Turkey’s Lira Crisis and Diplomacy’s Shifting Tide

Recent US sanctions over the imprisonment of an Evangelical Presbyterian Minister Andrew Brunson have compounded Turkey’s fiscal squeeze into a fully-blown financial crisis, with the Lira plummeting to an all-time low. As some commentators have warned, such a crisis could spell the end of the historic partnership between the two countries, and with it two of NATO’s most critical members, bearing profound implications for both the global economy, and the geopolitical landscape as we know it.

With Turkey in possession of the second largest army in NATO, borders with Iraq, Syria and Iran, and, historically speaking, a rare Middle Eastern democracy, the US has long courted Ankara as a vital artery of strategic influence.

In spite of the pragmatism underlying the conception of this relationship, its cracks are a long time in the making. Friction between the US and Turkey dates back to the 2003 Iraq Invasion, but it is the Syrian Civil War that has brought strained relations to breaking point. The US State Department’s decision to arm and financially support the Kurds infuriated President Reccep Tayyip Erdogan, who sees no distinction between Kurdish militia operating in Syria and the Kurdistan Worker’s Party or PKK, which his administration dubs a terrorist organisation. As the Syrian nightmare gradually unfolded, Ankara came to view the American policy towards Syria as a double game: the US profiting from the strategic gains offered by their relationship with Turkey, while simultaneously backing a Kurdish nationalist cause highly detrimental to Turkish security.

President Donald J. Trump and President Recep Tayyip Erdoğan of Turkey at the United Nations General Assembly | Official White House Photo by Shealah Craighead
President Donald J. Trump and President Recep Tayyip Erdoğan of Turkey at the United Nations General Assembly | Official White House Photo by Shealah Craighead

President Trump’s sanctions, in protest over US Brunson’s incarceration, has led this relationship to descend into a tit-for-tat diplomatic stand-off. Brunson was jailed on charges of espionage in Erdogan’s crackdown following the attempted military coup against him in 2016. The American is said to have conspired with Fethullah Gülen, an Islamic cleric and the alleged mastermind behind the failed putsch attempt. The Turkish President now wants a trade, handing over Brunson in exchange for the extradition of his public enemy number one, Gülen, who currently resides in exile in the US. Erdogan’s power and influence on the world stage is facing its greatest test yet and at a pivotal moment in modern Turkish history.

Turkey is in the midst of a construction boom, with large amounts of investment being poured into schools, hospitals and roads, these projects require extensive borrowing. As investor confidence in Erdogan and Turkey starts to drop, European banks that lent Turkey this money are starting to worry about recovering their loans, adding further pressure to Erdogan’s administration. Economists now fear that Trump’s sanctions against Turkey will also have a ripple effect on other emerging markets, with investors pulling funds out of economies such as Indonesia and South Africa as their currencies slide and placing them into more reliable currencies such as the US dollar.

While this shall inevitably strengthen the latter, the geopolitical implications of this crisis could prove deeply consequential. With an increasingly hostile reception from their historic partners in Washington DC, diplomats in Ankara may turn to Moscow to start securing their interests. The loss of such a crucial member would not only undermine NATO’s chain of encirclement around the Russian Federation, but also the very legitimacy of the institution itself, with one of its most crucial members starting to side with the Kremlin.

Ultimately, the big winner from all of this is Putin. The Russian leader could weaken NATO and exert further influence over a region in which Russia have recorded consistent strategic gains in the last five years, including the expansion of ties with Israel and the propping up of Assad’s government in Syria. Trump’s ‘America First’, hardball approach to foreign policy is evidently leading to radical changes in the geopolitical landscape, meaning the future of diplomatic institutions such as NATO is becoming an increasingly uncertain one.