Turkey: Currency Catastrophe Consequences


December 23, 2021: The near-collapse of the Turkish lira has shaken Turkey’s middle class and put president Erdogan in political jeopardy. In early December the lira briefly sold for slightly over 14 to the dollar, an all-time low. Currently it is 12 to the dollar because the government drove up inflation by spending a lot to stop the erosion of the lira. Despite that more Turks switched their cash savings to dollars. Inflation in November was slightly over 21 percent, a three-year high. Government efforts to keep the lira strong have inflation headed for 30 percent. Consumer prices have jumped, there are more lines at grocery stores and Erdogan’s polling numbers have dropped to under 40 percent. There are frequent food shortages and bread lines in Istanbul, the largest city and full of foreigners using their cell phone camera to record the inflation at work.

Erdogan blames corporate greed and high import prices for the rise in prices and accused some institutions of hoarding. However, few Turks buy those excuses – they blame Erdogan’s mismanagement and his wrong-headed economic policies. They are also tired of him playing world leader and point to his personal focus on “neo-Ottoman” foreign adventures like proxy war in Libya. These misadventures waste money. Some Turkish commentators say that the “strong presidency” Erdogan has constructed since he took power in 2003 gives him great leeway. The centralized structure marginalizes parliament and weakens institutional checks and balances. It places Erdogan firmly in control of the security forces (military, gendarme, and police) and intelligence services. However, the marginalization of parliament has had an unexpected result. Many young politicians in Turkey, including parliamentary members of Erdogan’s Justice and Development Party (AKP), have discovered their own prestige has diminished. In practical terms, they have little policy input. Erdogan’s popularity was based on his economic success. But for who? Some 70 percent of the workforce must get by on the minimum wage.

For a decade Turkey’s economy grew and Erdogan tried to minimize economic corruption. But corruption is back and members of his own extended family have been implicated in questionable financial deals. The first week of December Erdogan once again decided to lower interest rates despite the lira’s decline. That had little effect on prices. As for the value of the lira, as of December 23 it was trading right at 11.94 to the dollar. As it is, Erdogan can wait until 2023 for general elections – who knows, the economy may turn around and that is what he is betting his political life on. (Austin Bay)

December 20, 2021: Turkish police in Ankara and Istanbul arrested 22 terrorist suspects. At least 13 of the suspects are suspected of belonging to the ISIL (Islamic State in Iraq and the Levant), also known as Daesh. Others belong to Al Qaeda and similar terrorist groups.

December 19, 2021: Turkey’s Interior Ministry said Turkey continues to host over five million migrants and refugees. The five million come from around 190 different ethnic and national groups. 3.7 million of the refugees are from Syria.

The Defense Ministry stated that nearly 900 Libyan Navy personnel are currently receiving training from the Turkish military and training consultants. The training is permitted under the Memorandum of Understanding on Security and Military Cooperation Turkey with the UN recognized Libyan government in November 2019.

December 17, 2021: The Turkish Air Force is preparing to train with Qatar’s air force. Qatar flies French-made Rafale jets. Greece intends to buy Rafales. A report made in late November for Turkey’s parliament said that exercising with Qatar would allow Turkish pilots to directly familiarize themselves with the Rafale’s capabilities. Qatar would deploy up to 36 aircraft to Turkey for the exercises.

December 14, 2021: The Financial Action Task Force (“FATF”) has once again placed Turkey onto its “gray list” of nations subject to increased financial monitoring. Being on the gray list means a country is not doing enough legally and operationally to stop money laundering, curb terrorist financing, stop weapons proliferation financing and “other threats to the integrity of the international financial system.”

December 11, 2021: In northern Iraq, a Turkish airstrike hit a base allegedly occupied by a Yazidi militia aligned with the Kurdistan Workers Party (PKK). This Yazidi militia is known locally as the Sinjar Resistance Units (YBS). The base was in Ninevah province near the town of Khanasor and Mount Sinjar.

December 9, 2021: In northern Iraq three Turkish were killed during a clash with PKK (Kurdistan Workers Party) gunmen based in the area.

December 8, 2021: In northern Iraq Turkish troops continue searching for Yazidi YBS gunmen near in Mount Sinjar. There have also been clashes where the Turkish/Iraqi/Syrian borders meet. A UAV strike reportedly killed a senior YBS commander, Marwan Badal, yesterday. He was known to be a commander of PKK militias. Despite YBS activity in northern Syria and Iraq, most Yazidis want nothing to do with the PKK aligned YBS.

December 6, 2021: President Erdogan began a short two-day visit to Qatar. He intends to discuss Turkey’s economy and cooperation between Turkey and Qatar.

December 3, 2021: Turkey and Iraq acknowledged their military chiefs of staff have discussed joint military cooperation between their armies. Cooperation includes joint exercises. Joint operations are a possibility. Turkey and Iraq already cooperate closely on counter-terror intelligence.

December 2, 2021: President Erdogan appointed a new minister of treasury and finance. Like Erdogan, the new minister, Nureddin Nebati, favors low interest rates. The man he replaced favored raising interest rates in order to halt the lira’s decline in value.

December 1, 2021: Russia asked Turkey to use its influence with Ukraine to encourage Ukraine to implement the 2014 Minsk Protocol ceasefire agreement between Ukraine and pro-Russian separatists. The Kremlin’s statement specifically appealed to President Erdogan to use his influence. The Kremlin was responding to a recent offer by Erdogan to serve as a mediator.

November 30, 2021: The Turkish Defense Ministry said it is officially delivered to the U.S. its request for new F-16 fighters in lieu of F-35s. Another statement noted that Turkey is observing the arrival of U.S. military personnel in Greece in preparation for Operation Atlantic Resolve exercises. American aircraft will be exercising with the Greek Air Force.

November 26, 2021: In response to a new coronavirus variant, Turkey closed its borders to travelers from five African countries: South Africa, Botswana, Namibia, Mozambique, and Zimbabwe.

Turkey’s central bank claimed the nation’s banking sector is strong and has sufficient liquid assets to withstand the on-going currency crisis.

November 24, 2021: European and international monitoring groups accused the Turkey of attempting to use its influence with Interpol to get Interpol to crack down on Turkish dissidents and political opponents of Erdogan who are living in exile. A recent statement by Turkey indicated that Turkey wanted the international criminal police agency to “find, arrest and extradite” Turkish dissidents, particularly those with suspected terrorist connections.

November 21, 2021: Turkey claimed that since April its forces have “neutralized” (killed or captured) 831 terrorists in northern Iraq. In the operations Turkish Army soldiers seized nearly 1,300 weapons and approximately 316,000 rounds of ammunition.

November 20, 2021: Economists in Turkey and Europe are calling Erdogan’s insistence on lowering interest rates precisely the wrong strategy for countering rising inflation.

November 17, 2021: Following several days of consultations in Washington and with other European leaders, the European Commission President described the tension along the border between Poland and Belarus as a “hybrid attack,” not a migration crisis. Belarus is “weaponizing” migrants to disrupt Poland, Lithuania, and Latvia. The European Union then asked Turkey to stop flying migrants to Belarus. Turkey’s Directorate General of Civil Aviation has complied. Citizens of Iraq, Syria, and Yemen, most of them migrants being exploited by Belarus, will not be allowed to board flights from Turkey to Belarus.


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