As Turkey’s President Recep Tayyip Erdogan prepares to meet his US counterpart at the NATO summit on June 14, the leader might consider just how far his country has come since he came to power nearly two decades ago.

Initially booming through years of robust economic growth, Turkish foreign and security policy has also gone from defensive to assertive, Euro-centric to regionally engaged. Ankara has also put boots on the ground in Syria, Iraq, Libya and even Somalia, while Turkish military hardware is now coveted from Saudi Arabia to Poland.

Indeed, US President Joe Biden will also likely have to reflect that even the US is now looking to Turkey for military support, including to run Afghanistan’s Kabul airport to cover the ongoing US troop withdrawal.

Regarding another key power, too, “In three out of four theatres, Erdogan has fought against Russia and/or its proxies and defeated them,” Soner Cagaptay, author of A Sultan in Autumn and director of the Turkish Research Program at the Washington Institute for Near East Policy, told Asia Times.

Late last year, Turkish drones helped ally Azerbaijan recover the enclave of Nagorno Karabakh from traditional Russian ally Armenia. Turkish military muscle also helped the Libyan Government of National Accord (GNA) defeat Russian mercenary forces and their Libyan allies in 2019.

Meanwhile, Turkey’s own mercenaries – from Syria – have fought alongside Turkish troops to take control of large stretches of that country, despite opposition from the Russian-allied Bashar Al-Assad regime.

On a fourth front, too, Turkey has given its support to Ukraine, rejecting Russia’s annexation of the Crimea and offering to sell its combat drones to Kiev. Amazingly, Ankara has been able to do all this while Erdogan has maintained good relations with Russia’s autocratic president, Vladimir Putin.

Turkish President Tayyip Erdogan and his Russian counterpart Vladimir Putin in 2017. Photo: AFP

Yet, for all these foreign policy successes, “If there were an election today, Erdogan would surely lose,” professor Muzaffer Senel from the Department of Politics and International Relations at Ankara Medipol University told Asia Times.

Indeed, while Erdogan may claim success abroad, his domestic record is less accomplished. His Justice and Development Party (AKP) has seen its support dwindle from 42.5% in the 2018 parliamentary elections to as low as 26.5% in an April Istanbul Economics poll.

One issue alone continues to drive that opinion poll descent. “The economy – it’s Erdogan’s Achilles heel,” says Cagaptay.

With the Turkish currency losing 26% of its value since this time last year, youth unemployment at 25% and major industries such as tourism and manufacturing impacted extra-negatively by the global pandemic, popular dissatisfaction with his government is growing.

To address these deepening economic challenges, Ankara will need the assistance of foreign lenders and investors. Yet many of these have shied away from Turkey due to Erdogan’s unconventional economic ideas.

Left unresolved, however, these problems at home may have an impact on Erdogan’s actions abroad.

“If the economy tanks – and it is showing signs of weakness,” adds Cagaptay, “Erdogan can’t continue playing off east against west and north against south.”

The US that could be vital in helping Turkey out of its economic morass, making Monday’s meeting with Biden all the more key to Erdogan’s political survival.

Indeed, “If that meeting doesn’t end up with another financial shock,” says Senel, “that alone will be a success.”

Drones and diplomats

Turkey suffered two successive financial and economic crashes at the start of the 21st century, with its old political elite seemingly having little idea how to turn things around.

This provided fertile grounds for the AKP, which swept to power in 2002, promising a fresh start free of the corruption and incompetence of its predecessors.

There then followed a remarkable economic boom with average annual economic growth of 7.2% from 2002 to 2007, when the AKP was re-elected with a sizeable majority.

Pedestrians pass by a foreign exchange office in Istanbul as the Turkish lira continues to lose value against major international currencies. Photo: AFP via NurPhoto / Diego Cupolo

Having reorganized its banking and financial sectors after the 2000 and 2001 crises, Turkey was also well placed to weather the global financial crash of 2007-2008, with GDP growth hitting 11.2% in 2011, according to World Bank figures.

Subsequent growth was also periodically strong – 8.5% in 2013, 7.5% in 2017 – but by 2018 a major downward trend had clearly begun.

That year also saw Turkey fall out with the US, with the threat of sanctions over a range of issues – from Turkey’s purchase of Russian missiles to the arrest of a US pastor – causing a major currency crisis.

Propping up the Turkish lira after that drained the central bank’s reserves yet did little to stop the long-term tumble. 

Erdogan’s insistence that the way to fight inflation, which has been in double digits for the last four years, is to cut, not raise, interest rates has not helped.

When central bank governors disagreed with this, he fired them – destroying investor confidence in the bank’s independence and ability to tackle price rises.

The currency tumble thus continued into 2019, 2020 and now 2021, after Erdogan said on June 2, “It’s the interest rates that cause cost inflation in the first place,” knocking a further 4% off the currency’s value against the dollar.

Yet, high interest rates – the base rate is currently 19% – are crippling for many of Erdogan’s supporters.

With most businesses borrowing to expand – or simply survive during the pandemic – high repayments can threaten bankruptcy.

Turkish President Erdogan is fighting a losing economic war against markets that have bombarded his nation’s currency. Image: Twitter

At the same time, “Cheap credit to finance construction is what helped the AKP gain ground in the past,” Erdem Aydin, from RDM Advisory, told Asia Times.

Keeping credit cheap is vital for the big construction firms now tied closely to Erdogan’s presidential palace. Thus Erdogan finds himself caught between the expectations of his supporters and those of international investors and lenders.

Given the size of the Turkish economy – it is now the world’s 11th largest in terms of GDP at purchasing power parity – Erdogan will have to turn to foreign institutions if the economy swoons further.

“It has to be China or the US,” says Cagaptay, “and I don’t think China would be interested.”

However, US support – likely in the form of the International Monetary Fund (IMF) – would come with strings attached, which is why Erdogan has so far rejected the option.

Or at least, that is one reason. Another is likely that an IMF bailout would be a savage reminder of just where Turkey was when Erdogan took office, all those years ago in 2002.

After the financial and economic crashes of 2000 and 2001, Ankara was forced to go cap in hand to the IMF for a bailout. Most likely, Erdogan – and his supporters – would rather not see that process come full circle.