TRUMP, TURKEY AND CONTAGION
Turkey should impose exit tax on speculating fund managers, ban currency speculation of its lira, introduce capital controls, and restructure corporate and bank debt
WHEN one continues to caricature a country like Turkey as the “sick man of Europe”, it is inevitable that given its geopolitics as a bridge between Europe and the Middle East, contagion might eventually set in.
Thanks to the current United States-Turkey spat, the source and spread of that contagion is not Turkey, but American foreign policy which seems to have been captured by yet another far right faction in the ruling establishment.
Yesterday it was the white supremacist alt-right neo-conservative group, whose cheerleader is Steve Bannon and whose motto could well be “Might is not Right. Might is White”. Today it is Evangelical Christians whose reach in the White House could not be further from the Oval Office through their diehard flag bearer vice -president Mike Pence.
The Evangelical Christians are incensed that an upstart like President Recep Tayyip Erdogan would dare put one of their own, Pastor Andrew Brunson, whom Turkey alleges has links with terror groups, under house arrest in the city of Izmir. The White House has dismissed the charges as trumped-up. However, the Turkish Lower Court on Saturday has dismissed an appeal by Brunson’s lawyers to have the charges dropped.
Erdogan, meanwhile, is not amused that successive US administrations have refused to extradite Turkish religious cult leader Fetullah Gulen, his onetime ally but now arch enemy, whom he blames for masterminding a failed coup two years ago, which claimed over 200 lives.
Ankara is also not happy about US policy in Syria especially relating to the Iraqi and Syrian Kurdish minorities along the border with Turkey, which has accused some of the Kurdish militias aiding and abetting the Kurdish Marxist PKK terrorist group, which is fighting for a separate Kurdish state. President Erdogan has warmed up to Presidents Vladimir Putin of Russia and Hassan Rouhani of Iran over Syria, and has even threatened to buy a Russian missile defence system much to the chagrin of Turkey’s fellow Nato member countries.
The question that beckons is: “Who is setting US foreign policy?” Is it President Trump or vice president Pence or secretary of state Mike Pompeo? The latter has been at the heart of US-North Korea and US-Russian policymaking, but is conspicuous with his absence in the US-Turkey spat. Has he been sidelined as his predecessor Rex Tillerson was?
It seems that this US-Turkey spat is also a 21st century manifestation of a proxy war between Christian Evangelicalism and Sunni Islam. Islamophobia, as Trump has demonstrated several times in his speeches, tweets and policies, is at the core of his mindset and prejudices. Former US ambassador to Turkey Robert Pearson in a CNBC interview on Friday betrayed the Trump administration’s real intent when he said that Turkey’s economic decline doesn’t have to be “a permanent economic crisis like Russia’s, so long as Erdogan submits to the demands of the US, the economy or both”.
Trump’s tariffs has put pressure on the Turkish lira, but then the currency has been subject to relentless bashing by foreign fund managers over the years and has faced similar attacks especially in 2001 during the Turkish financial crisis.
Has Trump been sleepwalked into cutting off his nose to spite his face? Just look at the contagion impact the US action against Turkey and its currency has had on European stock markets and on the currencies of South Africa, India and Indonesia — all allies of America.
While the Turkish finance minister Berat Albayrak and the central bank could have acted more decisively, their ability to do so is constrained. There is an atavistic prejudice, which the “sick man of Europe” has historically suffered from the rating agencies, the IMF, the World Bank, the Western media and the international banks. These institutions have no qualms in leveraging the cost of finance to Turkey and its corporate borrowers to the maximum.
Perhaps, Erdogan should take a leaf out of Malaysian Prime Minister Tun Dr Mahathir Mohamad’s book. Remember 1998? Malaysia, too, was faced with corporate and bank debt woes during the Asian financial crisis when speculators, including George Soros tried to undermine the ringgit. Perhaps, Turkey too should impose an exit tax on speculating fund managers, ban speculation on the lira, introduce capital controls, and restructure corporate and bank debt.
This spat also raises the crucial issue of the desirability of the US dollar as an international currency and its use as a weapon of foreign policy war, especially against emerging countries. Its use as an international commodities trading currency could be numbered if the global community has the political will to do so. A basket of the euro, yen and the fast-rising renminbi would do nicely.
Failing that, President Erdogan may possess the mother of all trump cards — Turkey’s repudiation of its Nato membership and closure of the vital American base at Incirlik. That is sure to send the Pentagon in a spin!
Erdogan, meanwhile, is not amused that successive US administrations have refused to extradite the Turkish religious cult leader Fetullah Gulen, his one-time ally but now arch enemy, whom he blames for masterminding a coup attempt two years ago, which claimed over 200 lives.