Turkey’s traditional alliances are integrated into the chessboard whose epicenter is the Bosphorus, generating complex relationships with different actors. Turkey’s membership of NATO has never been an option, and nobody is seeking it. By abandoning the alliance, Turkey would inflict itself a very severe blow by preventing itself from pervading the strategy of simultaneous engagement on several fronts, which is perhaps the last surviving legacy of the foreign policy adopted in the first years of the Justice and Development Party (AKP) Government. There is no interest in abandoning the Atlantic Pact overseas, given the United States need Ankara not to leave the eastern Mediterranean to Russian, Chinese and French influences. The perspective to which Turkey is conforming is to make itself useful, if not necessary, to as many parties as possible, in order to prevent a frontal confrontation with any of them. Cooperation with Russia can not evolve, as some have imagined, in structured membership of alliances able to bind Ankara to Moscow alone. On the other hand, thereare other areas of cooperation, such as the development of nuclear technology (a partnership alternatively over and underestimated by eurocentric analyses) which will last in the long term.
The problem of the difficult management of public finances in the presence of unconventional monetary policy choices is well understood by the Turkish establishment, primarily by Berat Albayrak, who as a Finance Minister tended to give reassuring messages to the international financial community until his resignation last November the 9th.
The economic situation
Turkey’s economic and financial situation is characterised by a severe shortage of reserves in strong currencies and a weakness in the national currency. Its monetary policy is often described as contradictory, as it tends to maintain low interest rates in order to stimulate consumption and investment from outside, despite the choices made by the Turkish Executive contributing in fact to the construction of an environment hostile to investors and liquidity is being exhausted. Therefore, the contrast between the search for full reinstatement between the destinations of international portfolios, which are the basis of the great economic development of the years 2003-2015, and the framework of uncertainty resulting from deeply aggressive foreign policy choices, which discourage investors, is striking. It is the expansionary monetary policy at any cost proper to the Erdogan Presidency, which remained unrealized until the important constitutional reforms of 2017 that allowed the appointment of a governor of the Central Bank less independent from the Government. In August, the Turkish Central Bank avoided raising the interest rates to 8.25% to support the lira, imposing backdoor liquidity measures to avoid a further increase in inflation (which is already very high) another key objective of the Turkish Presidency. The Path of the Central Bank is therefore “prudent”, as reported by the Monetary Policy Committee of that institution itself. Formally, the reason why the Bank has taken such caution is the uncertainty following the pandemic. The increase in interest rates, which is what the markets are looking for, is something that does not seem to be in the Government’s plans. The current trade balance is negative, it would require direct foreign investments in hard currency in order to be rebalanced in a positive direction. These foreign investments have been in short supply for years.
On 24 September, the Bank finally raised interest rates by 200 basis points, but at the end of October it kept them at 10.25%. Current global economic situation does not suggest that they will be raised again soon. The Central Bank therefore may not be able in the future to prevent a further weakening of the lira,which hit an all-time low against the dollar of 1/9.57 on 26 October. The lack of monetary reserves has stimulated the purchase of gold by the State (Turkey now holds 583 tonnes of gold, while the previous record was of 485.20) and the demand for loans from our friends.
The willingness of some friends to come to the aid of Turkish demands will certainly not improve the economic situation if not temporarily: Qatar tripled the value of the currency swap agreement, bringing it to15 billion dollars, while the United States refused an increase in its exposure.
Half of Ankara’s debt is denominated in dollars and about $200 billion in bonds are due this year. Turkey has avoided applying for aid from the International Monetary Fund (IMF),which could also offer loans at minimum rates, because of the political price they would entail: a clear reverse on several of the reforms adopted in 2017 (primarily the independence of the Central Bank and constitutional guarantee bodies) and a new stringent anti-corruption legislation.
If the state cannot honour its debts denominated in foreign currency, the risk may evolve into that of the degradation of Turkish securities, resulting in the demand for high creditor interest. A very dangerous spiral with strong social and electoral repercussions.
The use of the IMF would be a last resort because its final political cost could be to resign and call new elections.
The Government of the Republic as a whole is not so reckless as not to understand the inherent contradiction of its economic choices. The problem of the difficult management of public finances in the presence of unconventional monetary policy choices is well understood by the Turkish establishment, primarily by Finance Minister Albayrak, who tends to give reassuring messages to the international financial community.
The External Front
The Presidency could be so eager in adopting the monetary policy of low rates not only out of ideological obstinacy, but also in order not to contradict itself and for fears of a further increase in inflation (already a hyperinflation). The Government of the country, being aware of the seriousness of the situation, may hope to put an end to it by capitalising the instability that Turkey itself created, without ever touching the point of no return. Ankara may be playing the game of raising tensions up to the maximum, up to a point where the situation seems to have been lost, to create the conditions for cooling down while proposing solutions which will guarantee Ankara a certain strategic advantage in exchange for a period of stability. In the present case, Ankara’s requests could consist of:
– the reopening of unreserved credits to the Turkish State,
– the recognition of the right to use part of the natural resources conferd by international law to Greece and Cyprus,
All this while Ankara intelligently develops complex relations with actors such as China, towards which there is a strong push for rapprochement and towards which it asserts its weight as a NATO member, and such as Russia, an ally and rival to which it cannot give too much space in the Mediterranean while structuring with it a strategic relationship of enormous importance.
China has invested considerable resources and financial commitment in the construction of the Belt and Road Initiative, which sees Turkey as one of the western doors of a huge logistics network that is supposed to make China a new center of global development. Beijing has expressed its interest in the Mediterranean through the control ofthe various ports, and has therefore provoked reactions from Washington, which is regaining ground in Greece thanks to fruitful cooperation with the conservative Government of K. Mr Mitzotakis. With Athens poised, Anatolia remains an indispensable landing point for Beijing. Ankara is well aware that it can assert its position and intends to structure a win-win relationship with China. In order to achieve this, it has granted the extradition of representatives of Uyghur irredentism and recognised its irredentist formations as terrorist groups. However, Turkey will never play with Beijing according to the rules dictated by the latter, that is, through financial penetration and chinese academics into Turkish territory followed by a gradual increase in its presence in the economy, as has happened in several realities such as South America. Against possible Chinese power, Ankara will oppose its membership of the Atlantic Alliance.
As mentioned, the relationship with Russia is much more complex. The important factor in the purchase of Russian-made armaments is secondary to the issue of nuclear cooperation and could also have major repercussions in the near future of relations with Iran. Turkey sees nuclear power as a formidable instrument both in pursuing its energy independence and in having a very strong deterrent if it makes it known that it wants to own a bomb , regardless of whether it actually wants to have it. Russia, Ankara’s indispensable neighbour as well as regional competitor, is facing a Cypriot government in line with American positions that have forced the downsizing of many Russian financial assets on the island and the unavailability of Cypriot ports to the Russian Navy. This, then, could counter by recognising the Turkish Republic of Northern Cyprus, and thus benefit from bases in the northern part of the island. The results of the ankara-backed candidate’s victory at the ballot box make northern Cyprus a much more oriented player than it has been in the past, given that the solution of a single federal state seems to be moving irretrievably away.
In the Russian Government there is an important pro-Turkish faction to which the Minister of Defence K. Šojgu also belongs, reciprocated in Turkey by the Eurasian faction, not a necessarily pro-Russian one but certainly more eager to appreciate a rapprochement with Russia (and China) than Turkey’s staying in NATO, which they perceive with much hostility. Adm. C. Gürdeniz, father of the Blue Homeland strategic concept, also belongs to the Eurasianists.
The Blue Homeland, while defined as defensive idea, projects the Turkish naval force as far as the Persian Gulf.
EU and NATO
Turkey’s status as a candidate member of the European Union and as a full member of the Alliance is Ankara’s greatest ace of the sleeve. A Europe divided between the conflicting economic and political interests of its members creates the internal division which is Turkey’s axis of manoeuvre. Berlin would like to be a negotiator with Athens, but both the German electorate of Turkish origin and the fact that Ankara is the third largest buyer of German war material weigh heavily. The episode of the S-400s and the Turkish Government’s willingness to purchase Russian air superiority aircraft following the exclusion from the F-35 program suggest that the Germans are very cautious. Athens, which hosted German Foreign Minister Maas on August 25, gives little credit to Berlin’s proactivity. Italy has participated in the deployment of structures towards Crete and Cyprus in order to counter Turkish aggression that threatens national energy interests, but the issue of Libya, whose Sarraj government depends to a large extent on Ankara, does not allow a clear stance to be taken. Participation in the Mediterranean Gas Forum would also be a good opportunity to get closer to Egypt and consolidate its position in an area vital to its interests, but the fall of Gaddafi makes Rome a lame duck. Among the major European players, France is the only one to act in a truly proactive way, through the provision of different naval arrangements in support of Greece. Paris, like any other European country, has an interest in its industrial and energy groups operating in compliance with the agreements made with Nicosia, and the fact of supporting Haftar in Libya allows an unreserved military commitment. The proximity of Paris to Haftar then explains the deployment, which took place in the summer, of a squadron of UAE interceptors in support of Athens and suggests that, in case of need, financial aid could come from Saudi Arabia, already engaged in a path of rapprochement with Lebanon following the fall of the Diab government.
The UK is likely to be one of the biggest players in the eastern Mediterranean crisis in due course. Being silent on ongoing maritime disputes with Greece and Cyprus, London shows a willingness not to oppose Ankara. Turkish Defence Minister H. Akar, criticising the French, stressed that Paris is not among the guarantors of the 1960 Cypriot Constitution, thus suggesting that London, which is the guarantor of that Constitution, has a say.
In this context, the United States is a very difficult player. In the Ankara-Athens dialectic, Washington has always shown that it cannot give up the former. The greater demographic weight, the Islamic nature of the country (although politically denied by the Turkish establishment until fifteen years ago), its geographical position and natural projectability in sensitive areas with a reliable military apparatus are very important structures in the hands of Ankara. Relations between the two countries have been deeply damaged since the failed 2016 coup, but the personal relationship between the presidents eases friction. In this context, France’s presence in support of the intra-Sunni axis opposing the Muslim Brotherhood makes Paris an annoying competitor of a Washington eager to find an escape route from the Middle East, in which it nevertheless finds itself mired and in spite of itself. The Minister for Foreign Affairs M. Çavuşoğlu has condemned the French intervention as aimed at promoting European armed forces to the detriment of the Atlantic Alliance and therefore, according to his thinking, contrary to US interests. Support for the political vision of the current American Presidency, interested so much in disoling itself from an Alliance from which it believes it does not receive sufficient benefit but in weakening the European Union with various actions to the detriment, above all, of Germany.
The research ship Oruç Reis has never begun its exploratory activities but has sailed the eastern Mediterranean with a robust military escort to often station in contesteded stretches of sea not deep enough as not to allow operational activities. The Turkish Oil Corporation (TPAO) has already communicated what the area of operations will be: easter of the 28th meridian, or east of the island of Rhodes. It is difficult to imagine that Turkey really wants to act offensively in a quadrant where its opponents would be NATO members, because the consequences would be unmanageable. The government’s most advanced positions in favour of an anti-Western stance in Turkey, those of the Eurasianists, are adopted by the Government in part and in a purely formal manner, but the interest is not to pursue their wide-ranging policies in full. The interest is to sit down early at the negotiating table “without pre-conditions” given the seriousness of the economic situation, in order to propose reconciliation in exchange for concessions, primarily liquidity. Athens responded by saying that it was prepared to go to the higher Courts without acknowledging anything to negotiate, given its belief that it is operating legally. Turkey would be hit by a boomerang effect if it were to be forced into further long delays without reaching an agreement. At that point, Ankara would be forced to divert its attention to different activities, such as shifting interest in newly discovered deposits in the Black Sea or further military activities in the Siro-Iraqi context, or increased support for Azerbaijan in the Caucasian context.
It is also possible that it will use the threat of reopening the borders to migrants, thus stimulating the setting up ofapnegotiating table with Germany.
If the economic situation in Turkey worsens and this causes alarm to the Turkish Government, only two solutions will be possible: recourse to the International Monetary Fund or early elections. In both cases, for reasons of consensus and despite the need for détente, the policy will remain that of provocation andthe maintenance of an atmosphere of “armed truce”.