Asymmetric operation against the trio initiative
In an environment with investigations into whether U.S. President Donald Trump had negotiated with Russia on some issues prior to the U.S. presidential election, whether Russia interfered in the presidential election and where Trump’s scandals are brought into the open, is it convincing that Trump said that relations between the U.S. and Russia are at their worst point since 1947, or is it a maneuver by Trump to change the agenda in order to get out of this tightening clamp? It is hard to know. Having said that, at this stage, it can be said that the U.S. Defense Department and the Pentagon are trying to manage Trump’s statements with more logic, whereas Russian President Putin and Russian institutions’ statements weigh more sober. At this point, the manipulative attacks on the national currencies of Turkey, Russia and Iran, which have teamed up to try and bring peace to Syria and held a summit in Ankara last week, was also not overlooked.
In a context in which the Russian ruble depreciated against the dollar from 57 rubles to 65 rubles and in which Iran fixed the dollar exchange rate at 42,000 rials in order to stop the depreciation of the currency, London-based, over-the-counter interbank prices saw the dollar trading at 4.19 against the Turkish lira. In fact, while the move of the dollar-TL exchange rate that increased from TL 3.78 to TL 4.04 was controversial enough, the manipulative exchange rate quotations that moved the dollar-TL parity from TL 4.04 TL to just over TL 4.14 in just three hours are under investigation by the Central Bank of the Republic of Turkey (CBRT). While there was no significant difference in Russia and Iran’s economic data and dynamics, Turkey defines this very quick change in the exchange rate as an economic operation of the asymmetric order that hopes to corner Turkey, Iran and Russia’s initiative. In all three countries, the mistake that financial market professionals should not make is to trade at unreasonable and significantly high currency rates.
To get mesmerized by and trade the dollar for TL 4.25 on orders coming from London is to facilitate the job of the operation forces that want to manipulatively raise the dollar-TL exchange rate to this level. Of course we should not forget other brokers who want to manipulate the market to pull off higher interest debts from emerging markets such as Russia and Turkey by using this period of global uncertainty to their benefit. At this point, the intervention by the CBRT to the rise in dollar-TL parity by raising interest rates by three or four points is like an overdose, trying to kill mosquitoes in a swamp with an atomic bomb. I hope the central bank does not make this error.
MAJOR STEP AGAINST THE TRADE WAR
The swordplay between the United States and China that kept on escalating, particularly over the past 15 days over global trade wars, has also caused fluctuations in expectations of global commodities, raw material and goods prices that will influence the coming period. The additional tax burdens or quota restrictions between countries such as the U.S., China and the EU, which have priority in global trade, and the United Kingdom and Japan, which are in the second ring, can cause a rise in global raw material and final product prices over the next few years in addition to being a new trigger for global inflation. In addition, when we consider that the political tensions Trump escalated in the Middle East and the Asia-Pacific triggered global oil and gold prices, the risk of global inflation is further increased.
At this point, the $135 billion, projectbased investment incentive system announced this past Monday, in other words, the investment move that will benefit from the super incentive system, will reduce Turkey’s foreign dependence in metals and metallurgy, petrochemicals, renewable energy technologies, refinery products from crude oil, medical devices and health tech- nologies, agricultural technologies, defense technologies, rail systems and, finally, motor vehicles and electronics industry, and in addition to enabling Turkey to import less over $13 billion in the medium term, it will improve Turkey’s foreign trade deficit by over $19 billion by enabling it to export over $6 billion of goods around the world.
The 70 percent dependence of Turkey’s manufacturing industry on imported raw materials raises Turkey’s input costs, particularly in manufacturing and energy due to the increase in prices of global raw materials and finished products and rise in exchange rates, and is reflected in Turkey as inflation. Therefore, especially in the past two years, with the great moves from the Energy and Natural Resources Ministry on domestic energy resources and mining facilities and $135 billion of investments in manufacturing that will benefit from the super-stimulus package, Turkey will reduce its external dependence. These are steps that will result in a critically important improvement in the current account deficit.
Moreover, against the manipulations, those who are not pleased with Turkey, Russia and Iran’s efforts to undertake initiatives in the region enforce the exchange rates and will attempt to move even further, which are huge steps that will strengthen Turkey’s hand. As this colossal $135 billion investment - added to the $891 billion investment incentive given from 2001 to February 2018 - is realized, Turkey’s position in global trade will also strengthen.