Sunday, August 19, 2018

Will President Trump Trump President Erdogan?

The US-Turkey fight is purported to be over Andrew Brunson, a Protestant Minister, imprisoned in Turkey for 21 months. That’s only the surface of several layers; it’s much deeper than one minister and goes back several years. . President Trump is tough. He’s a New York City streetfighter, who made it in New York City real estate, one of the toughest markets in the world. He has survived financial setbacks and fake news as well as the collective slings and arrows of the media. He is a tough survivor. President Recep Tayyip Erdogan is tough. He has survived imprisonment, banishment from political office, a legal coup, and a military coup. He is a tough survivor. Both use strong language. Neither suffers insults easily. President Trump tweets and insults. President Erdogan jails. President Trump is challenged by the Deep State. President Erdogan is eviscerating his Parallel State. We are currently witnessing a battle for survival between the two presidents. We were in Istanbul 5 years ago. It was a dynamic city with a booming economy. The fast pace of the people reminded me of the first time in Manhattan, witnessing the hurried pace of multitudes of New Yorkers on 5th Avenue. Optimism permeated Istanbul. Turkey wanted in the EU. The EU needed Turkey’s economic success as a model. It didn’t happen. The EU toyed with Turkey, which even eliminated capital punishment as a condition of joining the EU, but the answer was No. I believe Western Europe holds strong biases against the Turks, remembering the centuries of Ottoman rule and attacks on Austria. Many still view Turkey as backwards. The Greeks, Albanians, Serbs, Hungarians, Ukrainians and Romanians have no love for the Turks. Anti-Muslim bias probably also played a role. Roughly 2 million Turks work in Germany, but they are definitely second class non-citizens. President Recep Tayyip Erdogan was on a roll. He had tamed inflation while keeping inflation low. He unleased the economy. He invested in major infrastructure projects. Turks were rightly proud. Let us start with an underlying premise. Turkey’s main economic problem is a heavy debt load. Its growth was financed by foreign debt, usually in dollars or Euros. A drop in the Turkish Lira adversely affects debt repayment. Turkish companies owe about $220 in foreign exchange loans. Moody’s removed the “investment grade” rating from Turkey’s debt rating in 2016. They just rerated it as “junk.” Warning signs were present five years ago of President Erdogan’s megalomania. President Erdogan had already imprisoned scores of reporters and, with the assistance of Muhammed Fethullah Gulen’s supporters, framed scores of military leaders in 2005. There was not going to be another military coup on his watch. Iman Gulen founded in Turkey the Gulen Movement (Hizmet), which is a form of soft Islam, emphasizing hard work, education, altruism, and tolerance. A split between the allies occurred in December 2013, when the sons of three cabinet ministers were arrested for corruption. A tape was leaked, with Prime Minister Erdogan instructing his son to dispose of millions of dollars in incriminating funds. The inference was that the devoutly religious prime minister was also a deeply corrupt prime minister. The prosecutors forgot the cardinal rule. If you try to depose the king, sultan, shah, ruler, president, prime minister, boss, leader, make sure you succeed. They failed. The PM resisted calls to resign. The responsible prosecutors and police were quickly arrested. Gulen supporters in the judiciary, police, prosecution, and intelligence services were purged. Erdogan blamed Gulen, who moved to the United States in 1999 for medical treatment, has a Green Card. He lives in a compound in Saylorsburg, Pennsylvania. An arrest warrant was issued in Turkey for him on December 19, 2014. Then came the botched military coup on July 15, 2016. Over 160,000 Turks were arrested or detained, and over 180,000 fired from their jobs. Over 140,000 passports were cancelled, precluding them from leaving Turkey. 4,000 judges, 25% of the country’s total, were dismissed, so much for an independent judiciary. Elected officials, including members of Parliament, mayors, and party leaders, were purged and sometimes arrested. The broad brush of Erdogan’s vengeance includes, at recent count, includes 24,000 police officers and prosecutors, 7,300 academics, 15 universities and over 1,000 schools closed, 28 TV stations closed, as well as 36 radio stations, 66 newspapers, 19 magazines, 26 publishing houses, and 5 news services. Over 1,000 private businesses, often of his political opponents, were seized. The story is that Turkey had to empty its prisons of ordinary criminals to make room for the political prisoners. The Gulen Movement has been labeled a terrorist movement, but Erdogan’s victims include Kurds, socialists, communists, and innocent victims. The President again blamed Fethullah Gulen and has actively sought his extradition from the United States, which has been rejected several times on the grounds of insufficient evidence. Erdogan wants Gulen to the same extent Stalin wanted Trotsky. The Reverend Andrew Brunson has been in Turkey for 23 years, ministering to a small church with about 25 congregants in Izmir, Turkey. He was arrested on October 7, 2016 on grounds of terrorism as a member of the Gulen Movement. He has essentially been held as a hostage for 21 months in exchange for Gulen. The Reverend is not the only one though. 17 Turkish Americans are also being held, including Dr. Serkan Golge, a NASA scientist with dual U.S. Turkish citizenship. Dr.Golge was vacationing in Turkey when he was arrested. The prosecutor told the judge that the serial number on one of Dr. Golge’s dollar bills represented his hierarchy in the Gulen Movement. Apparently, they believe that serial numbers beginning with “F” are suspect. Dr. Golge’s wife is barred from leaving Turkey. The State Department is further upset because the mass arrests included three Turkish employees, Metin Topuz, Hamza Vlucay, and Mete Canturk, of the United States Embassy. Due process is non-existent in these arrests and dismissals in Turkey. More twists are in the dispute. President Erdogan’s body guards attacked several demonstrators in Washington, D.C. on May 16, 2017 outside the Turkish Embassy during a visit by President Erdogan. 15 were indicted. Reza Zarrab, a gold trader who helped Turkey violate the sanctions on Iran in trading for oil, was convicted of money laundering and sentenced to 32 months in prison. Erdogan wants him back. He will also want Mehmet Hakan Attila returned. Mehmet was Vice President of state owned Halkbank, which funneled the funds to Iran in breaching the sanctions. He has also been sentenced to 32 months while the bank is awaiting the imposition of perhaps substantial fines. Washington feels betrayed by President Erdogan. Israel arrested Ebru Ozkan, a 27 year old Turkish woman, in June for helping Hamas. Presidents Trump and Erdogan met on July 11 at the NATO meeting. The Americans believe, the Turks deny, that an agreement was reached for the release of Ebru in exchange for Reverend Brunson. President Trump phoned Prime minister Netanyahu on July 14, requesting the release of Ebru. Israel deported her the next day. Reverend Brunson remains a prisoner in Turkey, albeit now under house arrest. Charges were dropped at the same time against 11 of the indicted bodyguards. President Erdogan played President Trump for a fool, which he is not. The State Department then imposed sanctions on Turkey’s Interior and Justice Ministers. President Trump imposed tariffs of 20% on Turkey’s aluminum and 50% on Turkish steel. 11% of Turkey’s steel exports go to the United States. President Erdogan still believes in massive infrastructure, borrowing heavily. He built a railroad tunnel under the Bosporus, connecting Europe to Asia. He’s building a third bridge across the Bosporus, and a third international airport for Istanbul on the Asia side of the Bosporus at a cost of at least $10 billion. He wants to build a new canal connecting the Black Sea to the Sea of Marmara, bypassing the Bosporus. The environment be damned! Turkey’s boom was financed by borrowed money. Turkey’s banks borrowed dollars and euros, and loaned in Turkish Lira. 1/3 of Turkey’s bank borrowings are in foreign currency. Similarly, Turkey’s companies have often borrowed in dollars, such that about ½ of Turkey’s international debt is in dollars. The precipitous fall of the Turkish Lira jeopardizes the financial viability of the Turkish institutions. President Erdogan refuses to raise interest rates to fight the collapse in the Turkish Lira. Inflation is shooting up. He appointed his apparently unqualified Son in Law, Berat Albayrak, to be the Minister of both Finance and Treasury after his recent election victory. A few tweets and tariff increases should not sink a strong currency, but the Turkey Lira had already sunk 40% this year prior to President Trump’s actions. The TL was 2.4 to $1 when we were there 5 years ago. It was down to 3.8 at the beginning of 2018. It plunged to 7.23 to $1 before rallying. It’s hovering in the 5-6 range for now. Qatar offered Turkey $15 billion in investments, which buoyed the TL, but will only serve as a short term palliative unless Turkey’s economy is reformed. The good news for Turkey with the plunging TL is that it will attract large numbers of tourists for the bargain prices. Turkish residents will pay the price. The election gave President Erdogan peremptory powers. He can issue edicts, which can only be overturned by the Parliament, which he currently controls. He also controls the judiciary. The Turkish leader is acting like a true demagogue, giving a series of speeches blaming others for the country’s economic problems. He proclaimed “There are economic terrorists on social media,” and ordered an investigation of 360 social media sites. He said on Thursday: “If they have their dollars, we have the people. We have Allah.” Allah did not save the Ottomans, whom he admires. Allah did not save the later Sultans from financial insolvency by building two new palaces, the Dolmabahce and the Yildiz, which replaced the famous Topkapi. The foreign debt load financially hobbled the Sultans during their last decades in power. He exclaimed on Monday “We are together in NATO, and then you seek to stab your strategic partner in the back.” Turkey is increasingly a shaky member of NATO. Turkey was a bulwark of NATO against the Soviet Union during the Cold War because of its strategic location. Turkey signed a contract with Russia last year to purchase the Russian S-400 surface to air missile system. It is also acquiring a Russian nuclear reactor and buying Russian natural gas. Congress responded to the Russian missile pact by barring the sale of F-35’s to Turkey. The United States is rumored to have between 50 and 200 nuclear bombs stored at Turkey’s Incirlik Air Base. I hope the U.S. has gradually been pulling them out. President Erdogan said the US tariffs were an “act of economic war,” and “Once again we are facing a surreptitious plot.” He postures: “They cannot use the language of threat and blackmail against this nation,” and “Bullying this nation will get them nowhere.” He’s demagoguing the United States, but so far has been careful to not personally denigrate President Trump. President Trump has simply stated: “Our relations with Turkey are not good at this time.” And then we have the eternal issue of the Kurds. The Kurds were promised a homeland at the end of World War I, but it didn’t happen. Instead, they are spread between Turkey, Syria, Iraq and Iran. The Kurds have fairly regularly engaged in guerilla warfare against Turkey. The current Kurdish “freedom fighters” or “terrorists,” depending on your perspective, are in the Kurdistan Workers Party The Kurds have carved out a major part of oil rich northern Iraq. The United States has backed Kurdish rebels in Syria fighting the Assad Regime. President Erdogan views the Syrian Kurds and the Turkish Kurds as identical terrorist groups. The Turks are frightened at the prospect of Syrian, Iraqi, and Turkish Kurds carving out an independent country. President Erdogan responded by banning the import of U.S. electronic products, specificallppy singling out Apple’s IPhone, which are actually manufactured in China. Turkey also announced an antitrust investigation of Google, following up on the recent EU actions. He further responded by imposing 120% tariffs on U.S. cars, 140% on alcoholic products, and 60% on leaf tobacco, as well as tariffs on American rice, coal, and cosmetics. The Turkish President is making nice with Iran and Russia, both also feeling the sting of American sanctions. He is playing with fire with those two, historic arch enemies of Turkey. The tsars, commissars, and now Vladimir Putin have all wanted control of the Turkish Straits, the Bosporus and the Dardanelles, which control access to the Black Sea. Be careful of the Bear Hug. Iran is Shia and Turkey Sunni. The U.S. is upping the ante by promising more sanctions if the minister is not released. President Trump on Thursday called Andrew Brunson a “great patriot hostage” and said “We will pay nothing for the release of an innocent man.” He’s laid the marker: “The United States will impose larger sanctions on Turkey for their long term detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being.” President Erdogan's problem is that he is dealing with President Trump - nor President Obama Turkey will cave, but remember there’s multiple layers, nuances, and pieces to this puzzle.

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