A window of opportunity opens up
The decision to send Pastor Brunson home is testimony to President Erdogan’s flexibility, coming only 12 days after he personally accused the cleric of being a terrorist. There is now hope for sincere dialogue in areas of dispute with the US. However, the White House needs to reciprocate by ending the Halkbank investigations with findings acceptable to the Turkish side.
Longer term disputes -- such as the Syrian policy, the delivery of F-35 fighters and S-400 -- can be left to the healing effects of time, but the litmus test of Turko-American relationship will be Turkey’s compliance with the second phase of Iran sanctions, where a face-saving solution exists for Ankara.
The disappearance of dissident Saudi journalist Jamal Khashoggi is almost certain to strain the poor relationship between Turkey and the Desert Kingdom further, but we are not yet sure how severe or lasting the political repercussions will be. The downside is Ankara moving closer to Iran to avenge this slight to its sovereignty.
Post-election polls hint at AKP’s falling approval rating, with more to come thanks to the economic stagnation. It is fair to say March local elections will be Erdogan’s severest test of leadership. Political uncertainty is by no means over for Turkey.
The current account registered a hefty surplus in August, as expected, which, together with reserve drawdowns and unidentified inflows financed equally hefty outflows. The question is whether a trilogy of – a painful external adjustment, some constructive moves on the foreign policy front and several “heterodox” (and hugely distortionary) interventions -- could suffice to turn things around for the better. The econ author remains hopeful yet extremely skeptical.
Cosmo remains negative on EMs at large, but is now looking for catalysts to buy Turkish assets. The word “Halkbank” comes to His mind.
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