Turkish economy is the perfect showcase for how geo-politics affects economies, or more precisely, how a country’s rejection of subordination in international relations leads to threats of economic sanctions by powerful global regimes.

Analysts point at a number of issues, mostly those related to domestic politics or economic management, which may be responsible for the continuation of the economic distress.

Recent fluctuations in the value of the Turkish Lira have placed Turkish economy in the limelight again.

All these explanations have some merit and there is certainly plenty the Turkish administration should be doing to overcome fragilities.

Most of Turkey’s short-term economic troubles are due to the diplomatic conflict with the USA over regional issues and continuing threat of sanctions against Turkish economy.

A number of critical events in recent years have put Turkey and the USA at odds. The parallels between certain turns in Turkish economy and clashes in the USA-Turkey diplomatic relations are simple to overlook.

Most recently, for instance, President Erdogan took a strong position against President Trump’s declaration to recognize Israel’s illegal control over the Golan Heights.

The very same day, March 22, Turkish Lira depreciated by 6% within hours!

Although it swiftly regained value thanks to the quick reaction of the Turkey’s Central Bank, the incidence has once again started discussions about Turkey’s economic well-being.

This alone proves how responsive Turkey’s financial markets are even to minor fluctuations in the Turkey-USA relations.

However, the most important source of tension between the USA and Turkey is arguably Washington’s support for the YPG in Northern Syria.

Turkey considers the YPG as a terrorist organization because of its association with the PKK and its previous attacks on Turkish civilians.

The U.S. started to openly arm and train the YPG forces in 2014 while their affiliates were still carrying out suicide bombings in Turkish cities.

Turkey is fighting the YPG and insists on eliminating them from the region while the US regime sees the organization as a trustworthy partner.

Last January, a few weeks after the announcement that the U.S. army is retreating from Syria, President Trump tweeted that the USA “will devastate Turkey economically…” if Turkey takes further military action against the YPG.

When he was asked to explain the tweet, U.S. Secretary of State Mike Pompeo said, “we have applied economic sanctions in many places, I assume he is speaking about those kinds of things”. So, the threat of sanctions is as explicit as it gets.

Actually, the U.S. administration has already imposed sanctions on Turkey.

Last year in August, President Trump doubled the tariffs on Turkish steel and iron in order to pressure the Turkish government to release an American pastor who was detained on charges of connection to the failed coup attempt in 2016.

Serious claims about U.S. involvement with the coup attempt is also a source of tension between Turkey and the USA in general.

Following the announcement of sanctions, a capital outflow took place and the Turkish Lira lost 20% value.

Nowadays, the dispute between two countries centered around Turkey’s deal to purchase S-400 air defense systems from Russia.

The USA wants Turkey to buy the American-made Patriot missiles instead, but refuses to transfer technological know-how.

Turkey is more interested in developing its own military capacity and end its dependency on the USA, or any other country for that matter.

Accordingly, Turkey turned to the Russian-made S-400’s because of the technology transfer component of the deal. The USA, in turn, has suspended sales of F-35 fighter jets to Turkey even though Turkey has invested one billion dollars in the project.

The US regime. argues that S-400’s are incompatible with the NATO systems. Interestingly, NATO Secretary-General Stoltenberg seems to disagree with Pence. “It’s a national decision for each NATO ally to decide on procurement of capabilities.

Furthermore, Greece, another NATO ally, already has S-300 missiles. The first delivery of the S-400 missiles will take place in July 2019. Until then, the USA is likely to continue to show the stick to Turkey. Investors are watching, of course.

Turkey’s long-accumulated foreign debt, mostly denominated in dollars, has to be dealt with through strong and fast reforms towards productive and export-oriented sectors, for which Turkey has already made some progress recently.

Furthermore, the choice a country makes between its domestic resources and foreign capital is not merely an economic one. So, Turkey’s savings rate should be boosted.

In the meantime, the government in Ankara will continue to confront American diplomatic unilateralism and hopefully remind Washington of the geo-strategic importance of Turkey as a critical ally.

AA. com / ABC Flash Point News 2019.

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