to name some concrete measures the government would take to end the lira problem. But he refrained from doing so. He tried to calm the markets by claiming that the Turkish central bank is independent and would act as necessary. No one believes that the central bank in Turkey can act without Erdogan's approval. Erdogan is a self-declared enemy of high interests and the central bank did not intervene today when it was urgently needed.

In the mid of Albayrack's speech Donald Trump personally intervened via Twitter:

Donald J. Trump @realDonaldTrump - 12:47 utc - 10 Aug 2018
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!

Steel is one of Turkey's biggest export products. The U.S. imports $1+ billion worth of Turkish steel per year. The White House later said the these tariffs are tied to security, not to trade.

Meanwhile Erdogan held a phone call with the Russia's President Putin to "discuss the economic ties". He may have asked for an emergency loan.

Meanwhile the lira dropped to 6.80 for a dollar.

Erdogan then gave another speech in which he lambasted the U.S. pressure without naming Trump or mentioning his tweet.

At the end of the day the lira stood at 6.50 to the dollar after 5.50 yesterday. Turkish stocks were down some 2%. Stocks of some Turkish banks and steel producers fell 15%. Spanish, Italian and French banks, which lent tens of billion Euros to Turkish banks, also lost. Bloomberg documented today's tic-toc in a live blog.

Where from here:

Erdogan now has the weekend to discuss the issue with his advisors. If no measures are taken by Monday morning, today's crash will gain pace. The lira will fall further. The central bank will have to raise interest raise to 30+% to stop the slide and to attract urgently needed foreign money. The Turkish economy will go into a deep recessions. A number of its banks and companies will go bankrupt. Unemployment will rise.

Erdogan will blame the U.S. and the "interest rate lobby" for the downfall. His followers will believe him. Any hope that Erdogan will go over this is in vain.

But Turkey's problems are structural. The burst of its bubble was long expected. Its foreign account deficit is simply unsustainable. It will have to cut back on imports and boost its exports. It will need large emergency loans.

Yes, the U.S. is using the issue to put pressure on Turkey. But the U.S. is not the root cause of the problem. It only exposes it.

The U.S. pressure is not about Turkey's economy and not even about pastor Brunson. The pressure is, and has been since 2013, to bring Erdogan in line with the U.S. agenda. He will have to stop his good relations with Russia. He will have to stop his purchase of the Russian S-400 air defense system. He may be ordered to stop the Russian pipeline. He must follow the U.S. lead on Syria. As long as he does not do so the U.S. will try everything to bring him down.

The only chance Turkey has to escape from U.S. demands is to further ally with Russia. Putin knows that Erdogan needs him. He will play for time to increase the pressure and then make his own demands. Erdogan will have to give up completely on his plans for Syria. All Syrian land Turkey or its proxies hold must be put back under Syrian government control. Only then will the Turkey's trade route to the Gulf states reopen. Only then will Russia (and Iran) help Turkey though its crises.

On Monday Russia's foreign minister Lavrov will visit Turkey.

Will Erdogan accept the Russian demands or will he flip back to the U.S. side and surrender to Trump and the IMF?  Or will he find a different way to escape from this calamity?

Update (Aug 11, 8:45 utc):

Erdogan has an op-ed in today's New York Times. He reminds of the decades of good relations, lists his charges against recent U.S. action and blames it for the deteriorating relations. It culminates in this:

At a time when evil continues to lurk around the world, unilateral actions against Turkey by the United States, our ally of decades, will only serve to undermine American interests and security. Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives. Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies.

Posted by b on August 10, 2018 at 20:20 UTC | Permalink

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first rate analysis as usual.
On a related topic does anyone know if Trump is following through on his threat to revoke the security clearances of high level Obama officials?

Posted by: Ragheb | Aug 10 2018 20:35 utc | 1

You'll get more cred not referring to "(meaning (Jewish) bankers),",

especially since as you note Turkey's economic problems are to a large extent self inflicted.

Posted by: Jay | Aug 10 2018 20:52 utc | 2

Thanks b. Have to admit these finance squabbles are not my forte, but, I find myself hoping Turkey will move closer to Russia for the assistance they require.

Personally, I get sick of the U$A trying to bully the world into submission.

Posted by: ben | Aug 10 2018 20:53 utc | 3

Jay no. 2

You'll get more cred not referring to "(meaning (Jewish) bankers),"

I took this as b's description of Erdogan's words and thoughts, not b's.

Posted by: sleepy | Aug 10 2018 20:58 utc | 4

This article is an excellent overview of Turkey's current economic crisis and the political context in which it arose. Erdogan as prime minister and president relied too heavily on infrastructure development (in particular the construction industry, where his son and son-in-law among other cronies have or had stakes through companies they owned or were CEOs of) to boost the nation's economic statistics.

At the same time there is almost nothing in B's article to suggest that the Turkish public benefited much from the economic boom apart from the jobs it provided. This might suggest that Erdogan did not allow wages to grow much or to grow slowly, enough so that wages growth never quite matched rises in the cost of living. This could very well have been the reality as wages growth and the resulting consumer spending would in the short term have stimulated demand inflation. And Erdogan with his lack of economics knowledge would have mistaken this for something serious. The solution would have been to encourage Turkish small businesses to produce more for consumers and allow them also to export their products to neighbouring countries.

Posted by: Jen | Aug 10 2018 21:00 utc | 5

And ZeroHedge has reported that Turkish lawyers want to raid Incirlik Air Base and arrest US officers. Isn't this where nuclear weapons are kept too?

Posted by: TheBAG | Aug 10 2018 21:10 utc | 6

thanks b.. you lay it out well!! quote "Yes, the U.S. is using the issue to put pressure on Turkey. But the U.S. is not the root cause of the problem. It only exposes it." i agree, but doesn't change the fact we are coming to a cross roads with a trickster... it will be interesting to see how erdogan plays this and whether he is able to balance everything..

@4 sleepy.. thanks for articulating my own impression too..

Posted by: james | Aug 10 2018 21:26 utc | 7

Erdogan is a selfish, conniving SOB. Lavrov will tell him,"Sorry pal. We have too much on our plate." Edrogan will respond, "Thanks for a whole lot of nothing." He will turn to the US with tail in between his legs, and ask for leniency. He will portray it to his people as a triumph of his will against all odds. He will then do the bidding of the US. He will sever ties with Russia, stop implementation of the pipeline, keep his dirty fingers inside Syria and be nice to NATO. And the US will portray him as someone they can work with and still keep their agenda of influence in the ME and still try to oust Assad. And at the same time put even more pressure on Iran, with help from their friend who took a hiatus and now is back.

Posted by: Jose Garcia | Aug 10 2018 21:30 utc | 8

@Ragheb, "......revoke the security clearances of high level Obama figures." There's a better chance of hitting the lotto than something like that happening. May I also add that I believe in Santa Claus?

Posted by: Jose Garcia | Aug 10 2018 21:34 utc | 9

Turkey has done nothing that the rest of the world hasn't done already, leveraging growth by borrowing from the future. Turkey is THE bridge for Eurasia, and possibly the most critical strategic point in the world.
Trump seems to have run his 'peas through string' narrative to its end, and is acquiescing to the demands of Washington hawks. His tariffs are virtual acts of war and might indicate the resumption of the firestarting across the region that was rampant during the Obama admin.
I think it's bad gambling policy from Trump. If Erdo doesn't budge, and can't be removed, then America risks a devastating crisis of influence, which would probably result in reckless military action down the line. Obviously, many in Washington want that anyway.

Posted by: aaaa | Aug 10 2018 21:37 utc | 10

Posted by: Jen | Aug 10, 2018 5:00:02 PM | 5

Erdogan's popularity has a reason.

one of the major reforms carried out by the AKP government has been the creation of a general healthcare insurance system that covers both citizens and foreign residents in the country. The government also provided colossal amounts of money for the renovation of public hospitals and the establishment of an individual pension system.

Trump seems to have entered into a competition of rising tariffs and falling currencies.

Trump claims that this will pay US 21 trillion debt. If so US consumers will be hit with rising prices.

Posted by: somebody | Aug 10 2018 21:39 utc | 11


Its easier to search for wage growth in Turkey instead of making empty speculations.

And b did "suggest" that wages could have risen, for example by mentioning Erdogan's popularity in Turkey.

Posted by: T | Aug 10 2018 21:52 utc | 12

Why does it matter if Turkey aka Erdogan (he's an autocratic sultan by now) leans toward the US or towards Russia?
Neither side will actually solve his problems. Economical crises won't stop cause you choose the right alliance.
An IMF loan won't reduce the deficit and won't change Erdogan's central bank policy.
Of course it would be a great show to see Erdogan battle the IMF after they lent some billions to Turkey and then want their usual neolib shock therapy.

Posted by: nervos belli | Aug 10 2018 22:01 utc | 13

@8 'Lavrov will tell him,"Sorry pal. We have too much on our plate." '

That is not the way Lavrov talks or acts. Russia will be prepared to help but at a price.

b's suggestion makes sense i.e. Erdogan will have to give up whatever plans he has for Syria.

Posted by: dh | Aug 10 2018 22:14 utc | 14

A few sobering bombs should start to fall where
they belong instead of on the children of Yemen.

Posted by: CarlD | Aug 10 2018 22:21 utc | 15

b: The escalation of the currency crisis during the last week coincided with the escalation of a minor conflict with the United States.

Erdogan picked a fight he couldn't win. Why?

His economy is much more dependent on the West than on Russia. And Trump's resolve to use economic power against China and Iran has been clear for months.

Is Erdogan stupid? Hardly.

The economic damage from this episode provides Erdogan with a convenient excuse to back away from his dalliance with Russia/Putin. It was always an uneasy relationship because it was forged not from friendship but from hardship (Russian economic sanctions).

Erdogan proved his ability to play a double-game when he supported ISIS. In the last few years, he has played a similar double-game with Russia.


Being nice to Erdogan is not going to change the outcome:

b: Erdogan had bet on the U.S. plan to overthrow the Syrian government.
As an Islamist, Erdogan was congenitally disposed to join the conspiracy against Syria that used ISIS and other extremists as a proxy army.

It was not just a US plan. Turkey had a key role. Besides Turkey and US, other conspirators included Israel, Saudi Arabia, and Jordan. EU countries get an 'assist' for keeping quiet (they hoped to benefit from the hundreds of billions of dollars of reconstruction).

b: In mid 2016 the CIA arranged for a coup against Erdogan but Russian intelligence warned Erdogan and the coup failed... the current U.S. plan is to use Turkey's economy problems to finally bring Erdogan down.
How do we know the truth of this? If USA were so determined to topple Erdogan, why wait for 2 years? They could've crashed the economy as soon as the coup had failed.

The fact is, Erdogan (who had been a loyal ally and close friend of CIA asset Gulen) was strengthened by the coup. And since then he has gone from strength to strength to the point that he now has dictatorial power.

b: ... within Turkey he had a very successful career and continues to be supported by a majority of his people.
He polled just over 50% a mere two years ago. His "popularity" has been enforced by jailing critics, shutting down opposition newspapers, and conducting an extensive propaganda campaign.

Once more thing:

b: the Obama administration ... refrained from actively using the U.S. military to bring the Syrian government down.
"Refrained?" The Obama Administration was forced to back down by Russian determination (both diplomatic and military). In response, the Obama Administration supported ISIS (pretending to bomb them - but not actually doing so) - along with Erdogan's Turkey (NATO ally and trusted co-conspirator).

Posted by: Jackrabbit | Aug 10 2018 22:22 utc | 16

TheBag @6> Turkish lawyers want to raid Incirlik Air Base and arrest US officers ...

Just more evidence that it's all farce.

Posted by: Jackrabbit | Aug 10 2018 22:26 utc | 17

PKK is not a terrorist organisation.
Well, yes, Turkey and Germany say so, but Russia thinks otherwise.
Russia is right, they are wrong. Russia knows that True Partizans can't be terrorists.

Posted by: hopehely | Aug 10 2018 22:27 utc | 18

follow-up @16

Erdogan was USELESS to the Assad must go! Coalition after Turkey shot down the Russia warplane. Another Turkish provocation could've sparked WWIII.

But the Erdogan's anti-USA stance after the apparent coup helped USA to develop a relationship with the Kurds. And USA-Kurds were an "enemy" that Erdogan, as a nationalist, could use to further his political interests.

USA now occupies northeastern Syria thanks to Kurdish help. Was that just by accident?

Posted by: Jackrabbit | Aug 10 2018 22:37 utc | 19

The whole world has been feasting on debt, using it to continue to impose growing inequality and stagnating wages on workers. Both the Swiss and Japanese central banks have become direct owners of stock. This is the new normal, and it certainly is not stable. What you see in Turkey, has happened else where - when you can't grow the national pie, you stretch it with inflation and private debt, both of which Turkey has had a lot of over the last ten years. There was some genuine growth, but Turkey's 3+ child policy has watered down any gains and put even more demands on state services.

Turkish figures on inflation are outright lies, like figures from most governments. During my time in Turkey some financial people I worked with had a practice of doubling the declared figures from the government in their personal expectations and transactions, I'm sure the banks they worked for did so as well. The only people who seemed to believe those figures were HR people doing compensation and benefits work, because it made them feel better about themselves when they could give their blue collar workers a raise 2 to 3% above official inflation levels.

B is absolutely correct. The US won't let up on its pressure until Tayyip bows long and deep. He doesn't have the ability to do that, and has left himself little room both domestically and internationally to do so and still preserve the respect he has.

Turkey has already instituted soft capital controls for individual withdrawals and transfers in foreign currency today. Luckily the friends who informed me about it, had already transferred a majority of their foreign currency savings overseas earlier in the week. There are also already reports of certain medicines being in short supply.

No one can save Turkey at this point. The Chinese and Russians aren't stupid enough to try, with such an arrogant and two-faced partner still half in bed with NATO/USA. The US will begin escalating its trade wars, and increase the expense of dollar debt. Why not? As the master of the world's reserve currency, it can always print more to meet its obligations, everyone else will suffer more at least in the short term. And if it can succeed in using that to increase domestic opposition and unrest in unfriendly countries, it stands a chance of turning that into a much more durable advantage. For friendly countries, that are always special swap lines they can establish... and for unfriendly nations, nothing but increasingly expensive imports and restricted access to foreign capital for development.

Turkey and Iran will be the first the US tries to bring to their knees. If it succeeds, it will redouble its efforts on Russia and China. This is an economic war, and it will get even more pronounced, quicker than any of us expect. Two or three years later is when the real war will begin.

Posted by: Out of Istanbul | Aug 10 2018 22:45 utc | 20

Least of Erdogan's policies is the economy.
US is arming he YPG, almost the same as arming the PKK.

Next stop Libya revisited with Turkey bombed for fighting with terrorists and Erdogan murdered on the streets.

Posted by: michael d | Aug 10 2018 22:54 utc | 21

T @ 12: Thanks for the link (but not for the snark).

Erdogan's popularity is based in the more rural, inland areas of the Anatolian peninsula. Voters in these areas tend to be socially conservative and very religious. These voters have historically had less contact with the outside world (than people in the Aegean and Mediterranean coast areas have had). They would not have had much education and their job skill levels would fit them mostly for low-wage unskilled labour work on construction projects of the kind that enriched Erdogan's family members (and which also gave Erdogan some leverage over Syria through damming projects on the Euphrates river).

It's these voters who would have benefited from the 30% wage hike plan in 2015 - but the hike plan is based on a low minimum wage. And why such a massive hike? - unless wages have been suppressed for a long time.

But I notice that the linked article mentions that Turkish workers have low productivity and the export-oriented industries that employ them are mostly labour-intensive industries in textiles (such as making carpets) and food processing and services. What does low productivity tell you? - not much government or private investment in improving worker skills and the tools and any machinery they use? And these industries must compete with Chinese export-oriented textile and food processing industries where worker productivity is likely much higher due to capital investment in machinery and equipment.

Yes I'll keep on making "empty" speculations.

Posted by: Jen | Aug 10 2018 22:54 utc | 22

Erdo Meeting Lavrov on Monday. Which way will Erdo go?

Camp USUKIS or Camp Putin?

Posted by: fast freddy | Aug 10 2018 23:21 utc | 23

Erdogan is threatening the independence of the Central Bank. Thats a no no.

"Turkish President Recep Tayyip Erdogan has signed off (last month) on a series of changes to the way the central bank’s top leaders are chosen, signaling he plans to follow through on a pre-election pledge to tighten his grip on monetary policy under the new executive presidency."

Also due to rapidly depleting foreign exchange reserves due to a significant current account deficit and 200 billion a year in foreign debt needing to be refinanced each year Turkey is in danger of falling into to IMF debt trap. Just needs a little push .

While self sufficient in food and many manufactured goods Turkey must import a good amount of oil and fuel as they have not fully developed their energy resources. More cooperation with Russia and Iran might be a solution as all of them are under attack as well.

Posted by: Pft | Aug 10 2018 23:23 utc | 24

Erdogan still has the NATO card to play, and he will, IMO. The West has yanked Turkey's chain for decades enticing it with an EU membership it was never going to be formally offered all for the Cold War. Different War now--control of the entire planet is the Outlaw US Empire's goal since GHW Bush announced the New World Order--but Turkey must be kept on leash or the Heartland is a total loss. This is Big League Hard Ball, and Pompeo's threat of more sanctions was answered by them being seen as the opening salvo of full scale Economic War. I'll comment here as elsewhere. Erdogan will round up the nuclear weapons, disarm foreign NATO troops and confine them to barracks effectively turning them into hostages, close Incirlik and all other NATO bases, formally withdraw from NATO, then tell Trump to masturbate. What the ransom will be for the troops is unknown. None of the weaponry and armaments will be returned as Turkey will take them as compensation for the economic damage done. And there's nothing any NATO country can do about it; not even the Empire.

Posted by: karlof1 | Aug 10 2018 23:34 utc | 25

Trump is putting Erdogan in a bind, such that he's gonna have to quit riding the fence as he's been doing. Erdogan will have to choose to reverting back to a US poodle (and on a short leash, at that) or he could make a break to the East and it's economic and security architectures.

Time will tell and time is getting short for Erdogan. My guess (hope) is that China/Russia makes the more palatable deal.

Turkey, by virtue of its geography, will always be a pivotal country. No one, especially in today's geopolitical climate, wants Turkey on the other guy's side. African has played this for all It's worth, but now comes the blowback. Erdogan won't be able to dictate terms, but should be able to get the best deal from the East.

Posted by: Woogs | Aug 10 2018 23:44 utc | 26

Erdogan needs someone to blame for the the Turkish economy. Really only the US and “banks” can fit the role. The animosity currently displayed by trump gives credibility to erdo’s claim. The US is aiding Erdogan in his show but what next?

Turkey should swing east improving relations with its neighbors and economic ties with Russia, China and the members of their Eurasian project but doing so will not be easy. I guess China could invest in Turkey but Turkey needs more than a short term fix and too many of turkey’s trade partners are US vassals.

Posted by: Alaric | Aug 11 2018 0:09 utc | 27

This is the beginning of the end of the world as we know it. Turkey will have to default because no other remedy is available to it. Only IMF could provide the sufficient bridge loan (at around $90B), but the standard IMF prescriptions (devaluation and exporting to America and Europe) are not workable when both the US and the EU are incapable of absorbing any more of imports. If IMF goes ahead and loans the money due to political considerations, Turkey won't be able to repay the money because the path to earning sufficient quantities of USD and EUR is closed shut by America's determination to narrow its trade deficit. It's a dead end.
China has wherewithal to bail the Turks out, but Chinese are unlikely to do that, because they love money more than anything else, and lending to Turks is the surest money-losing proposition in existence today.
So the reckoning for Ankara is at hand. The contagion begins here and now, with Brazil and India, and countless other countries being lined up for the economic slaughter.
Interestingly enough, today all of America's relevant cable channels were openly gloating at Erdogan's desperate plight. They shouldn't. The final chapter of this saga will be played out in NYC and Washington DC, and Silicon Valley. Huge chunk of these unrepayable loans are denominated in US currency, and therefore were originated in the US financial system. And that's where the buck will literally stop few short years from now. The devastation will be almost total.

Posted by: telescope | Aug 11 2018 0:19 utc | 28

b: >i>Meanwhile Erdogan held a phone call with the Russia's President Putin to "discuss the economic ties". He may have asked for an emergency loan.

He may have asked for a delay in Syrian action against Idlib. Imagine Erdogan desperate plea: "I can't fight off USA economic sanctions without your support Vlad!!!!"

Same sort of forestalling nonsense happened in the south. Israel and USA made several claims/demands that Russia stop Syrian action to reclaim territory.

Posted by: Jackrabbit | Aug 11 2018 0:26 utc | 29

@20 I don't see it that way. To any rational actor, maintaining good relations with Turkey is essential. I don't understand the theme forwarded about Turkey being given 'mafia deals'. The stability of Turkey should be a matter of national security to all regional powers. Europe should be pissing themselves at the threat of Turkey's domestic troubles, and doing everything that they can to mitigate disaster.
This is more about USA, or at least Trump using bully tactics. Maybe it will blow over, or maybe it will end in disaster for somebody or everybody

Posted by: aaaa | Aug 11 2018 0:31 utc | 30

@31 'This is more about USA, or at least Trump using bully tactics.'

Not completely but I think you're on the right track. I's about Donald's base. They love it when he sticks it to the goddam furriners.

Have to wonder about the endgame here. Total hegemony? Then what? Utopia?

Posted by: dh | Aug 11 2018 0:44 utc | 31

Excellent article as usual! I learned more from this about the Turkish dilemma than anywhere else. One question: Turks have lots of gold. Could Turkey make gold an alternative national currency, and, as in the USA long ago, tell anyone they can mint their gold free of charge at the national mint and use it as money?

Posted by: Fiona Jenkins | Aug 11 2018 0:47 utc | 32


Gold production has plummeted 50% since its peak a few years ago. Also the top 3 gold mining companies are foreign owned and Turkey only earns 2% royalties on the gold

Posted by: Pft | Aug 11 2018 0:53 utc | 33

b: excellent article. However, the economics of this situation do not explain the full blown crisis for - as some have already noted - the economics of Turkey are nothing more than what several dozen 'other countries' have done.

And right there is the explanation - several 'other countries' - mainly European - are considering a revolt against US led economic sanctions (in particular those against Iran and Russia).

It does not take a lot of imagination for those 'other countries' to smell what is coming their way if they choose to crawl out from under American led hegemony. Turkey is a deep state lesson for those with eyes to see and ears to hear.

Posted by: les7 | Aug 11 2018 1:05 utc | 34

On another note and a little OT, in either 2008 or 2010 a report by a US think tank put the housing properties and business holdings of the very socialist Syrian government at over a trillion dollars. There were expectations that Bashar Al Assad would privatize much of it in his opening of the country to westernisation.

The war in Syria, while primarily about oil was also about the plunder of this resource. The UN indicates the war damage to this resource at between 250 and 400 billion.

Turkey offers the same potential plunder (which the Eu wanted access to as part of the price of membership) & faces the same potential threat. Having hosted CIA backed extremists and having broken the critically important peace deal reached with the Kurdish elements of his own country, Turkey is about to reap what it has sown if it does not retreat back into the American fold.

Perhaps the private conversation in Helsinki took regime change off the table for Iran as it has moved into the Russian orbit. Given the back-stabbing history, Turkey does not and will not enjoy such patronage.

Posted by: les7 | Aug 11 2018 1:22 utc | 35

Thank you for this lucid analysis regarding Turkey's crisis.

I wonder what Erdogan will do next on Donald Trumps Game Show.

Posted by: Guerrero | Aug 11 2018 1:33 utc | 36

@b - excellent reporting, thank you.

It seems that Turkey needs a devaluation and a bail out.

The problem with turning to the US is not only that no promise it makes is dependable, but also that the US nowadays seems to be able to piss off everyone it deals with - with or without Trump, it doesn't seem to matter. To an extent, Trump as front man obscures the very real hubris saturating the entire US system of governance like a cancer.

The Asian Infrastructure Investment Bank was founded as an alternative to the World Bank, and it could invest in large projects in Turkey.

If Turkey gets funding from the west it will come with austerity measures. Alternately, one could conjecture that the east might loan some money but it would come, not with austerity but with defined economic policies - in other words, with education to fill that gap in Erdogan's understanding of his economy that b cites. This can only be conjecture, because I don't think such a large, country-bailout has occurred yet from the EAEU-SCO bloc, not in this century at least. And I don't have any grounding in the subject.

Realistically, if Erdogan turned back to NATO and the west, how long would the promises last until he was stabbed in the back? One year? Eighteen months? Can anyone see longer than two years? And what exactly could even Europe offer Turkey that wouldn't come with cultural distaste and neoliberal austerities?

And meanwhile the realpolitik imperatives to embrace the east in order to remain sovereign between east and west continue to grow. Soon Turkey will receive transit fees for gas, I think, will it not? It could fairly soon be admitted to the SCO and the EAEU, could it not? Again, I haven't studied any of this closely. And I don't know how Turkey fits on the map of the One Road either, but this could perhaps offer very potent promise.

As for Incirlik, I seem to have read here and other places that the movement of nuclear weapons follows very heavy protocols agreed on globally - one of the few times the US would insist on international law maybe. But even a host nation cannot simply seize nuclear weapons not under its jurisdiction - this is what I thought we were hearing back during the attempted coup days.

Turkey could throw the US out of Incirlik, but the weapons would move secretly under the high security and by the hand of the US. But even to throw the US out can take some period of time, with some wordplay and some push-and-shove games. All these things can take time. Immediately, Turkey has a monetary crisis, and that's a NOW kind of thing, but it's the only one. Remedies exist, nations do survive. As was well observed, there's a lot of ruin in a nation.

Erdogan has been cavalier with his economy. One way or another, he will have to sober up, to some degree, and perhaps gradually. I have long felt that hanging out with wise people rubs some of that wisdom off. To my eye he seems vastly improved today over what he was even two years ago. He's been talking to some worthy people. Clarity comes gradually.

Turkey is a rock that sits astride east and west. That in itself is greatly valuable. If Erdogan can't make some gain out of that immovable political reality, he's losing his touch.

Posted by: Grieved | Aug 11 2018 1:47 utc | 37

Telescope at 29

The final chapter of this saga will be played out in NYC and Washington DC, and Silicon Valley. Huge chunk of these unrepayable loans are denominated in US currency, and therefore were originated in the US financial system. And that's where the buck will literally stop few short years from now. The devastation will be almost total. /BLOCKQUOTE>

The source of most of those dollars floating around the world is the US consumer.

Posted by: sleepy | Aug 11 2018 2:02 utc | 38

Yes, Erdogan has been "cavalier" but he has also anticipated for many years (until fairly recently) entry into the EU and has been on and off the Western "shit list" so many times over so many years (only for there to be reconciliation, because of not-just their strategic importance (IRL) but the strategic importance to Turkey/Erdogan in the Western Camp. (Not unlike Yanukovich when he was "looking westward."

I am curious just how sweet a pot had been offered to Turkey by the IMF and others over the years and when the bulk of all this "incautious debt" was accrued. Is Erdogan "stupid" or just over confident of Turkey's essential part in regional power plays.

Erdogan just days ago said he might have Turkey join the Brics .... which might be bluster and very well might not. Lots of pipelines, lots of foreign infrastrucure investment and Chinese money.

Kinds of scary how many over at NYT comments seem to be hoping (in a positive fashion) for regime change because he's a "despot" ... as if that mattered IRL.

Coming within 72 hours of Mohammed Bin Salmans over-reaction to Canada's tweet (which in fairness did go out on the Government Tweet Account), and given the crippling effect of the Iran sanctions / tariffs already in effect, this appears to be Trump abusing his power, as Bin Salman abused his, to threaten another country's economy (in substantial ways) over the matter of a single detainee apparently choosing to abandon all normal formal diplomatic options. I wondered if Trump was showing MBS "how it should be done" ... but given the context, yes, it appears to be all-about the Pastor and an deal for release that fell-through (which Erdogan had reportedly agreed to ... for a coup member and Gulen supporter -- color me surprised) Anyway.

This may have backlash and fallout as yet unimagined. Apparently American made Foreign Cars (BMWs made in Alabama) are in shipping hell, as is a large (very large) tanker of soybeans, the legal status of which under "evolving" sanctions/tariffs prevents it from being off-loaded. Not to mention American companies and jobs that are going off-shore because they can't afford tariff price increases. Man's an idiot.

Has anyone seen any more number crunching?

Posted by: Susan Sunflower | Aug 11 2018 2:21 utc | 39


They have no IMF debt. Its been paid off. However, the IMF helped them overcome the 2001 crisis which has led to the current crisis. It forced the Treasury to exercise “fiscal discipline,” and cleared the road for privatizations, etc.

The AKP took advantage in 2002 . "The economy grew with the foreign credit that started flowing in the AKP era; tax and privatization incomes increased; and the IMF debt started being paid with these. Meanwhile the public sector and especially the private sector borrowed swiftly from markets and the economic wheels were turned with this loan. "

Good times are over though. Be interesting to see how they avoid another IMF trap.

Posted by: Pft | Aug 11 2018 2:43 utc | 40

Excellent blog B, and an excellent comment thread as well.

The price that the U.S./West will demand for financial assistance is not only Turkey's complete subservience, but they will want Erdogan's scalp as well. In addition, any financial help from the IMF will, as usual, be primarily aimed at protecting Western banks, not repairing Turkey's economy.

For these reasons, I think that Erdogan will have no choice, but to turn East. I would expect China to be the lender of last resort. However, I doubt that China will want to throw good money after bad. I would thus look for Turkey to be required to restructure its foreign currency debts before it gets new money.

Restructuring Turkey's U.S. dollar debts and moving Turkey into the Eurasian camp would be of significant value to Russia and China in the economic theatre of their war with the U.S./West.

Posted by: dh-mtl | Aug 11 2018 2:56 utc | 41


The US consumers dollars are hardly the source of most of the dollars floating around the world. Consumer saving deposits and personal expenditures are only a small part of the dollars in circulation

These are created from the Fed Reserve system and Eurodollar institutions. Eurodollars, according to Friedman are created in the same way as American banks' deposit Inabilities—"their major source is a bookkeeper's pen". He identifies the key to understanding the Eurodollar market as the fact "Eurodollar instititutions are part of a fractional reserve banking system", very much like US banks. According to Professor Friedman, the failure to recognize "the magic of fractional reserve banking" is the chief source of misunderstanding about the Eurodollar market. We understate the importance of this market in money creation/debt

Even if the Fed and US sourced dollars contracted, the Eurodollar markets in the tax havens would be able to make up the difference

Posted by: Pft | Aug 11 2018 3:04 utc | 42

Posted by: Pft | Aug 10, 2018 10:43:17 PM | 41

Thanks. I saw that Erdogan had said (yesterday or before) that he didn't need IMF help and it was mentioned elsewhere that (gasp) he had not asked for it (as if it was expected) Erdogan also said (but I'm not savvy enough to know significance) that the tariffs (or was it sanctions?)violated WTO policies.

(The Iranian ambassador to the UN in an op-ed in Guardian, said that the provisions withint the JCPOA, include a commitment to providing Iran with trade, so the signatories of the agreement cannot comply with Trumps demands without violating JCPOA ... making his demands illegal under international law ....

Guardian: Guardian: Trump’s sanctions against Iran are a clear breach of international law.

Posted by: Susan Sunflower | Aug 11 2018 3:14 utc | 43

When Hillary Clinton left the position of Secretary of State and John Kerry took over, the Obama administration changed its position. It endorsed the coup against the elected Egyptian President Morsi
The change of mood was triggered by the unexprected visit of Morsi to Iran. The first official visit of an egyptian president in decades. Iran has been in favor of the 'democratic' Moslem Brotherhood over Israeli-US supported Mobarak despotism. Israel (and Saudi Arabia) panicked over the possible entry of Shia Iran into Sunni Egypt thus the USA allowed the toppling of Morsi, the jailing of the Moslem Brotherhood and the return of Egypt to the Saudi's.

Posted by: Virgile | Aug 11 2018 3:30 utc | 44

We also have to remember that Erdogan played the EU card. As Turkey was applying for joining the EU it benefitted from loans and support in reforming the country. His success made him lose the sense of reality. He was ready to turn his back to an poor Europe to try to grab the Arab countries market. Davutoglu, his FM directed him into neo-ottomanism where the less industrialized Arab countries would be kept underdevelopped to absorb Turkey's products. He dumped turkish products onto Syria causing the closure of Syrian factories and the growth in joblessness. Before Bashar al Assad was able to realize what was happening and cancel the free trade deal with Turkey, the "civil war" started encouraged and later supported by Erdogan and Davutoglu. We know the rest...

Posted by: Virgile | Aug 11 2018 3:47 utc | 45

Erdogan knows Turkey ain't Great. He also knows that he'll never Make Turkey Great Again by surrendering to fleeting US whims.
US displeasure over his choice of S-400 to defend Turkey was the last straw. The West is in terminal decay. He'll jump East.

Posted by: Hoarsewhisperer | Aug 11 2018 3:58 utc | 46

@ Jen 22

I am willing to support the speculative mind in this thought labyrinth. After all that's what the moonshine is for.

Thanks for that worker productivity comparison as it reveals one of the great limiting factors with education being held firmly in the grip of madrassas or systems that are similarly ideologically constrained regardless of country or religion. Narrow world view and limited analytical skill give you low functionality.

The outlook for Erdogan is limited and if he is dependent on his rural and worker rump voters then his immediate opportunity is to expand his rural export sales. If he were to cooperate with Syria and Russia and enable the 'finish' of the terrorist remnants in Idlib province he would be saved the dilemma of what to do with this gang of returnees. The EU may be stupid enough to accept the white helmet nutters but not this Idlib lot. By sweetening up Syria this way he could enjoy the benefit of a road haul route through Syria to the South to Jordan and even Saudi Arabia. That route has been closed for years.

Likewise building a trade relationship with Iraq and Iran could be more fruitful than kicking them. His financial crisis will not evaporate overnight but he could expand the gas pipeline network and include Syria, Iraq and Iran plus even the southern Arab gang in an enlarged supplier group and grow wealth base on transit royalties. I accept that this is all speculative but it is not fanciful in terms of geography and near term economic betterment.

Right now he is close to becoming Greece 2 and I am sure no Turkish Sultan would desire to be known as coming second to Greece in any way.

On the subject of Zero Hedge's report. I doubt that there are any advanced US weapons of any description left at Incirclic airbase other than a few US planes and a store of small bang armaments. The rants of ultra nationalist Turkish males are puerile.

Posted by: uncle tungsten | Aug 11 2018 4:10 utc | 47

susansunflower@40 -- "I wondered if Trump was showing MBS "how it should be done" ..."

I think you miss the strategic point. Trump has a small problem (in addition to hands). His China policy has cut into the US Farm export domain. He's got a bunch of gender-confused suckers north of the border who will take the hit by shrewdly managing to grab the new Saudi market opportunity. Why not call on his son-in-law's 'new best friend' and dictator MbS to trump up some crock of BS excuse and slide right past any WTO/NAFTA agreements with the Canadians? The Saudi regime gets to flex a bit (on a whipping boy) and it's a win-win done deal.

Posted by: imo | Aug 11 2018 5:26 utc | 48

On the subject of Turkeys labour productivity it appears that while its a bit low compared to the EU/OECD average productivity growth is relatively robust. Turkish workers work long hours as Turkeys labour laws favour companies to pay OT rather than hire additional workers. As anyone knows worker productivity drops off rapidly when workers must work over 40 hrs per week on a sustained basis. Also as a developing country (borderline developed) comparisons with long standing developed countries will be unfavorable in some areas.

Posted by: Pft | Aug 11 2018 5:53 utc | 49

I've said it once and I'll say it again, Make Istanbul Constantinople again.

Posted by: jezabeel | Aug 11 2018 5:57 utc | 50

If we assume that Erdogan thinks the US was behind "the Gulen coup", and there is every reason to suppose that is true, then Erdogan must be aiming to leave NATO, or be thrown out by NATO. So he demands the return of Gulen, and US refuses. The US uses PKK as proxies in Syria, and Erdogan objects. So he decides to buy S-400 from Russia. US says don't do that, or we will stop you buying F-35s. Erdogan says he "won't be blackmailed". The US Senate stops the F-35 deal. US says release Brunson, Erdogan refuses. US puts tariffs on Turkish steel, Erdogan starts talking about taking Incirlik airbase (holding US nukes). See where this is going?

If Turkey is thrown out of NATO, he will be forced into the Russia-China bloc, and the Middle East will have seen Turkey, Syria, Iraq, Iran, then Lebanon, move into the eastern sphere. Russia could then take Georgia and Armenia and perhaps Azerbaijan to complete the set.

The US is playing an extremely dangerous game, trying to assert its financial dominance over China, Russia, Iran, and Turkey, when it is totally bankrupt and its infrastructure is falling apart. So what do we REALLY need? - a space force!!!

Posted by: Palloy | Aug 11 2018 7:03 utc | 51

Whatever else Erdogan is , he is not stupid. I think he long ago saw tha his country was deemed "expendable" by the west and thus sought to find another and better act to play. The attempted coup was clearly an attempt to kill him orchestrated by the US. Turks in general are more patriotic than any other people that I know, regardless of who is in charge, Erdogan has played the religious card, and must stick to it.
Erdogan probably realized that Turkey will gain tonnes more of being part of the Silk Road than being a US ally. If one considers Turkey's development position in comparison to the ME in general, it is pretty far ahead, very far ahead, it probably could develop nuclear weapons of its own if it wanted, but chooses not to because that would upset relations with Iran.
And that is important, Turkey are Sunni and Iran is Shia, and yet they get along well....
Of course they do, they have a common goal of becoming wealthy and prosperous economies and have no use for Saudi Wahhabism, because it is medieval and is only favored by the disenfranchised.
The US knows that if Turkey leaves NATO, the whole ME is on the brink of being lost, Israel has no strategic depth and can be overrun in a day, barring its nuclear weapons, it is useless; a costly US financed airstrip populated mostly by stark raving mad people. That's it.
So I think the Chinese will bail out Turkey, they have the money and China needs a stable Turkey, because Syria is in ruins, they will not allow the Bosperus being part of a war.

Posted by: Den Lille Abe | Aug 11 2018 7:06 utc | 52

@52 -- "So what do we REALLY need? - a space force!!!"

Posted by: Space pants! | Aug 11 2018 7:20 utc | 53

"The Gezi protests in 2013 had all the signs of a U.S. color revolution attempt"

My ass ....

Posted by: Turkish Local | Aug 11 2018 7:22 utc | 54

The choice is not between the economic opportunities of the West and the East (although the East does offer more). The choice is between being a Western puppet and being a more-or-less equal partner of the Eastern countries.

The US Empire has blocked the supply of advanced weapons and capital to Turkey; they may also block the supply of high-tech components, software, engineering services, confiscate Turkey's capital as well as the capital of the Turkish wealthy, and completely close their markets to Turkish exports. Erdogan only needs to look at Russia to see how far the West will go.

On the other hand, if he moves his reserves to yuan or gold, the supply of any product produced in the SCO bloc (advanced weapons, electronics, nuclear technologies) will be guaranteed. Russia can use its ports in Krasnodar krai and Crimea to reliably supply Chinese goods to Turkish Black Sea ports (Turkey's connection to Iran is not sufficiently developed at this point, plus Iran itself is not very well connected to China yet). NATO won't be able to do anything about it, as together Russia and Turkey have complete control of the Black Sea. Turkey may also unilaterally alter its obligations under the Montreaux convention and severely restrict or eliminate altogether the presence of American warships in the Black Sea.

The Eastern bloc makes a very simple proposition: if you have the money, you can buy it, no strings attached. They're not trying to re-engineer the inner workings and cultures of countries they work with. That alone is more important than any marginal advantages in product quality that the Western economies may offer.

Posted by: S | Aug 11 2018 7:47 utc | 55

TheBAG @6:

IIRC, the nukes have been relocated to Romania.

Palloy @52:

IMO, the US Space Force is the Pentagon's answer to China's PLA Strategic Support Force. Kinda funny to see the US to follow China, usually it's the other way around.

Posted by: Ian | Aug 11 2018 8:40 utc | 56

I remember Turkey's out of control inflation problem from the 1980s when I used to import old rugs and kilims from Eastern Anatolia. Carpet dealers set up their own unofficial banking system, which was designed so they could invest in rugs and carpets by loaning each other huge wads of cash at no interest for very short terms, often days, or even hours. They all wanted to get rid of the cash as quickly as possible. Using it to buy up more rugs and kilims to hold onto, was far better than putting in the bank, where its value would decrease significantly by the day, whereas rugs and carpets would most likely increase in real value or, at the very least, act as a hedge against rampant inflation. They loved dealers like me, who would bring foreign cash, which they could hoard, knowing that it could double in value in a short few months.

Like many other Middle Eastern nations, the Turks are used to getting round the system, and they will always find a way. The United States and Europe should worry more about themselves, as the entire economic system of the West is now rigged in the favor of banks and big business. Large movements of cash are almost impossible for the vast majority of businesses. They may be a sign of widespread corruption, but widespread corruption in the hands of many is far better for the economy than widespread corruption in the hands of very few.

Posted by: Bryan Hemming | Aug 11 2018 8:41 utc | 57

Good political Analysis, although Putin interests and positions over years as appeasing American bully with extended hand in peace b does not explain at all since all that did not bring iota of calm and reason but only escalation of US western provocations with dangerously wrong notion of Russian weakness and new Cold War and will be further escalated with NorthStream 1,2 closure and further absurd accusations.

B also ignored the fact that the so called attempted coup was Erdogan's own doing not CIA to consolidate power before voting for new constitution as hundred of thpusands of his political opponents at schools, universities and financial institutions, government, military and economy were threatened, arrested or imprisoned or lost jobs , position, influence and money. What communists, teachers priests had to do with CIA.

It was grab of power, Hitker needed to burn Reichstag Erdogan needed his own psyop event.

Also b should stick to politics he is versed in not financial economics. In fact raising of interested can be correlated with inflation and expectation of higher interests rates may even cause it , look at US interests rate up inflation up while when interests were about zero inflation was lower as people's income collapsed .

I am not discovering any economic law here as there are none but deliberate policies of financial ruling elites.

Posted by: Kalen | Aug 11 2018 8:47 utc | 58

As a Turkish citizen I can say that

1) We have been waiting for this 'Financial Terorism Attack' for almost 2 years. No surprise.
2) The Dollar op indicates that the USA (or rather those who pull the strings in the US) finally admits that our Ally is responsible for almost all mischievous events which took place in Turkey. The PKK-FETO(Gulen Network)-Dollar attack-ISIS attacks-several coups-many gladio ops and anything along the line... We now have a tangible culprit. Up until now, the US stance was 'I did not inhale' sort of a defence regarding the events.
3) The USA is not a country, but rather a useful contract killer on a larger scale compared to the PKK-FETO-ISIS etc. and that's it. It is now obvious that the US is not a team manager, it is simply a player in the field along with the rest, PKK-FETO-ISIS etc.
4) The US is now stepping forward fearlessly because 'the arms of the octopus', as Erdogan put last week, has been severed in Turkey. So some naughty guys have pushed the US to the front yet as an another suicide bomber.
5) While Trump-Pence (representing the Dollar) attempt to punish Turkey, China (21st century blockchain chaps) wants to come in for help as a rebuilder (as in the case of Syria). The IMF (with a catholic director) says hi too.

Posted by: ConfusedPundit | Aug 11 2018 9:12 utc | 59

@Fiona @32 - One question: Turks have lots of gold. Could Turkey make gold an alternative national currency, and, as in the USA long ago, tell anyone they can mint their gold free of charge at the national mint and use it as money?

Turkey has not a chance to such when it goes alone. Its reserves are way too small. Turkey could go to some kind of gold standard when China and Russia do. Both seem to prepare for such a move. Both build up their gold reserves. The Chinese Yuan is already managed to strongly correlated with the price of gold.

Posted by: b | Aug 11 2018 9:34 utc | 60

Economic logic would say that Turkey will turn to Europe.

Turkey, Russia, Germany and France .....

Posted by: somebody | Aug 11 2018 10:17 utc | 61

Also significant
Turkey ready to beef up border security with Iran

Translation: They will cooperate to fight the PKK:

Posted by: somebody | Aug 11 2018 10:28 utc | 62

Plus - the rift with the US might mean a lot of stories will come out.

US delivered Öcalan to gain control of PKK

The U.S. delivered Abdullah Öcalan, the imprisoned leader of the outlawed Kurdistan Workers’ Party (PKK), to Turkey in 1999 in order to gain control of the group, former Chief of Staff Gen. İlker Başbuğ has claimed, stressing that this is his “personal opinion.”

Once Öcalan was driven out of Syria in 1999 and eventually delivered to Turkey, the PKK “moved out of Syria’s control and came under U.S. control,” Başbuğ told daily Hürriyet in an interview in Washington. He was in the U.S. to take part in a number of closed-door meetings with a range of think tanks in the U.S. capital.

Posted by: somebody | Aug 11 2018 10:53 utc | 63

This is too narrow a view. There are plenty of reasons to suppose that the USA is fomenting opportunities (if I may say so) to whip a wayward multilaterist into natoist line. It is naive to accept that this started off self-inflicted by Turkey. We know how deep the manipulation runs. I do not believe that it is only the good guys who are capable of doing their thinking long term. Stupider and worse-educated though they be, amongst those Pests in the West, there are chess, judo and mah jong players. For dogged longtermism, think Killinger, Brzez-in-peace, and the pnac and neo-munro brigades on the whole. You have only to follow the history of the USA-UNO warfare from the pre-90s peak of UN authority to the abject surrender from the Banky accession to see how the rogue state adjusted its strategy and eventually accomplished its goal of utter abjection of the UN.

There are plenty of other considerations. For example, an element of cahoots at play between Trump (spiking the guns of his enemies back home (still do not know whether he has any, though)) and Putin in order to weaken drastically Turkey's hand in Syria's political geography. It is plausible that Turkey's strong and triumphalist positioning in northern Syria is an even greater obstacle to Trump's withdrawal programme than the obfuscations and provocations of his DS enemies (does he even have any, or am I repeating myself?). In such a scenario, both Trump and the RF would gain some rather useful concessions from Erdogan.

Posted by: Plod | Aug 11 2018 12:05 utc | 64

Erdogan's NYT Op-Ed

Methinks the lady doth protest too much.

Having destroyed Ataturk's secular legacy and joined the conspiracy against Syria, Erdogan complains that US doesn't respect Turkey. That is rich.

Posted by: Jackrabbit | Aug 11 2018 12:36 utc | 65

Superb analysis b, my deepest congratulations.

Posted by: Canthama | Aug 11 2018 12:39 utc | 66

The deal was a carom shot, personally sealed by Trump, to trade a Turkish citizen imprisoned on terrorism charges in Israel for Brunson’s release. But it apparently fell apart on Wednesday, when a Turkish court, rather than sending the pastor home, ordered that he be transferred to house arrest while his trial continues.

I have a question. Is the deal still a possibility? Couldn't they still agree this and then row back on the other stuff? Both beasts have now beaten their own chests (it's a jungle out there dontyaknow!) and presented their peacock feathers, so why not?

Posted by: et Al | Aug 11 2018 12:48 utc | 67

Ian ...Nukes in Romania now...
Yes, that is what I understand too.

Grieved ...the movement of nuclear weapons follows very heavy protocols agreed on globally...
Remember how virtually no one noticed or noted when vast quantities of the disintegrating SU's nukes and related machinery were spirited out of the Khazakstan SSR by USA operatives in the early 90s.
Also, how SA's small arsenal were taken walkabout by, ahem, said USA operatives, during the GNU transitional period when the Afrikaner Nationalists were being forced to capitulate. (Not by force of circumstance, of course.)
There are many other incidents of clandestine transportation. Greenham Common has interesting archives as do many other citizens' oganisations.

Posted by: Plod | Aug 11 2018 12:52 utc | 68

et Al @67

My theory @16 (admittedly, a cynical view) implies that this ends with both Erdogan and Trump getting what they want and each being hailed a hero by their nationalist supporters.


We should not lose sight of the backdrop:

1) Sanctions against Iran that force countries to choose between SCO and the West.

2) Western 'Deep State' expertise for compromising the press and establishing controlled opposition.

3) Western 'Deep State' cozy relations with Sunni Islamists/Takfiris.

Posted by: Jackrabbit | Aug 11 2018 13:07 utc | 69


I agree with you here, b stretched that a bit too far. Gezi park certainly wasn't instigated as a colour revolution. I knew people who were originally at the park when the police raided. What allowed the Gezi park protests to reach the scale they did, was a unique Turkish situation, where anarchist football supporters could team up with half-crazed stalinists to break police lines and force them to flee. If those police lines held, the protests would have died out. They did fail, and the imagination of a populace was ignited. Unfortunately it wasn't deep and wide enough, appealing mostly to the middle classes or richer, and not to much of any of the working poor. The government took some time to respond, playing the urban vs rural divide, expanding the police forces with loyal, young, testosterone jackasses. I knew a guy high in the party, he was ruthless, thankfully for everyone involved he wasn't issuing the commands, or according to him he would have first opened up with bullets and not tear gas. I believed him, and that conversation was the last time I worked with him.

But Tayyip has certainly lost it. Some of those very loyal police idiots who were hired during Gezi, have been purged out of paranoia this year after the election. I've heard that some have even fled to the US.

Posted by: Out of Istanbul | Aug 11 2018 13:10 utc | 70

I think that Tom Luongo has it right in this paper.

I also think that Trump is piling on the pressure in order to force the events, much like he did with North Korea.

Posted by: dh-mtl | Aug 11 2018 13:41 utc | 71

If Turkey is in such dire financial straits and is tempted to jump east, one consequence may be a dumping of refugees onto Europe- after all, why should Turkey keep them? The temptation to burn the bridges with the west will be huge, especially if the currency squeeze stays on from the west.

Yes, I understand Erdogan's aversion to high interest, he will never acknowledge his fault anyway.

The urge to lash out will be overwhelming, I believe, and it will be against the west.

Posted by: morongobill | Aug 11 2018 14:03 utc | 72

Years ago I interviewed at NCR for a project called ESL or Electronic Shelf Labels. They are small LCD price displays for store shelves. Prices are entered into a computer and communicated to the ESLs via RF network. One selling point was to help stores comply with laws that require stores to have registers charge or match the price of what it says on the shelves. The other selling point was for countries with fast changing currency valuations especially due to inflation. One example I was told about was Turkey. This was over 20 years ago. So the Turks have had to deal with this type of thing before.

But, thank you B for showing how people in other areas have to live with mismanagement of their govt/economic systems (in this case one that also involves Syria/mideast). Devaluations are a periodic thing that govts do to deal with other areas of mismanagement and/or corruption. Just ask the Mexicans about what happened to the peso in the 90s.

Posted by: Curtis | Aug 11 2018 14:14 utc | 73

Turkey imports 99% of its hydrocarbons. They will ally with the side that offers the best energy deal. Control of the hydrocarbons has always been at the heart of all of the conflict and machinations between the global powers.

Posted by: Peter gonzalez | Aug 11 2018 14:15 utc | 74

Posted by: Jackrabbit | Aug 11, 2018 9:07:04 AM | 69

Turkey has a long term gas deal with Iran they are not going to stop because of Trump who might not survive the next presidential elections.

Europe insists on the Iran deal though its businesses and banks are vulnerable - and may follow the US sanctions for fear of secondary sanctions.

Main issue for Iran is finance - Euros - and Turkey which owes Iran for gas is in a good position to act as go-between.

Let's see if Germany and France will make it. Merkel is an extremely cautious polition but Macron might push her.

Posted by: morongobill | Aug 11, 2018 10:03:12 AM | 72

Most of Turkish trade including steel and loans is with Europe. Turkey will NOT create more conflict with Europe.

Posted by: somebody | Aug 11 2018 14:16 utc | 75

Superb, concise and coherent. As an Assyrian American whose grandmother’s family was massacred by Kurds in WW I , I am no fan of Turkey. Re: their role in destroying Syria where more Assyrians and Christians were Massacred and raped, so I want to see Erdogan’s nuts in Putin’s vice.

Flipping Turkey to the One Belt One Road is one more FAIL for the Neocons/Neoliberals

Re Trump and Pence: the dogs bark but the caravan rolls on - Vladimir Putin

Posted by: Anunnaki | Aug 11 2018 14:46 utc | 76

1) It is not at all clear that Russia and Iran will be capable of resolving Turkey's economic problems. Iran in particular is the target of US economic warfare, rapidly escalating right now.

2) Domestically, giving up the war in Syria for Russia's price means not just humiliation: It means leaving the war against the Kurds (and yes, it is a war against the Kurds, despite propaganda about the terrorist PKK,) because they see their strategy totally undermined by a semi-independent Rojava in Syria.


3) The US is capable of papering over the crisis, especially since a large portion of it is US-induced.

4) The US doesn't want peace in Syria and Turkish support for the Idleb pocket and the Afrin pocket, combined with an uneasy toleration for a Rojava on a US leash (if it should be so bold as to look northwards to its compatriots,) is feasible for continuing war in Syria. This has the added attraction of being a drain on Russia for no good return

The conclusion: Any belief that Putin is going to win Turkey relies more on legends of his genius than a real analysis, I think. This is especially tragic even for Putin personally, since there is no real strategic return on Syria.

Posted by: steven t johnson | Aug 11 2018 14:52 utc | 77

Turkey is a beautiful country. It will have a lot of takers, including Russia and China. Turkey is also a member of NATO, has one foot in Europe, and has a very significant food production capacity, which is crucial to eastern powers telling the US to F off.

Turkey will have no problem finding a suitor. The US is as has been typical overplaying its hand thinking that the other side will fold (e.g. Syria, Iran). But they are dealing with people who put pride over corruption, which is generally the opposite of western thinking.

Posted by: ariko | Aug 11 2018 14:58 utc | 78

To show that he is tough, Erdogan should threaten to send pastor Brunson back to jail and in solitary confinment... for "national security" reasons and to "protect him" from been lynched by angry Turks.
That will provoke an outcry in the USA and possible escalation but Erdogan has nothing to lose anymore. In any case any pastor wouldn't mind living like a monk for a while

Posted by: Virgile | Aug 11 2018 15:27 utc | 79

Anyone seen Tom Luongo's piece about this, "Lira Collapse To Jump The Mediterranean"?

He believes that "Turkey knew this was coming and are prepared for it"

Posted by: xpat | Aug 11 2018 15:33 utc | 80

pleased to see NBC got the headline correct: "WORLD: Turkish currency crashes after Trump doubles tariffs on metals"
In fact, have to search to find Turkey story below the fold.

(the Saudi vs. Canada story is apparently scrubbed. One wonders how many hospital patients and students were actually transported home or had trips cancelled. Unlikely to know. RT says canadian oil industry crippled by falling prices (below $40/barrel) due to lack of pipeline capacity --

RT: Canadian oil crisis continues as prices plunge.

Is this one-two punch going to become a "thing" or fad amongst despots? Exploiting financial crisis for the hell of it or simply fun and profit? Seems rather transparent.

Sort of like how you don't have to "like" or approve of Erdogan to disapprove of American crack-the-whip tactics ... Apparently the "magic" of regime change continues to appeal to many Americans' imaginations.

Amazing how rarely issues regarding Gulen and coup and Erdogan's suspicions of American involvement have been mentioned --- Erdogan is a simply cast as a "bad economic managers" and thus deserving of this chaos because he's noncompliant with US ambitions. Or something.

Posted by: Susan Sunflower | Aug 11 2018 15:38 utc | 81

Erdogan will do whatever saves Erdogan at the moment and he will change paths when it suits him. That is the problem with him, no reason to trust him.

Trump is loud mouth bully who expects to get his way by threatening countries/leaders. This is a very NY way of being (I’m a New Yorker). I’m happy someone is standing up to Trump even if it is Erdogan. The US would be very foolish to allow Turkey to leave its camp. Unfortunately, the the US empire fans, US policy is meant to assist Israel not the US.

Turkey’s future really lies to the east. Europe is never going to accept Turkey and the US will never treat Turkey as anything other than a vassal.

Posted by: Alaric | Aug 11 2018 16:12 utc | 82

The thing is, it takes two to tango. There are many European banks (big European banks, not your backyard, clandestine bank) that are elbow deep in Turkey's debt. If Turkey defaults, the EU will suffer a "contagion" (the same thing if Greece had defaulted).

According to top economist Michael Roberts, "some of Turkey’s banks are foreign-owned and the biggest lenders to Turkey are Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas."

Posted by: vk | Aug 11 2018 16:36 utc | 83

Jen @ 5

Your second paragraph is the biggest load of tosh ive read in a long time

Posted by: m | Aug 11 2018 16:37 utc | 84

Thanks for this excellent analysis b.

Some thoughts on currencies.



“Emergence of money was not based on market exchange but wergeld and then state. The story of money starts with the imposition of a unit of account and some financial instruments. This financial instruments were first uncollateralized unconvertible financial instruments (in Egypts and Mesopotamia via shubati), went to collateralized financial instruments (gold coins), then convertible financial instruments (convertible paper money) and then back to unconvertible financial instruments. Both states and private sector have issued monetary instruments.”

I think this is what China is trying to do with its yuan/gold experiment. It is trying to enter the international market at the ‘convertible paper money’ stage.

I think the main problem with a gold based system is that there is not enough gold to cover all the transactions. But once the yuan becomes more accepted they could move to the ‘unconvertible financial instrument’ stage. Similar to the trip the USD took.

Posted by: financial matters | November 02, 2017 at 08:46 AM

Posted by: financial matters | Aug 11 2018 16:47 utc | 85

Erdogan is clever, but unfortunately, several times less clever than he think he is. Politically, he decided to be perpetual leader by cementing support around 50% of voters and using assorted authoritarian tricks like delivering media to political cronies, some of them from Qatar. War with Kurds was basically of his choice, they were not content to be junior members of AKP, and nothing else was acceptable to Erdogan. War with Syria by chaotic proxies were also his choice.

And economically, this is classical case of "from difficulties of growth to the growth of difficulties". As Confused Pundit wrote, the crisis was expected for several years, and Erdogan did little to bolster the capability to handle it, like decreasing the trade deficit etc. Nobody can "rescue" countries of the size of Ukraine, Turkey, Mexico, Argentina or (coming soon) Pakistan. Crisis mechanism includes changed mix of foreign credits to short term and eventually the tide turning the direction.

However, picking unnecessary fights at the worst of times is really showing that Erdogan is an old dog that cannot learn new tricks. His carrier is full of unnecessary and often unfinished fights that he picked, but it good time it was part of his macho charm. Erdo and Trump are like evil twins in that respect.

Posted by: Piotr Berman | Aug 11 2018 16:47 utc | 86

vk @ 83

I think that US and European banks have been papering over their losses since 2008. Eventually something will cause it to give.

I think that China/Russia/Iran are coming up with the real deal to replace it. Something based on real trade and productivity rather than derivatives.

Posted by: financial matters | Aug 11 2018 17:01 utc | 87

Putin will send help..


Posted by: igybundy | Aug 11 2018 17:37 utc | 88

Re: "imprisoned U.S. pastor Andrew Brunson"

He's a tangent, or detail, in this analysis-- but can anyone recommend a credible source (article, etc.) about Brunson?

Naturally, the US politicians are melodramatically wringing their (praying) hands and clutching their pearls Bibles over the alleged unjust imprisonment of this "man of faith".

There are highly-placed officials, e.g. AG Jeff Sessions, who identify as Christian fundamentalists and nominal Dominionists. These True Believers have prospered politically by using religious-themed demagoguery to attract and enthrall the conservative Christian voting bloc; righteously clamoring for the deliverance of an ostensibly innocent clergyman/martyr serves this agenda.

Trump is manifestly not religious, unless one counts his megalomaniacal self-worship. But he'll race to the head of the "Free Brunson" movement to appeal to the Republican base.

I admit my bias-- a guess that Brunson is still another intelligence asset, or self-serving fraudster.

Posted by: Ort | Aug 11 2018 17:48 utc | 89

xpat @ 80

Thanks for this link. Tom Luongo often seems on point.

""Because, this morning the talk about this collapse is not about the effects on the Turkish economy or Turks themselves, but rather how it affects the bottom lines of the broader markets… you know, those who have the most to lose here.""

I also liked his perspective on the Russian default of 2014/15. This was a strategic default as being a sovereign currency issuer it was not necessary for Russia to default.

""He destroyed the legitimacy of advisors like Alexander Kudrin and much of the ‘Atlanticist Fifth Column’ that dominated the financial sector and began the process of truly de-dollarizing the Russian economy.

And because of this set Russia on a path of financial and foreign policy independence that cannot be challenged by the U.S. in any material way. Sure, sanctions will hurt a little here or there, but there are work-arounds. People are smarter than governments, and capital flows to where it is treated best.""

Posted by: financial matters | Aug 11 2018 18:00 utc | 90

"Yes, the U.S. is using the issue to put pressure on Turkey. But the U.S. is not the root cause of the problem. It only exposes it."

You contradict all over in this piece like in this sentence.

yes, an economic fundamentals are the problem no doubt. so is every other country except the us and a countries that have currency swaps with the us' federal reserve. that's why you are not going to read that currencies of this bunch of countries are under attack. here is word always about "emerging market" countries which are all more or less have lost its value against $.

the push-pull situation between turkey-usa is lasting quite while, the us side was sending persistently warnings to the turks in regard of various issues. but turks stonewalled americans.

Posted by: partizan | Aug 11 2018 18:37 utc | 91

The trade wars, including Turkey, are created by just one man – Trump. This begs the question is Trump’s family and friends making billions on currency trades following yo-yo financial attacks on foreign governments? As I recall his family is close with the Soros empire that almost took down the UK via currency manipulations.

Once Turkey is economically weakened enough a Ukraine style revolution will be engineered in order to block the China led BRI and put more pressure on Iran. Trump then gets a trifecta out of the deal!

For similarities between the US policy on Turkey as a repeat of the deFinlandization of Yugoslavia where financial attacks were used to remove Yugoslavia as a barrier to NATO expansion as described by Dr Bob Allen in his long paper titled “Why Kosovo? The Anatomy of a Needless War, June 1999 at”

“Yugoslavia collapsed under the impact of the IMF's structural
adjustment program. Budget cuts meant that the federal government
could no longer provide everyone with economic and social security,
and so allegiance to Yugoslavia defaulted to allegiance to republics
and national communities. The freely contested elections of 1990
exacerbated this tendency, for they took place only at the republic
level and not at the national level. The national government lacked
any democratic legitimacy and was not capable of advocating the
national perspective. Instead, republic leaders responded to the
insecurity of their citizens by advancing the interests of the
republics vis-a-vis other republics and the country as a whole.”

Hopefully Russia, China and Iran have learned from the Yugoslavia and Ukraine events to arrange an economic accommodation with Turkey.

Posted by: Krollchem | Aug 11 2018 18:41 utc | 92

There is no question that the US and EU Banks have papered over losses valued in trillions of dollars - never to be reconciled or recovered.

It's funny money.

That said, the US and EU is capable of and does indeed entrap poor countries with World Bank loans designed to make them fail and steal their resources.

Erdogan, like Assad, Hussein, Milosovic, will be thoroughly mocked and maligned in the MSM.

Posted by: fastfreddy | Aug 11 2018 18:51 utc | 93

thanks for the many fine comments - especially from those who appear to live in turkey including confused pundit - welcome back!

@86 piotr.. i see it much like you.. thanks for articulating all that...

@93 ff... i was wondering if we are coming to some climatic point where the financial system is going to implode or undergo some major change? it seems like the way it is presently set up - as a ponzi scheme of sorts - works for those in power, but is a tool of abuse for those who are on the outside trying to get in..

Posted by: james | Aug 11 2018 19:10 utc | 94

That Erdogan says the US could push Turkey to find new friends and allies means that he has already started looking for new friends and allies. He was at a recent SCO meeting.

I take the long view. Turkey is a sovereign state that will be around for a very long time. Real people live there that have a right to peace and prosperity. My analysis is that in the long run the peace and prosperity of Turkey requires it to turn away from the US/NATO and to the SCO and the East. And I can't imagine that Erdogan wants to stay in an alliance that tried to kill him.

Another factor is that Erdogan is exactly the right type of person to make the turn. He is bullheaded sort of like a Trump but even tougher. A normal type politician would not be able to make the turn.

Being an Armenian I know people think I hate Turks but I don't. Turks living today were not alive in 1915 so I keep that a separate issue which I discuss with them and remain friends. I actually feel more at home with Turks than Americans.

Posted by: AriusArmenian | Aug 11 2018 19:41 utc | 95

The pastor is a CIA operative, obviously. The US wants him out before he compromises the entire CIA-Mossad network in Turkey.

The CIA has always used Christian missionary groups, like the Wycliffe Bible Translators.
Here's some more historical factual info for the newbees who don't know or the others who don't recall.

Mormons are a proxy force for CIA, exposed during the unpeeling of Howard Hughes's empire.

Erdogan has two huge assets he will be playing. His military will be decisive in Syria (directed by Russian operational controllers) against any stragglers, proxies or coalition advisors. And his control of the Bosphorus Straits will be significant as he helps Russia turn the Black Sea into Lake Vladimir. Throttling the flow of NATO ships and non-Russian freight will gain for him a negotiating edge.

Incirlik will soon be emptied of B-61 nukes and Turkey will probably be looking for Russian tenants as NATO moves to Greece and Italy and Israel. Germany left months ago.

The Russian GRU and SVR will be more important to Ankara than ever. The US will be plotting with Mossad a new assassination plan to liquidate Erdogan. That solves the US problems with the quickness of a bullet or a bomb.

For certain, terrorism will be unleashed soon, daily, and Erdogan's support leadership and his family will be fair game. The Hegemon means to stop Turkey from going Eurasian.

The EAEU is the first stop for Turkey to help with trade. Then, China and BRI and loans from AIIB.

Turkey relies on Russian tourism for hard dollars. Soon, their beaches and other vacation spots will be packed with Chinese tourists.

It's not all bad. New, from the East, will help convert the Turkish economy with yuans and RMB loans, and Sino foreign direct investments.

Posted by: Red Ryder | Aug 11 2018 19:43 utc | 96

As a follow up to comment #92

Pacification of Turkey will further geopolitical goals for the US alliance of Israel, Egypt, UAE and Saudi Arabia:

1. Weakening the Turkish Muslim Brotherhood in Turkey may also reduce its influence in Egypt;
2. removal of Turkish troops in Qatar as part of the Qatar-Turkey Combined Joint Force Command would allow a Saudi/UAE invasion of Qatar and the capture of its wealth funds and natural gas reserves to rescue of the Saudi Arabia economy;
3. cutoff of Iranian oil and gas to Turkey to further weaken Iran;
4. Enhanced oil (and natural gas) transport from the Caspian basin via the pipelines from Baku through Georgia and loading docks in Southern Turkey;
5. Increased pressure on Syria, Iraq and Lebanon for control of offshore oil and gas reserves (Iraq shares some oil fields with Iran);
6. Gaining access to the recently Oman condensate fields via political pressure on this third form of Islam;
7. Blocking the BRI and Russian transportation routes to Europe via Turkey.

Posted by: Krollchem | Aug 11 2018 19:46 utc | 97

Piotr Berman @ 86 ...picking unnecessary fights at the worst of times is really showing that Erdogan is an old dog that cannot learn new tricks. His carrier is full of unnecessary and often unfinished fights that he picked, but it good time it was part of his macho charm. Erdo and Trump are like evil twins in that respect.

Charming analysis with Donald Trump and Erdogan cast as current-historical super-heroes

financial matters @ 87 I think that US and European banks have been papering over their losses since 2008. Eventually something will cause it to give.

I think that China/Russia/Iran are coming up with the real deal to replace it. Something based on real trade and productivity rather than derivatives.

Thank you for this succinct analysis and hopeful assessment of world economic situation.

Anunnaki @ 76 Flipping Turkey to the One Belt One Road
is one more FAIL for the Neocons/Neoliberals.
Re Trump and Pence: the dogs bark but the caravan rolls on - Vladimir Putin

Agreed. That is the way the Universe rolls. Smoke and mirrors once again come up short.

Posted by: Grieved @ 37 Erdogan has been cavalier with his economy. One way or another, he will have to sober up, to some degree, and perhaps gradually. I have long felt that hanging out with wise people rubs some of that wisdom off. To my eye he seems vastly improved today over what he was even two years ago. He's been talking to some worthy people. Clarity comes gradually. Turkey is a rock that sits astride east and west. That in itself is greatly valuable. If Erdogan can't make some gain out of that immovable political reality, he's losing his touch.

Wise words. Turkey as Asia landbridge, and Constantinople as the gateway back and forth.

Posted by: Guerrero | Aug 11 2018 19:59 utc | 98

If USA was behind the coup and really wants Erdogan gone, why didn't they crash Turkey's economy before Erdogan became a virtual dictator?

Why has Erdogan decide to fight over a pastor instead of Trump's Iran sanctions and oil embargo?

Probably because he's negotiating. Turkey will probably remain with the West and get subsidized/discounted oil that insulates Turkey from oil price swings due to Iran sanctions/conflict.

Let's not forget Erdogan's negotiation over Syrian refugees. He got $3billion to from EU to keep them in Turkey.

Posted by: Jackrabbit | Aug 11 2018 20:07 utc | 99

Thanks for that.

But please elaborate on:

"In November 2015 the Turkish air defense ambushed and shot down a Russian jet"

What was the strategy here? Where lied the benefit in Erdogan's mind? Or came it from others sabotaging rapprochement with Russia?

Posted by: John Dowser | Aug 11 2018 20:19 utc | 100

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