Turkey’s economy has recently halted the decline of its exchange rate, but inflation, unemployment and debt are wreaking havoc upon its governing class. President Recep Tayyip Erdogan’s recent gamble to develop a safe zone approximately 30 kilometers into Syria has its origin in Turkey’s flailing domestic political economy.
Having tasted bitter defeat, Erdogan’s authoritarian mien seeks to ameliorate the nation’s economic malaise by promising to halve the current rate of inflation to 5%. After releasing a blueprint on the transformation of Turkey on September 30, Erdogan believes he can talk up business sentiment to induce better economic growth. But Turkey needs broad, consistent foreign exchange from foreign direct investment, remittances and vacationing foreigners. These remain Erdogan’s best hope of paying off dollar-denominated debt (US$440 million) due next year. Absent procuring foreign currency from a favorable business climate, the Turkish treasury will default.
This is why the administration of US President Donald Trump has publicly decided not to sanction Turkey for its procurement of the Russian S-400 missile interceptor system. Keeping Erdogan tethered to the US administration is partly statecraft based on sound geo-economics.
But Erdogan has openly sought to diversify his fiscal resources by openly soliciting China. Having taken billions from China and Qatar, the Turkish leadership openly seeks to repatriate Kurdish terrorists along its Syrian border. Funding for this $27 billion stabilization program comes from Beijing.
How should team Trump manage Turkish regional ambitions?
The US must seek to accommodate Erdogan’s domestic ambitions by securing favorable terms on debt servicing. Changing the scope of Turkey’s foreign ambitions begins fiscally. Second, the Americans have the heft to alter Europe’s transgression of not admitting Turkey into the European Union. Third, the US should openly support Turkey’s ability to mediate newly emerging diplomatic detente between Arabs and Israel over a rising Shia crescent emptying into Jordan. Last, Ankara should be supported to enlist regional counter-terror objectives to thwart Iran’s western advance.
What is emerging as the Turks seek to advance a cordon sanitaire preventing Kurdish incursion into Turkey is an informal coalition of interests among Israel, Saudi Arabia, the United Arab Emirates and the United States regarding an imploding Syrian nation-state and the theocracy in Tehran.
Turkey remains the linchpin in the management of trajectories far beyond the borders of the Eastern Mediterranean.