Turkey’s “Olive Branch” incursion against Kurdish positions in Northern Syria this week looked bad for Washington. It’s worse than it looks: Turkey cemented a new set of strategic and economic relationships after defying the United States, its erstwhile main ally. Ankara now has financial backing from China and Qatar and the strategic acquiescence of Russia and Iran. Most of all, it has the financial backing to pursue its regional ambitions.
Turkey reportedly killed several hundred Kurdish and allied Arab fighters this week, reducing an American-supported force that had done most of the fighting against ISIS in Syria. US-Turkish relations are at an all-time nadir, but Turkey’s financial markets remain unruffled. Washington has hard words for Turkey, but no sticks and stones.
Money is the decisive variable for Turkish President Recep Tayyip Erdogan, whose domestic position depends on his ability to hand out economic benefits in the traditional style of third-world dictators. During 2016, Erdogan spurred Turkish banks to increase their lending to business and consumers, and set in motion a credit boom that inevitably led to a bigger trade deficit.
Import booms driven by credit-fueled demand have been the undoing of Turkish markets in the past. This time is different. Turkish stocks have risen during the past month, right through the week of the “Olive Branch” offensive, and the cost of hedging the Turkish currency’s exchange rate has remained relatively low. The US-traded Turkish equity ETF, TUR, has climbed back to just below its high point of last August, while the cost of options on the Turkish lira (or implied volatility) remains at the low end of the range.
The correlation of forces, as the defunct Soviet Union liked to call it, has shifted since last August, when the US and Turkey entered a diplomatic standoff over two relatively minor issues. Turkey arrested a Turkish national employed by America’s embassy in Ankara, and the US suspended the issuance of entry visas to Turkish citizens in retaliation. Meanwhile federal prosecutors in New York tried and convicted a vice-chairman of Turkey’s Halkbank with close ties to the Erdogan government. Turkish stocks plunged and the cost of currency hedging jumped in response.
With the attack on the American-allied Kurdish YPG militia in the northern town of Afrin last week, Turkey undertook a major military action in open defiance of Washington, and the markets didn’t notice. On the contrary, Turkish stocks rallied right through the offensive. Money is Erdogan’s scarcest strategic resource, and the continued flow of capital into Turkish markets is an important gauge of Turkey’s power.
On Jan. 24, Donald Trump used the harshest language that a US president has ever directed against a NATO ally, expressing “concern about destructive and false rhetoric coming from Turkey, and about United States citizens and local employees detained under the prolonged State of Emergency in Turkey,” and warning Turkey “to deescalate, limit its military actions, and avoid civilian casualties and increases to displaced persons and refugees.” Turkish stocks were unchanged.
In the background to the Syrian incursion, Turkey flaunted its ties to its most important sources of money, namely Qatar and China. Qatar is the largest foreign investor in Turkey with more than $20 billion in commitments, with another $19 billion in the pipeline for 2018. Meanwhile Turkey has become the guarantor of the Qatari royal family’s security, with a new military base in the tiny country. Turkey backed Qatar during last year’s Gulf States boycott, airlifting food after Saudi Arabia closed its border.
Qatar meanwhile has started to buy large quantities of Chinese arms, especially missiles that could be directed against Saudi Arabia, and has brought People’s Liberation Army personnel to train its armed forces, a relationship put on display at a December military parade in the Qatari capital of Doha. That is noteworthy given the presence of America’s largest air force installation in the region, the Al Udeid Air Base, the principal US hub for US operations in Iraq and Afghanistan.
Turkey meanwhile has reached a strategic accommodation with Russia over the future division of Syria: Turkey will abandon Sunni rebels whom it supported in the past in return for Russia’s forbearance while Turkey reduces Kurdish forces friendly to the United States. According to a Jan. 22 TASS press summary, Kirill Semenov, the head of the Islamic Research Center of the Institute of Innovative Development, explained: “Turkey’s operation in Afrin could have only happened as a result of agreements with the Russian side, particularly taking into account the fact that the Turkish air force used the Syrian air space.
Moscow’s permission should have been obtained to avoid incidents. Moscow had no commitments to the Kurds. The fact that the Russian military deployed observers in the area of Afrin earlier was a move for a further bargain with Ankara. Back then Turkey’s operation was not beneficial for Moscow, while now it can fault the United States for funneling weapons to the Kurds, turning them into an instrument of the American influence.”
China’s One Belt, One Road project acts like a magnetic field on the region: All of the players are lining up towards China, where Turkey and Iran see their economic future. China’s direct investment in Turkey remains relatively small, but Turkey will be a key node in China’s One Belt, One Road initiative. China is building new railway links to Turkey via Iran, and the Bank of China is financing infrastructure projects inside Turkey. China’s second-largest telecom equipment provider ZTE plans to make Turkey its regional technology hub.
With US-Israel-India axis blending together against the interest of the Muslim nations, China & Russia can be natural allies of the Islamic countries. Let Turkey and Iran take the lead in forging closer unity & cooperation among the Muslim nations towards taking a firm stand against Israel & her associates.
Joji Cherian
Yes we are in a criis alright. I just got the book "two Years Together" by Alexandre Solshenytskin. The English version is banned by American publishing houses but there is a self published English version under the name "Crucixion of Russia". It is the 200 years Russian Jews. Russia had the world’s largest Jewish population and they included the rich and powerful. but they also did terrible things in Russia. Alexandre, who also wrote "Gulag Archipelago" captures that in this book.
now we have the 2nd largest Jewish pop soon to become the largest (and in that sense similar to Russia). The book then is both a vital chapter of western history that is hardly addressed and it reflects what is taking place in America.
but unlike Russia the wealth and power America represents and they have not seized is enormous with few examples in history.
True, also the fact that Chinese doesn’t prop up terror outfits at whims of US MIC to achieve their Imperial objectives through hook or crook.
China is ruling the world. By the time China connects the world capitals with railway and roads, then the US empire will die with no one firing a shot. It is called strategic despoliation ferment.
Michael Bagala
I am atttaching link https://www.haaretz.com/1.4920795. (Questions of survival – Haaretz – Israel News | Haaretz.com 23 june 2006)
The lobby has been planing for life after America for quite a long time as reported in a credible media certainly not enimical to those people. That is after sucking off all the blood from america.The trgedy si that all the reptiles in the congress will not react to it. As for evangelicals like Pence they believe in some stupid things and the lobby exploits it .
Again I tell you what America needs is a total revolution peaceful or not I can not say to oustfrom both Democratic and Republican reptiles and redeem from this lobby.As for Ctholic Church It is still a puzzle for me as to why it does not react to this danger.
Joji Cherian
What you said is unbelievable but so true. What in world has America become? Actually we have spent trillions and the "war against terrorism" is mainly due to Israel.
I understated the moral bankruptcy of America and as hard as it is for me to believe things are going to get worse… example legalization of Pot and the drug epidemic…but much more.
May I sugest that America is waitng for a leader to redeem herself from theis servility and slavery to Jewish lobby.As of now I can not see any emancipation by normal constitutional route since all the establishments including both major parties the law making bodies, financial and media outfits etc are all controled by this lobby. I am sure it will require open rebellion or a second Americn revolution to free America.
Michael Bagala
It is not my wish that America be doomed. But reality speaks for itself.I remember an America that demanded Israel to witdraw from Sinai back in 1956 and got Israel complied.Now six decades later and billions and billions in finacial write offs and unqualified political military and diplomtic support for all depradations commited by Israel the Isrelis insult the American establishemnts to the point of saying that Netinahu or Saron or Olmert kicning on the face of Bush or Obama
As for the Catholic Church.What is it today.When The Church’s own children are treated by Israelis as they do now they keep quite.Christianity is disaapearing from the land of origin of course with help of jewish Christians.The only force that can make an attempt to stop this disastrous Jewish thrust is the Catholic Church.But it keeps mute for reasons I can not understand.
So don’t feel bad.I just stated the obvious when I said America is doomed.
Will the American ghost soldiers just disappear? Who can trust the US now?
Clearly, the U.S. has lost much of its clout with the countries of the Middle East, other than Israel, Saudi Arabia, and most of the GCC emirates. Turkey, also rebuffed in its decades long attempt to join the EU, is increasingly looking towards China and Russia for economic and even military alliances and support. Turkey is still a member of NATO, I guess we’ll know that the balance of power has shifted irreversibly when Turkey moves its military allegiance from NATO to the Shanghai Cooperation Organization. Places like Turkey have to thread a torturous path when they are caught up in great power conflicts. Still the economic development prospects of the OBOR program have to outweigh the convoluted covert warfare and terrorist machinations offered by the U.S.
Joji Cherian
I agree with you on principle that Jews now control America. That took aound 70 to 100 years to accomplish. Jews hate Catholicism and among the Protestant sects there are "Christian Jews".
It is not so easy to simply say "America is doomed" for that could include a powerful wealthy nation who is morally bankrupt.
If you have never listened to E. Michael Jones I suggest you hear one of his youtubes such as "culture wars".
One of Obama’s biggest failures was allowing the CIA to be involved in the failed coup againt Erdogan ————-since that moment——–it has been downhill for the Americans. Erdogan, on holiday gets a phone call from Mr Putin and that was the beginning of the end for the Americans
As if they’re not trying hard and dismally failing. Sadly the USA keeps on inventing new ideas on how to shoot at herself and Causing as much damage as possible
The author is concerned because in the end Israael will be the loser if Kurds are defeated.Cuck Schumer wailing for the Kurds speaks for itself
America is collective dicatorship of Netinyahu,Sheldon Adelson,Haim Saban,Chuck Shumer,Bernie Sanders along with whichever joker is the president of USA at tail end.
US destroyed Vietnam,Afganistan Iraq and so on.Now aiming Iran. Securing the ralm for Netinyahu and Zionists the meanwhile destroying itself.
Really good news
Look on the brighter side of things …
The US still has the option of kicking Erdowan’s Turkey where it hurts most. Openly support the formation of a soverign Kurdish state in eastern Turkey.
Excellent article, clean & clear & candid — as always, whether you like / agree or not with Goldman’s ideas.