TURKEY-US TIES FAILING FAST AS LIRA PLUMMETS

Turkish President Recep Tayyip Erdogan’s sonin-law and Finance Minister, Berat Albayrak, was wiping the sweat off his brow on Friday as he outlined an economic model to investors that would promote growth and lower inflation in coming months.

But halfway around the world, President Donald Trump announced on Twitter that he would be doubling tariffs on Turkish steel and aluminium. The lira had fallen again by the time Mr Albayrak concluded his speech.

The latest salvo in a worsening diplomatic crisis between the two Nato partners came amid a currency crisis fuelled by Ankara’s fiscal policies and prompted a siege mentality among Turkish officials.

They warned that the continuing dispute with Washington could lead to a broader break in a relationship that survived the trials of the Cold War.

“Unless the US starts respecting Turkey’s sovereignty and proves that it understands the dangers that our nation faces, our partnership could be in jeopardy,” Mr Erdogan said in an opinion piece in The New York Times on Friday.

“At a time when evil continues to lurk around the world, unilateral actions against Turkey by the US, our ally of decades, will only serve to undermine American interests and security.

“Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies.”

The lira fell to 6.38 to the dollar on Friday as it crossed one historic low after another – a loss of about a third of its value in just one month and more than 15 per cent in a single day. It had spent much of 2014 hovering at slightly more than two to the dollar.

Amid the currency crisis, Mr Albayrak’s speech offered few concrete steps to ease investors’ anxiety, other than pledging the Central Bank’s continued independence.

In speeches on Thursday and Friday, Mr Erdogan signalled he would not back down from the dispute or reverse course to stem the currency’s fall, saying Turkey would emerge victorious from an “economic war”.

He called on people to change their gold and foreign currency to liras and said: “If they have their dollars, we have our people, our righteousness, our God.”

Despite the call, Turkish bankers reported branches running low on foreign currencies, with one bank saying it could not meet a customer’s request to withdraw $5,000.

The US Treasury imposed sanctions on Turkey’s justice and interior ministers at the start of the month over the continued detention of Andrew Brunson, a pastor held for nearly two years over allegations of espionage for Kurdish separatists and supporters of Fethullah Gulen, who is accused of organising a failed coup in 2016.

But relations between Washington and Ankara, who control the two largest armies in Nato, have been sour for years. Turkey has been angered by America’s reliance on People’s Protection Units in Syria in the campaign against ISIS.

The group is the Syrian affiliate of Turkey’s Kurdish insurgent group, the Kurdistan Workers Party, and Ankara considers its growing power on the border a major national security threat.

Turkey has also demanded that the US extradite Mr Gulen, who is living in exile in Pennsylvania but no progress has been made on the demand.

Tension with the US has only exacerbated the economic crisis.

Mr Erdogan was sworn in after elections in June to a new term as president but with vast new powers that officially inaugurated an executive presidential system in Turkey.

The leader of the nationalists and Mr Erdogan’s ally, Devlet Bahceli, had called for early elections in August but the president called them even sooner, arguing that Turkey needed stability to handle regional crises near its borders.

The move prompted speculation that Mr Erdogan was trying to pre-empt economic crises, as analysts warned that Turkey’s economy was overheating and its current account deficit was rising.

A currency crisis would threaten the solvency of businesses that had taken loans in foreign currency but earned revenue in liras.

Mr Erdogan’s AFK party rose to power in the early 2000s largely on the promise of economic reform and strong growth.

The president has resisted the economic maxim that raising interest rates was necessary to curb Turkey’s high inflation rate.

His consolidation of power further worried investors already nervous about the central bank’s independence under the new executive system after the elections.

Those fears grew after Mr Erdogan appointed Mr Albayrak to the Treasury and Finance Ministry, which meant the president would exert greater control over monetary policy.

But the focus in Turkey has mainly been on the US tariffs and sanctions and how they threaten a longstanding alliance, forcing Ankara to look elsewhere for friends.

Turkey has worked closely with Russia in Syria, brokering peace talks and negotiating settlements in various parts of the country.

The US has also been considering sanctions against Turkish officials if the planned $2 billion (Dh7.35bn) purchase of Russian weapons systems proceeds.

Amid Friday’s economic panic, Mr Erdogan spoke with Russian President Vladimir Putin.

Ibrahim Kalin, the Turkish president’s spokesman, argued in an article in the pro-government Daily Sabah that this was a “new low” in US-Turkish relations.

“The US runs the risk of losing Turkey as a whole,” Mr Kalin said.