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Tag: Recep Tayyip Erdoğan

  • Saudi Arabia and Turkey are emerging as the new peace brokers of the Russia-Ukraine war

    Saudi Arabia and Turkey are emerging as the new peace brokers of the Russia-Ukraine war

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    Turkish President Recep Tayyip Erdogan welcomes Saudi Arabia’s Crown Prince Mohammed bin Salman Al Saud in Ankara, Turkey, on June 22, 2022.

    Mustafa Kaya/Xinhua via Getty Images

    Nearly 300 prisoners of war – both Ukrainian and Russian – faced death or indefinite detention in late September of 2022.

    It was a fate that looked all the more real as Russian President Vladimir Putin announced the mobilization of some 300,000 Russian conscripts to fight on the Ukrainian front. 

    But on that very same day, the warring countries made the shock announcement that they had come to an agreement on a prisoner swap, which would release the detained fighters and political prisoners from their respective captors.  

    The sheer suddenness and size of the swap – the largest since Russia launched a full-scale invasion of its neighbor the prior February – came as a shock, and an immense relief to the family members of the detained. 

    But they ultimately didn’t have Russia or the West to thank. Behind the scenes, the hard negotiating work was overseen by two unlikely leaders: President Recep Tayyip Erdogan of Turkey and Crown Prince Mohammed bin Salman of Saudi Arabia.

    Ukrainian President Volodymyr Zelenskyy presents state awards to Ukrainian defenders released from Russian captivity during a ceremony for 331 Ukrainian soldiers and policemen who were freed in a prisoner swap with Russia in Kyiv, Ukraine on December 2, 2022.

    Ukrainian Presidency | Handout | Anadolu Agency | Getty Images

    “I would like to thank the Turkish government for helping facilitate the exchange of prisoners between Ukraine and Russia, building on their leadership on the grain deal,” U.S. national security advisor Jake Sullivan wrote on Twitter at the time. 

    Saudi Arabia for its part brokered the return of 10 foreign nationals captured by Russia who had been fighting in Ukraine – two of which were American – thanks to the Saudi crown prince’s close relationship with Putin. 

    “We thank the Crown Prince and Government of Saudi Arabia for facilitating [the prisoner exchange],” Sullivan wrote in a separate post. 

    In the latest development, Saudi Arabia plans to hold a Ukraine peace summit in Jeddah to which Ukraine, the U.S., European nations, China, India, and Brazil among many others are invited. And it was reported in July that the Saudi and Turkish leaders are attempting to broker a deal to bring Ukrainian children forcefully deported by Russia back to their families. 

    Turkey, meanwhile, is trying to revive the crucial Black Sea grain initiative it brokered in mid-2022 between the warring countries. Its political heft as NATO’s second-largest military and its control over the Turkish straits, the only entry point from the Black Sea into the Mediterranean, gives it particular diplomatic leverage.

    The rise of these so-called “middle powers” in mediating such large-scale conflict signals a new world where players beyond the U.S. and the West can call the shots, and where smaller states aren’t forced to tie themselves to either the U.S., Russia, or China. 

    A more multipolar world

    These changes reflect “the rise of global multipolarity and mid-level regional powers with international roles,” Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, told CNBC. 

    “Saudi Arabia and Turkey are good examples of such mid-level powers now helping shape international realities in a way they rarely did during the Cold War.”   

    Both Turkey and Saudi Arabia are broadly seen as well-positioned brokers, given they both have good relationships with Russia’s Putin while at the same time being longtime allies of the West, through Turkey’s nearly 70-year-old NATO membership and through the Saudi kingdom’s more than 80-year-old security relationship with Washington. 

    Lithuanian Deputy Defence Minister Vilius Semeska poses with Selcuk Bayraktar, Chief Technology Officer of Turkish technology company Baykar, and Haluk Bayraktar, Chief Executive Officer of Baykar, next a Bayraktar TB2 advanced combat drone in Istanbul, Turkey June 2, 2022.

    Baykar | Reuters

    The diplomatic initiative, Ibish said, “helps solidify the Saudi-Turkish rapprochement and promote the image of these countries as significant global players, regional partners and more independent actors,” beyond their traditional institutional alliances.

    The efforts are also in both countries’ interests; they want to increase their political clout, analysts say, while Saudi Arabia’s Crown Prince Mohammed bin Salman seeks to transform his kingdom’s image and status in everything from sports and tourism to diplomacy.  

    Still, Washington has criticized Saudi Arabia for curtailing oil production and keeping prices high, which helps Russian oil revenues that in turn finance the Ukraine invasion. And Turkey, like Saudi Arabia, refuses to partake in sanctions against Russia, irking its Western allies. 

    But maintaining independent positions helps both countries’ relationships with other powers like China as well as neutral states in the Global South like India and Brazil. 

    Saudi Arabian Crown Prince Mohammed bin Salman (R) meets Ukrainian President Volodymyr Zelenskyy (L) in Jeddah, Saudi Arabia on May 19, 2023. (Photo by Saudi Foreign Ministry / Handout/Anadolu Agency via Getty Images)

    Saudi Foreign Ministry | Anadolu Agency | Getty Images

    And Kyiv has reason to respect both mediators: Turkey supports Ukraine with substantial weapons and aid, while Saudi Arabia’s crown prince already invited Ukrainian President Volodymyr Zelenskyy to the kingdom in May so that he could be heard at the Arab League summit.

    “Both Erdogan and Mohammed bin Salman are engaging in a bit of competitive mediator roles in which they are trying to improve their country’s national diplomatic stature by achieving humanitarian goals in the Russo-Ukrainian war,” said Ryan Bohl, a senior Middle East and North Africa analyst at Rane. 

    “By doing so, they hope to improve their country’s reputations in both the Global North and Global South.”

    What can they actually accomplish?

    Taking on the task of trying to mediate Europe’s largest land war since World War II requires realism; and Ankara and Riyadh have measured expectations for upcoming peace summits and negotiation attempts. 

    Turkey and Saudi Arabia “are among the actors which could help prevent further escalation in the Ukraine war,” Ibish said, “but it’s an exaggeration to think they are the main or only potential buffers.”

    Ayham Kamel, Middle East and North Africa practice head at the Eurasia Group, says the upcoming Saudi-hosted peace summit is “unlikely to represent a serious step toward peace talks capable of ending the war in the near future.”

    But, he added, it will “build a platform for more constructive engagement among the West and developing countries in the Global South.”

    Saudi Arabia is keen to position itself as a mediator in Russia-Ukraine war, regional expert says

    Many developing nations have largely refrained from taking a side in the war or even condemning the invasion, as they often have important trade or military relationships with Russia or simply have a historic distrust of the West. 

    Some, like Brazil, have also suggested that Ukraine cede territory to Russia to end the fighting – a proposition Kyiv categorically refuses. 

    “Riyadh is under no illusion that the August gathering will lead to a breakthrough on substance, and Western countries do not expect Global South participants to embrace the Ukrainian peace plan in its current form or be open to expanding sanctions against Russia,” he noted. 

    In a conflict where the stakes involve potential nuclear fallout, however, even limited diplomatic progress and communication is welcomed.  

    Since both the West and Russia are so far trying to avoid global escalation, they are also not heavily pressuring Riyadh or Ankara to take a side, Bohl said. “It still serves both NATO’s and Russia’s purposes for the two countries to have working relations between them.”

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  • Sweden still not ready for NATO, Erdoğan tells Biden

    Sweden still not ready for NATO, Erdoğan tells Biden

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    Ankara hasn’t seen sufficient progress from Sweden to support its application to join NATO, Turkish President Recep Tayyip Erdoğan warned U.S. President Joe Biden in a phone call Sunday ahead of a summit of NATO leaders this week.

    “Erdoğan stated that Sweden has taken some steps in the right direction by making changes in the anti-terrorism legislation,” Turkey’s communications directorate said in a statement following the bilateral call.

    But the supporters of “terrorist organizations” — pro-Kurdish groups including the PKK and YPG, which are banned in Turkey — continue to hold demonstrations in Sweden, the statement said. “This nullifies the steps taken,” it said.

    The call comes ahead of a two-day summit of NATO leaders in Lithuania that starts on Tuesday. Biden has thrown his support behind a push to get a deal done on Sweden at the meeting in Vilnius.

    Erdoğan’s administration has been blocking Sweden’s hopes of joining the defense alliance, accusing Stockholm of backing Kurdish separatism. While it had initially accused Finland of doing the same, Erdoğan later gave the green light on Helsinki’s application and the country became a NATO member in April.

    Biden and Erdoğan also discussed the sale of U.S. F-16 fighter jets to Turkey in the call, with the Turkish president “noting that it is not correct to associate” Ankara’s request for F-16 aircraft with Sweden’s NATO membership bid, according to the statement.

    On the call, Erdoğan also brought up Turkey’s “desire to revive the EU membership process,” according to the statement. The Turkish president said he would like to see EU member states send a “clear and strong message” in support of its EU bid at the NATO summit in Lithuania.

    While Turkey became a candidate for full membership of the EU in 1999, talks have effectively stalled over the past decade. The country has not committed to making the reforms required to meet the criteria set out by Brussels.

    Erdoğan and Biden agreed to meet face-to-face in Vilnius and discuss Turkey-U.S. bilateral relations and regional issues in detail, according to the Turkish statement.

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    Gabriel Gavin

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  • Turkey agrees to back Sweden’s NATO membership bid

    Turkey agrees to back Sweden’s NATO membership bid

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    VILNIUS — Turkish President Recep Tayyip Erdoğan on Monday agreed to drop his resistance to Sweden joining the NATO alliance and to submit the ratification to the Turkish parliament “as soon as possible,” the alliance’s Secretary-General Jens Stoltenberg told reporters.

    “Sweden will become a full member of the alliance,” Stoltenberg said ahead of a summit of NATO leaders starting Tuesday.

    He said Erdoğan had given a “clear commitment” to move on Sweden’s accession.

    The Turkish’s leader’s change of position came after a meeting with Swedish Prime Minister Ulf Kristersson and Stoltenberg.

    In a joint statement following the talks, Turkey, Sweden and NATO underlined that Stockholm had changed laws, expanded counter-terrorism cooperation against the Kurdistan Workers’ Party (PKK) and restarted arms exports to Turkey. 

    Ankara and Stockholm also agreed to create a “new bilateral Security Compact” and that Sweden will present a “roadmap as the basis of its continued fight against terrorism in all its forms,” the statement said. 

    As part of the deal, Stoltenberg has also agreed to create a new post of “Special Coordinator for Counter-Terrorism” at NATO.

    The announcement comes after over a year of wrangling to get Turkey and Hungary to sign off on admitting Sweden and Finland into the alliance, with NATO leaders publicly and privately lobbying the Turkish leader to expand the alliance roster.

    Sweden and Finland both ditched their traditional neutrality in the wake of Russia’s full-scale invasion of Ukraine and asked to join the alliance in May 2022.

    The accession of the two countries — which have long been close partners of the Western alliance — was easily approved by most NATO members, with Turkey holding out. Finland joined in April following approval by Turkey’s parliament in March.

    But Sweden proved to be a thornier problem, with Erdoğan denouncing the presence of Kurdish groups in Sweden. Relations were also inflamed when protesters in Sweden burned copies of the Quran.

    Earlier on Monday, Erdoğan linked a change of position on Sweden to a revival of his country’s moribund effort to join the European Union. The recently re-elected Turkish president also met with European Council President Charles Michel on Monday evening. 

    The Council leader described the session as a “good meeting,” tweeting that the two “explored opportunities ahead to bring” the EU’s cooperation with Turkey “back to the forefront & re-energise our relations.”

    Sweden promised to “actively support efforts to reinvigorate” Turkey’s EU membership bid in a seven-point agreement with Ankara. Stockholm also agreed it will not support other Kurdish militant groups and to boost economic cooperation with Turkey.

    The next step, according to the agreement, is that Turkey “will transmit the Accession Protocol for Sweden to the Grand National Assembly, and work closely with the Assembly to ensure ratification.” 

    In a statement after the announcement, U.S. President Joe Biden welcomed the agreement and said: “I stand ready to work with President Erdoğan and Turkey on enhancing defense and deterrence in the Euro-Atlantic area.”

    Although Hungary has also refused to back Sweden’s NATO bid, Stoltenberg noted that Hungarian Prime Minister Viktor Orbán had promised that his country would not be the last holdout against Sweden’s membership.

    Sweden has one of the most capable militaries in Europe and its entry into NATO together with Finland will solidify the alliance’s control of the Baltic Sea.

    The agreement on the night before the summit’s official program starts removes a major headache for Stoltenberg and the alliance’s leaders, who are also dealing with Ukrainian demands that Kyiv be given a clear path to membership. 

    Opinions across NATO differ on how fast Ukraine could become a member. Those disagreements will likely be front and center on Wednesday when Biden holds one-on-one talks with Ukrainian President Volodymyr Zelenskyy.

    Jacopo Barigazzi, Jonathan Lemire, Paul McLeary and Alexander Ward contributed reporting.

    This article has been updated.

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    Lili Bayer

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  • Ukraine NATO bid still unresolved as alliance leaders gather

    Ukraine NATO bid still unresolved as alliance leaders gather

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    VILNIUS — It’s one problem down and one to go for the NATO alliance as leaders prepare to meet for a summit in the Lithuanian capital. 

    Sweden’s troubled membership bid was accepted by Turkey’s president late Monday but the tricky issue of formulating acceptable language on Ukraine’s membership aspirations still hasn’t been agreed.

    After intensive talks on the summit communiqué, there was still no final deal on what will be offered to Ukraine, although a senior NATO diplomat said: “We have made very good progress and I am 100 percent optimistic.”

    Officials negotiating the language on Ukraine are now expected to reconvene on Tuesday, the same day leaders will begin their two-day meeting.  

    “I believe it is coming together — it is very close,” said a second senior NATO diplomat, who like others was granted anonymity to discuss sensitive negotiations.

    Ukrainian President Volodymyr Zelenskyy upped the pressure on the alliance on Monday, demanding that NATO send a clear signal his country will join once the war with Russia is over.

    “Even if different positions are voiced, it is still clear that Ukraine deserves to be in the Alliance. Not now — there is a war, but we need a clear signal. And we need this signal right now,” Zelenskyy said.

    Kyiv’s bid to join NATO after hostilities are over has widespread backing among alliance members, but has run into resistance from Germany and the United States. While all allies formally agree Ukraine will become a member one day, Berlin and Washington are hesitant about offering Ukraine a concrete path to membership, preferring to focus on Kyiv’s immediate needs to battle the Russian invasion.

    “I don’t think there is unanimity in NATO about whether or not to bring Ukraine into the NATO family now, at this moment, in the middle of a war,” U.S President Joe Biden told CNN in an interview that aired Sunday. He added that if Ukraine were a NATO member,  “We’re at war with Russia, if that were the case.”

    A senior German official said earlier on Monday: “The time is not right at this summit for an invitation to Ukraine, for concrete steps toward membership. There is no consensus on this among the allies either.” 

    Biden, who arrived in Vilnius on Monday, plans to meet with Zelenskyy on Wednesday.

    Alliance leaders will be able to give their full attention to Ukraine on Tuesday after another big problem — Sweden’s stalled bid for NATO membership — was resolved after Turkish President Recep Tayyip Erdoğan promised to put the issue to Turkey’s parliament.

    Hans von der Burchard contributed reporting. 

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    Lili Bayer

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  • Turkey’s inflation rate cools despite steep lira plunge

    Turkey’s inflation rate cools despite steep lira plunge

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    Ayhan Altun | Moment Open | Getty Images

    Turkey’s monthly inflation rate for June came in lower than expected, despite the continued collapse of the lira currency following the re-election of President Recep Tayyip Erdogan.

    Turkey’s consumer price index rose 3.92% month-on-month, official data showed Wednesday. The reading was lower than Reuters’ forecast of 4.84% and compares against a 0.04% increase in May.

    The largest gains were attributed to tobacco and alcoholic beverage prices, which jumped 11.13%, while restaurant and hotel prices inched up 4.31%.

    On a year-on-year basis, inflation rose 38.21%, also slightly lower than Reuters’ forecasts of 39.47%.

    While June was the eighth consecutive month of price growth deceleration, Conotoxia’s Market Analyst Bartosz Sawicki told CNBC that there is “little reason for optimism.”

    “The lira freefall starts to take its toll once again as it reignites cost pressures,” he said. Meanwhile, BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash said the country could have seen even higher numbers.

    “Could have been much worse given the 25% odd FX correction seen [through] post elections and worries about FX pass [through],” Ash said via an e-mailed statement.

    Ash added that the central bank will need to “work very hard to bring inflation meaningfully down from here.”

    Last October saw Turkey’s inflation rate soar to 85%. The Turkish lira was last trading at 26.09 against the dollar.

    “With Simsek there is at least a chance of managing [through] this all without a broader systemic crisis, but there is absolutely no room for a policy error at this stage,” Ash continued.

    Erdogan had named former economy chief Mehmet Simsek as his new treasury and economy minister, who was known for his market friendly policies. 

    Alongside that appointment was Turkey’s new central bank governor, former Wall Street banker Hafize Gaye Erkan

    Last month, the central bank lifted the country’s key interest rate from 8.5% to 15%, and affirmed that there will be further gradual monetary tightening until the inflation situation in the country improves.

    However, the lira’s demise is not the only source of inflationary pressures, said Contoxia’s Sawicki.

    “Inflation expectations refuse to grind lower in the permanently profoundly negative real interest rates and an overheated economy,” he said in an e-mail.

    Turkey’s introduction of a minimum wage hike, as well a possible overhaul of tax rates which were postponed due to the elections should contribute to the return of the annual inflation rate toward the 50% mark in the second part of the year, he forecasts.

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  • Migration money feud infiltrates EU summit

    Migration money feud infiltrates EU summit

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    BRUSSELS — EU countries are bickering over granting billions in new funds to deal with migration as asylum applications soar and backlogs pile up at the Continent’s borders. 

    Germany, which received a quarter of all EU asylum applications in 2022, specifically wants to “revitalize” the EU’s ties with neighboring Turkey, according to a senior German official — a nod to the last time the bloc faced such levels of migration. 

    Then, in 2016, the EU offered Turkey billions in exchange for the country housing thousands of Syrian refugees fleeing civil war. Now, there is a push to authorize up to €10.5 billion in new money for not just Turkey, but also countries like Libya or Tunisia, hoping it would help them prevent people from entering the EU without permission. 

    The debate has jumped onto the agenda of an EU leaders’ summit in Brussels on Thursday and Friday. And countries are sparring over whether to reference a monetary request in the meeting’s final conclusions, according to five diplomats and officials from four different countries. 

    The behind-the-scenes fight illustrates how much migration has come to dominate the political agenda. Organizers for the summit had hoped to keep the divisive migration talk to a minimum in favor of discussions on Russia, China and economic security. But with high-profile disasters like the recent migrant shipwreck near Greece and arrival figures continuing their steep climb, the heated issue is becoming increasingly hard to avoid. 

    Notably, draft conclusions for the summit, dated Wednesday evening and seen by POLITICO, still had two indirect references to the fresh migration funds: The €10.5 billion pot and another €2 billion for “managing migration” within the EU’s own borders. 

    Whether that language survives until Friday is another question. 

    Germany: Let’s talk Turkey, not money

    Germany, as always, is one of the key players in the debate — and in this instance, it is making arguments for both sides.

    On one side, Berlin wants to renew the EU’s relationship with Turkey, hoping it can take in more asylum seekers and help cut down on unauthorized border crossings. In return, the Germans want the EU to improve trade ties with the country. 

    On the other side, however, Berlin is fiercely opposing the attempt to explicitly mention money in the summit conclusions. The logic: Committing to fresh billions now would imperil upcoming talks over whether to add €66 billion to its budget. Germany wants to discuss the whole package at once, instead of approving parts of it in advance.

    As of Wednesday night, the summit conclusions draft still contained an indirect endorsement of the money.

    Germany, as always, is one of the key players in the debate — and in this instance, it is making arguments for both sides | David Gannon/AFP via Getty Images

    The document mentions “financing mechanisms” — seen as a reference to the €10.5 billion — for “the external aspects of migration.” That money would go to countries like Turkey, Libya and Tunisia, which migrants often traverse on their way to Europe. 

    There’s also an indirect reference to the €2 billion for internal EU migration management. The text calls for “support for displaced persons,” particularly from Ukraine, via “adequate and flexible financial assistance to the member states who carry the largest burden of medical, education and living costs of refugees.” Translated, that would mean more money for countries that host the bulk of Ukrainian refugees, like Poland and Germany. 

    Yet during a meeting of EU ambassadors on Wednesday, German officials urged their counterparts to cut or massively reduce both passages, according to the five diplomats and officials, who, like other officials in this story, were granted anonymity because they are not allowed to publicly discuss the talks.

    As of Wednesday night, that appeal had failed. But German Chancellor Olaf Scholz may take up the issue himself with his counterparts on Thursday.

    The German argument is that including the figures would mean EU leaders are essentially making a big step toward endorsing the full budget package — which the European Commission requested just last week — before even discussing it, two of the officials said. 

    Nevertheless, Commission President Ursula von der Leyen is expected to briefly present her €66 billion budget plan during the gathering of EU leaders on Thursday, meaning there will likely be an initial debate about the money, the officials said. 

    Von der Leyen’s plans are expected to run into resistance from a number of countries, particularly the so-called “frugal” countries, including Austria, Denmark, the Netherlands and Sweden.

    Speaking to a briefing for reporters in Berlin on Wednesday, a senior German official also voiced caution about von der Leyen’s plan.

    “One of the questions is: Is the Commission’s assessment of the situation convincing?” said the senior official, who could not be named due to the rules under which the briefing was organized.

    Time to work with Erdoğan again? 

    At the same time, the senior German official stressed Berlin’s interest in renewing the EU relationship with Turkey.

    “[Turkish President Recep Tayyip] Erdoğan has been re-elected, and this must be an opportunity for the EU to take another broad look at its relationship with Turkey,” the official said. 

    Turkish President Recep Tayyip Erdoğan | Adem Altan/AFP via Getty Images

    “For us, it’s a matter of putting EU-Turkey relations once again on the agenda … to possibly revitalize them, if all sides want to commit to this,” the official continued, adding that the European Commission and EU foreign policy chief Josep Borrell should “come back in the fall with proposals.”

    One idea could be an update of the EU’s trade rules with Turkey — a thorny issue, though, as talks between Brussels and Ankara have failed to make progress on modernizing the so-called EU-Turkey customs union for several years.

    Germany’s Scholz held a phone call with Erdoğan on Wednesday during which both leaders discussed how “to cooperate further and deepen exchanges on various cooperation issues,” according to Steffen Hebestreit, Scholz’s spokesperson. 

    Any progress in EU-Turkey relations would also require the agreement of the EU countries perpetually at odds with Turkey — Greece and Cyprus.

    At least in that sense, there seems to be progress: “We agreed to include a paragraph on Turkey and the future relations,” a Greek diplomat said.

    The latest draft conclusions from Wednesday evening ask Borrell and the Commission “submit a report” on EU-Turkey relations “with a view to proceeding in a strategic and forward-looking manner.”

    Barbara Moens, Jakob Hanke Vela, Lili Bayer, Jacopo Barigazzi and Gregorio Sorgi contributed reporting.

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    Hans von der Burchard

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  • CNBC Daily Open: Rate hikes and red lights

    CNBC Daily Open: Rate hikes and red lights

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    Road sign and red traffic light for STOP at corner of Wall Street and Broadway in New York, USA.

    Tim Graham | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    BOE’s supersized surprise hike
    The
    Bank of England raised interest rates by 50 basis points, bringing rates to 5%. Markets were betting on a 25-basis-point hike. But May’s inflation reading for the U.K. was a scorcher: Inflation last month remained unchanged from April, while core inflation actually rose from 6.8% to 7.1% year over year. If inflation remains stubborn, expect more surprises from the BOE.

    Turkey’s welcome hike
    Turkey’s central bank — under its new governor Hafize Gaye Erkan doubled the country’s interest rate from 8.5% to 15%. That goes some way in tackling Turkey’s soaring inflation which, aided by President Recep Tayyip Erdogan’s insistence on keeping rates low, hit 39.6% in May. But some analysts criticized the hike for being too modest — most were expecting rates to hit 20%.y 2

    Capital requirements hike
    On the second day of his Senate testimony, Federal Reserve Chairman Jerome Powell said new regulations  aren’t likely to apply to banks below $100 billion in assets. Those rules would increase the amount of capital banks need to maintain, among other conditions. Separately, FDIC Chair Martin Gruenberg said the rules are expected to kick in next year.

    Mixed markets
    U.S. markets mostly rose Thursday, as the S&P 500 and Nasdaq Composite snapped their three-day losing streak, while the Dow Jones Industrial Average remained virtually unchanged. The pan-European Stoxx 600 lost 0.51%, but one stock had a great day: shares of British online grocer Ocado rocketed 32.05% amid speculation that Amazon might buy the company.

    [PRO] Bearish market, overvalued stocks
    Even with the recent rally in the S&P 500, the index is still trying to climb beyond the high it reached in January 2022 — which would usher in an official bull market. Yet market strategists from UBS and JPMorgan Chase and are already warning that the stock market may be overvalued.

    The bottom line

    Investors have been lulled by a sense of security that inflation in the U.S. is falling, albeit slower than hoped, and interest rates will gradually fall as the beast is slayed. That’s the engine behind markets’ astounding rally in recent weeks.

    But investors are being rudely returned to a world they thought they had put behind them — a world, in other words, of continual rate hikes. Fed Governor Michelle Bowman thinks “additional policy rate increases will be necessary” — to the extent that they are “sufficiently restrictive” — so that inflation will drop further. Bowman, who is on the Federal Open Market Committee, essentially echoed Powell’s Wednesday comments that more rate hikes are necessary despite June’s pause. (“Pause” is a word Powell dislikes, by the way, which sheds light on how the Fed is thinking.)

    The prospect of more hikes might be why investors are fleeing to technology stocks. Amazon, Apple and Microsoft all climbed yesterday. It sounds contrary, I know. Don’t tech stocks, dependent on growth, suffer the most from high interest rates, which erode the value of future earnings?

    My sense is that investors see artificial intelligence as a moat around earnings, a barrier which rates cannot encroach. Well, that’s the hope, anyway.

    Still, excitement over AI might not be enough to sustain the whole market. Despite adding close to 1% Thursday, the Nasdaq is on track to break its eight-week winning streak. Likewise, the S&P’s 0.37% gain might be too little to preserve its five consecutive weeks of closing in the green.

    Some analysts hoped that bullish markets would charge forward, seeing red. But the hue in sight now seems less a matador’s red cape than traffic-halting red lights.

    Correction: This article has been updated to correct the date of the S&P’s all-time high.

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  • Turkey hikes interest rates to 15% as Erdogan reverses policy on fighting inflation | CNN Business

    Turkey hikes interest rates to 15% as Erdogan reverses policy on fighting inflation | CNN Business

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    London
    CNN
     — 

    Turkey’s central bank almost doubled interest rates to 15% Thursday in a dramatic reversal of its unorthodox policy of cutting the cost of borrowing to tame painfully high inflation.

    Annual consumer price inflation has come down from a two-decade high of 85.5% in October but was still 39.6% in May.

    The central bank said that there were indications that underlying inflation in Turkey was increasing, even as inflation in many other countries trends downwards.

    “The strong course of domestic demand, cost pressures and the stickiness of services inflation have been the main drivers,” the central bank said in a statement.

    This is the first rate decision by Turkey’s central bank since last month’s reelection of President Recep Tayyip Erdogan.

    It is also the first rate increase in more than two years, and the central bank’s first decision since the appointment earlier this month of new governor Hafize Gaye Erkan, a former Goldman Sachs banker and the first woman to hold the position.

    In its statement, the central bank said it hiked rates to bring down inflation “as soon as possible,” and that it would continue to do so gradually “until a significant improvement in the inflation outlook is achieved.”

    Liam Peach, senior emerging markets economist at Capital Economics, wrote in a Thursday note that there were “encouraging signs” from the central bank that further rate hikes were ahead.

    The London-based research firm expects Turkish interest rates to rise as high as 30% later this year.

    Erdogan had ordered his central bank to cut rates nine times since late 2021, taking them to 8.5%, even as inflation around the world started to accelerate and most economies were doing the opposite. In that time, the value of the Turkish lira crashed 170% to a record low against the US dollar.

    A weaker lira has aggravated Turkey’s cost-of-living crisis by making foreign imports more expensive, and pushed the government to use up billions of its foreign currency reserves in an attempt to boost the currency’s value.

    Erdogan — who has fired four central bank governors in as many years — has since tried to reassure investors that he intends to normalize Turkish economic policy by filling key posts with more orthodox figures such as Erkan.

    This month, Erdogan also appointed Mehmet Simsek, Turkey’s former deputy prime minister and finance minister, and a former economist for US wealth management firm Merrill Lynch, as his finance minister.

    But the lira weakened further after Thursday’s rate hike news, dropping more than 2% to a new record low of 24 to the US dollar.

    Craig Erlam, senior market analyst at Oanda, noted that the rate hike had come in at the lower end of market forecasts, and investors couldn’t afford to relax too soon.

    “Erdogan hasn’t really hesitated to sack [central bank] governors that raise rates in the past, so investors will never feel fully at ease as long as he’s president,” he wrote in a note.

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  • U.S. still expects Sweden’s NATO ascension by July despite Turkey tensions, U.S. ambassador says

    U.S. still expects Sweden’s NATO ascension by July despite Turkey tensions, U.S. ambassador says

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    U.S. Ambassador to Turkiye Jeffry Flake speaking in Washington D.C., United States on May 3, 2023.

    Anadolu Agency | Anadolu Agency | Getty Images

    The U.S. is still holding out hope that Sweden will join NATO by July in spite of Turkey’s apprehensions, Ambassador to Ankara Jeffry Flake said.

    “We hope Sweden can become a member of NATO soon,” Flake told CNBC’s Dan Murphy Friday, adding that Sweden has taken a number of measures to address Turkey’s security concerns.

    “We fully expect and hope that by the time Vilnius comes … that Sweden will be a member.”

    Earlier this week, Turkish President Recep Tayyip Erdogan had on Wednesday rebuffed mounting international pressure to ratify Sweden’s NATO membership bid before the defense alliance convenes for the 2023 Vilnius summit of July 11-12.

    Officials from Sweden, Turkey, Finland and NATO had convened in Ankara with hopes of easing Turkey’s objections.

    “Sweden has expectations. It doesn’t mean that we will comply with them,” Erdogan said, according to Turkish state-run outlet Anadolu. Turkey, Finland and Sweden had last year inked an agreement to on the sidelines of the NATO summit in Madrid, committing to address Turkey’s security demands.

    Ankara’s objections are complex, but center mainly on Sweden’s support for Kurdish groups that Turkey considers to be terrorists, and on weapons embargoes that both Sweden and Finland, along with other EU countries, put on Turkey for targeting Kurdish militias in Syria.

    Erdogan also wants Sweden to crack down on protests against his government. For months, Sweden’s capital has seen protests built up against Turkey, which at the start of the year led to the heavily criticised burning of the holy Muslim book Quran by some demonstrators.

    “In order for us to comply with these expectations, first of all, Sweden must do its part,” Erdogan said.

    Prior to the recent elections in May, Turkey’s presidential spokesperson in March said that Ankara has “left the door open” to Stockholm’s bid to be a part of the military alliance “if it shows will and determination.”

    On Tuesday, U.S. President Joe Biden met with NATO’s Secretary General Jens Stoltenberg, emphasizing their “shared desire to welcome Sweden to the Alliance as soon as possible,” a White House statement said.

    “Obviously, our relationship is grounded in NATO. I think it will continue to be so,” Flake said of U.S.-Turkey relations, underscoring both parties’ security and commercial partnership.

    “On the commercial side, we[‘ve] got a healthy amount of balance trade, about 33 billion as of last year. That’s increasing every year,” he said.

    The Turkish leader has previously criticized Flake for paying a visit to Kemal Kilicdaroglu, the presidential candidate of the opposition alliance that Erdogan beat in recent elections. Flake on Friday characterized his relationship with Erdogan as being “in a good place.”

    He added, “Sometimes it’s a challenging relationship. That is true, but we have a good security and commercial and people relationship with Turkey.”

    —CNBC’s Natasha Turak contributed to this article.

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  • Putin labels dam attack ‘barbaric.’ The world says he orchestrated it.

    Putin labels dam attack ‘barbaric.’ The world says he orchestrated it.

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    In his first comments since the destruction of a strategic Russian-controlled dam in southern Ukraine, Russia President Vladimir Putin blamed Ukraine for the extensive damage and called the actions of those responsible “barbaric.”

    Putin told Turkish leader Recep Tayyip Erdoğan in a phone call on Wednesday the blast that destroyed the dam was a “barbaric action” that “led to a large-scale environmental and humanitarian catastrophe,” according to a Kremlin statement.

    Just one problem: The West says Putin was the one responsible.

    Both Russia and Ukraine have blamed one another for the alleged explosion that destroyed the dam and forced the evacuation of thousands of people, a rescue effort largely facilitated by Ukraine.

    Damage to Ukraine’s Nova Kakhovka dam, which has unleashed massive flooding in the Kherson region, could be a potential war crime, EU and Ukrainian leaders said Tuesday.

    Putin, according to the Kremlin’s readout, was undeterred in his call with the Turkish leader, saying that “the Kyiv authorities, at the suggestion of their Western curators, are still making a dangerous bet on the escalation of hostilities, commit war crimes, openly use terrorist methods, and organize sabotage on Russian territory.”

    Earlier Wednesday, Ukrainian President Volodymyr Zelenskyy also spoke with Erdoğan, saying later he condemned the “Russian act of terrorism” on the dam.

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  • Twitter Users React To Elon Musk’s Censorship

    Twitter Users React To Elon Musk’s Censorship

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    Despite portraying himself as a paragon of free speech, Twitter owner Elon Musk has repeatedly given into the requests of powerful autocratic regimes to silence their citizens. The Onion asked Twitter users how they felt about Musk’s censorship, and this is what they said.

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  • Turkish lira continues slide to new record lows following Erdogan’s election victory

    Turkish lira continues slide to new record lows following Erdogan’s election victory

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    People walking next to a Turkish national flag at the historical grand bazaar in Istanbul.

    Ozan Kose | AFP | Getty Images

    The Turkish lira slumped to yet another all-time low Tuesday, extending its slide after the re-election of incumbent President Recep Tayyip Erdogan.

    The currency was last trading at 20.15 against the greenback at around 5 a.m. Tuesday morning local time, surpassing Monday’s lows. Earlier in the session, it had briefly weakened to 20.2 levels to the dollar. The lira has lost more than 7% of its value since the start of the year.

    Turkey’s Election Board on Sunday confirmed that Erdogan won Turkey’s 2023 presidential election with 52.14% of the votes, while his opponent Kemal Kilicdaroglu received 47.86%.

    “If a big move weaker in the lira, and potential systemic economic crisis is to be avoided, Erdogan needs to move fast and appoint someone like Simsek as economic point person,” said BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash via e-mail.

    Mehmet Simsek was Turkey’s former finance minister who was known for his market friendly policies. He subsequently went on to become the country’s deputy prime minister from 2015 to 2018.

    “The question is whether any such person will have enough freedom to make economic policy changes that are needed — like rate hikes,” Ash continued.

    Turkey’s monetary policy places an emphasis on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unconventional view that raising interest rates increases inflation.

    “There’s a widespread expectation that [the lira] going to weaken in coming months,” Standard Chartered Bank’s Steven Englander told CNBC on “Street Signs Asia” Monday.

    He added that Turkey has “a lot of economic issues” that will intensify following Erdogan’s return to office.

    Meanwhile, Goldman Sachs analysts stated in a research report, following the run-off election results, the the focus fpr the market will continue to be on the central bank’s foreign currency reserves and the lira.

    “International reserves have continuously fallen since the beginning of the year and are close to levels when previously TRY [Turkish lira] volatility sharply increased,” the investment banks’ analysts wrote.

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  • Recep Tayyip Erdogan Fast Facts | CNN

    Recep Tayyip Erdogan Fast Facts | CNN

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    CNN
     — 

    Here’s a look at the life of Recep Tayyip Erdogan, current president and former prime minister of Turkey.

    Birth date: February 26, 1954

    Birth place: Istanbul, Turkey

    Birth name: Recep Tayyip Erdogan

    Father: Ahmet Erdogan, coastguard and sea captain

    Mother: Tenzile Erdogan

    Marriage: Emine (Gulbaran) Erdogan (July 4, 1978-present)

    Children: Two daughters and two sons

    Education: Marmara University, Faculty of Economics and Administrative Sciences, 1981

    Religion: Muslim

    Active in Islamist circles in the 1970s and 1980s.

    Before his political career, Erdogan was a semi-professional football (soccer) player.

    Erdogan is considered a polarizing figure: supporters say he has improved the Turkish economy and introduced political reform. Critics have accused Erdogan of autocratic tendencies, corruption and extravagance.

    Erdogan has also been heavily criticized for failing to protect women’s and human rights, curbing freedom of speech and attempting to curb Turkey’s secular identity.

    Under Erdogan and his ruling Justice and Development Party (AKP), Turkey has lifted restrictions on public expression of religion, including ending the ban on women wearing Islamic-style headscarves.

    Has called social media “the worst menace to society.”

    1984 – Elected as a district head of the Welfare Party.

    1985 – Elected as the Istanbul Provincial Head of the Welfare Party and becomes a member of the central executive board of the party.

    1994-1998 – Mayor of Istanbul.

    1998 – The Welfare Party is banned. Erdogan serves four months in prison for inciting religious hatred after reciting a controversial poem.

    August 2001 – Co-founds the Islamist-rooted Justice and Development Party (AKP).

    2002-2003 – Erdogan’s AKP wins the majority of seats in parliamentary elections, and he is appointed prime minister.

    2003-2014 – Serves as prime minister.

    June 2011 – AKP wins by a wide margin in the parliamentary elections, securing a third term for Erdogan.

    June 2013 – Anti-government demonstrations target Erdogan’s policies, including his plan to turn a park into a mall, and call for political reforms. Thousands are reported injured in the clashes.

    December 2013 – Corruption probe begins which investigates more than 50 suspects, including members of Erdogan’s inner circle. The following month, the government dismisses 350 police officers amid the investigation. Ten months later, the prosecutor drops the inquiry.

    March 2014 – After Erdogan threatens to “eradicate” Twitter at a campaign rally, Turkey bans the social media site, and a two-week countrywide blackout ensues.

    August 10, 2014 – Erdogan is elected president during the first-ever direct elections in Turkey.

    November 2014 – At a summit hosted by a women’s group in Istanbul, Erdogan says that women and men are not equal “because their nature is different.” It’s not the first time the Turkish leader has made controversial comments about women: previously, he told Turkish university students that they shouldn’t be “picky” when choosing a husband and has called on all Turkish women to have three children.

    June 7, 2015 – In Turkey’s parliamentary elections, AKP wins 41% of the vote.

    July 15-16, 2016 – During an attempted coup by a faction of the military, at least 161 people are killed and 1,140 wounded. Erdogan addresses the nation via FaceTime and urges people to take to the streets to stand up to the military faction behind the uprising. He blames the coup attempt on cleric and rival Fethullah Gulen, who lives in self-imposed exile in Pennsylvania.

    April 16, 2017 – A vote is held on a constitutional amendment expanding Erdogan’s presidential powers. Turkish state media report that about 51% of people voted yes on the referendum, which abolishes the country’s parliamentary system and would potentially allow for Erdogan to remain in office until 2029. International election monitors question whether the election was free and fair, citing last-minute rule changes, the muzzling of opposition voices and the dominance of the “yes” campaign in the media. Opposition leaders in the Republican People’s Party say that they plan to challenge the election results in court.

    May 16, 2017 – Erdogan meets US President Donald Trump at the White House. During a joint news conference, Erdogan praises Trump’s electoral victory and vows to help the United States fight terrorism. After the two men speak, demonstrators protest outside the residence of the Turkish ambassador. Nine people are injured when Turkish security guards rush into a line of protestors and kick people on the ground. Law enforcement sources tell CNN that some of the men involved in the fight were Erdogan’s bodyguards.

    October 12, 2017 – Erdogan accuses the United States of sacrificing its relationship with Turkey in a speech made days after the arrest of a US consular staff member and the announcement that he refuses to recognize the authority of US Ambassador John Bass. Erdogan blames Bass and other officials left over from the Obama administration for sabotaging relations between the two countries.

    December 2017 – In response to Trump’s decision to recognize Jerusalem as Israel’s capital, Erdogan declares the move to be null and void and announces Turkey’s intention to open a Turkish embassy in Jerusalem.

    June 24, 2018 – Is reelected president.

    November 2, 2018 – The order to kill Washington Post journalist Jamal Khashoggi came “from the highest levels of Saudi government,” Erdogan writes in an opinion piece in the Washington Post. The friendship between Turkey and Saudi Arabia “doesn’t mean we will turn a blind eye to the premeditated murder that unfolded in front of our very eyes,” he writes.

    January 8, 2019 – After backing the decision that the United States will begin pulling troops from Syria, Erdogan claims US National Security Adviser John Bolton made “a serious mistake” telling reporters that the United States would only pull out of Syria if Turkey pledged not to attack its Kurdish allies there. “Bolton’s remarks in Israel are not acceptable. It is not possible for me to swallow this,” Erdogan says during a speech in parliament. “Bolton made a serious mistake. If he thinks that way, he is in a big mistake. We will not compromise.”

    January 14, 2019 – Trump and Erdogan discuss “ongoing cooperation in Syria as US forces begin to withdraw” during a phone call just one day after Trump threatened to “devastate Turkey economically” if the NATO-allied country attacks Kurds in the region.

    October 9, 2019 – Turkey launches a military offensive into northeastern Syria, just days after Trump’s administration announced that US troops would leave the border area. Erdogan’s “Operation Peace Spring” is an effort to drive away Kurdish forces from the border, and use the area to resettle around two million Syrian refugees.

    October 22, 2019 – Erdogan meets with Russian President Vladimir Putin in Sochi and the men announce a wide-ranging agreement on Syria, announcing that Russian and Turkish troops will patrol the Turkish-Syrian border. Kurdish forces have about six days to retreat about 20 miles away from the border.

    January 2, 2020 – The Turkish parliament gives Erdogan authorization for one year to deploy military to address Libyan commander Khalifa Haftar’s offensive against the UN-recognized government in Tripoli, Libya.

    December 20, 2021 – Erdogan unveils a plan to prop up the Turkish lira with a raft of new unorthodox economic measures, including compensating Turkish savers worried about the tumbling value of their nest eggs by compensating them for the impact of the depreciation of the lira on their deposits. A few days before, Erdogan announced a nearly 50% hike in the country’s minimum wage, hoping it would provide relief to suffering workers.

    February 5, 2022 – Erdogan announces on Twitter that he and his wife had contracted the Omicron variant of the coronavirus and were experiencing mild symptoms.

    February 7, 2023 – Erdogan declares a three-month state of emergency in 10 provinces following a magnitude 7.8 earthquake that struck Turkey and Syria on February 6.

    May 28, 2023 – Erdogan wins Turkey’s presidential election, defeating opposition leader Kemal Kilicdaroglu and stretching his rule into a third decade.

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  • Putin congratulates ‘dear friend’ Erdogan as NATO’s Turkey challenge looks set to stay

    Putin congratulates ‘dear friend’ Erdogan as NATO’s Turkey challenge looks set to stay

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    Turkey on Sunday voted for another five years of the leadership of Recep Tayyip Erdogan, the powerful, nationalist president who now enters his third decade in power.

    Russian President Vladimir Putin was among the leaders that congratulated Erdogan on his win on Monday, calling him a “dear friend,” according to the Kremlin.

    Turkey’s historical election is highly consequential for its population of 85 million, in terms of the future of the country’s democracy, economy and foreign relations. But it’s also deeply significant for many parts of the world beyond Turkey’s borders.

    “Turkey is a vital, vital NATO ally for the United States and for the other NATO partners,” David Satterfield, former U.S. ambassador to Turkey, told CNBC just before the final presidential vote. Turkey has been a member of NATO since 1952, boasts the alliance’s second-largest military after the U.S. and houses 50 American nuclear warheads and a major air base used by NATO forces.

    It’s a manufacturing powerhouse at the crossroads of Asia and Europe, as well as an important agricultural exporter for many countries around the world. Turkey also hosts more than 4 million refugees.

    More recently, Erdogan’s government is playing a leading diplomatic role between Russia and Ukraine and mediating the crucial Black Sea grain deal, which unlocks vital Ukrainian produce exports blocked by Russia’s full-scale invasion.

    Turkish President Tayyip Erdogan meets with his Russian counterpart Vladimir Putin in Sochi, Russia August 5, 2022.

    Turkish Presidential Press Office | Reuters

    Erdogan has also stood in the way of some of the major goals of Turkey’s Western allies, such as aggressively pushing back on Russia for its war in Ukraine, and allowing Sweden into the NATO alliance. Erdogan’s friendly relationship with Putin and refusal to impose sanctions on Russia, as well as his government’s purchase of Russian weapons systems, makes many Western officials uneasy.

    Putin, in his congratulatory message Monday, praised Erdogan’s efforts to “conduct an independent foreign policy,” according to his spokespeople. “We highly appreciate your personal contribution to the strengthening of friendly Russian-Turkish relations and mutually beneficial cooperation in various areas,” he said.

    With Erdogan at the helm of such a strategically vital country for a fresh new presidential term, many are asking: what does this mean for NATO and Western geopolitical goals?

    A threat to NATO cohesion?

    The outlook is mixed among political and economic analysts inside and outside of Turkey whether Erdogan is bad news for the future of NATO.

    Mike Harris, founder of advisory firm Cribstone Strategic Macro, believes the Turkish strongman’s extended rule is decidedly negative for the 74-year-old alliance.

    “Putin clearly wants NATO to fragment, and Erdogan in charge increases the likelihood of NATO fragmenting,” Harris said after the election’s first round in mid-May. He pointed to Erdogan’s staunch refusal to cut ties with Putin and to his frequent criticism of Western governments.

    But Turkey has so far benefitted significantly from its commitment to an independent foreign policy, when it comes to Russia.

    Turkey is a critical NATO partner but has a 'vital' relationship with Russia: Ex-U.S. ambassador

    Turkey’s trade with Russia doubled to $68.19 billion in 2022 from $34.73 billion in 2021, according to the Turkish Statistical Institute. Turkey now receives 7% of Russian exports, up from 2% in 2021. Russian tourists and expatriates, including billionaire oligarchs escaping sanctions, have poured into the country as their options for travel became severely limited. Earlier in 2023, Putin waived the cost of Russian gas exports to Turkey, a move broadly seen as an effort to help Erdogan’s election chances.

    This begs the question of what leverage NATO allies might try to use to change that, if any.

    While maintaining good relations with Russia, Turkey has simultaneously supported Ukraine with weapons and aid — including the powerful and deadly Turkish-made Bayraktar drones — and facilitated prisoner swaps between the warring countries, which Western officials have praised.

    Will Turkey allow Sweden into NATO?

    What's next for Turkish politics?

    Harris agrees. “He’s already achieved his objective,” he said of Erdogan. “So is Sweden going to get into NATO? I would put money on that, guaranteed. Why would he fight that battle anymore? That was an election issue.”

    Already, Sweden’s foreign ministry on Monday said the Swedish and Turkish foreign ministers will meet “soon” to discuss Stockholm’s potential accession to NATO, according to Reuters.

    CNBC has contacted the Turkish presidency’s office for comment.

    Russia relationship ‘vital’

    Ultimately, Erdogan’s foreign policy decisions will be made with the intent to primarily benefit Turkey, not its Western allies. In the words of former U.S. ambassador to Turkey David Satterfield, Ankara’s relationship with Russia is “vital” — whether positive for NATO or not.

    “Turkey has been a critical partner for the NATO alliance and for the broader international coalition opposing Putin’s war in Ukraine … I think ‘supporting Russia’ is not the term I would use,” Satterfield told CNBC’s Dan Murphy on Friday. “Turkey has a vital relationship with Russia, its relationship that has generated both good and bad for Turkey in the past,” he said.

    “We welcome, welcome the dialogue that President Erdogan has with President Putin, when the subject is stabilization, when the subject is the ability to access grain and other products through the Black Sea from Ukraine, that has been extremely useful and extremely important,” the ambassador said.

    “And we do not see this as a pivot or an alignment of some kind with Russia. We see it as the conduct of necessary relations with a very important, for good or ill, neighbor of Turkey.”

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  • Turkey’s lira sinks to near record low as Erdogan is re-elected

    Turkey’s lira sinks to near record low as Erdogan is re-elected

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    A man holding a Turkish flag.

    Uriel Sinai | Getty Images

    The Turkish lira sank to a fresh record low Monday as incumbent Recep Tayyip Erdogan secured his victory in the 2023 presidential election, extending his rule into a third decade in power.

    The currency briefly touched 20.0608 against the greenback at around 11 a.m. Monday morning local time, close to the recent low seen last week.

    “We have a pretty pessimistic outlook on the Turkish Lira as a result of Erdogan retaining office after the election,” Wells Fargo’s Emerging Markets Economist and FX Strategist Brendan McKenna told CNBC’s “Squawk Box Asia.”

    McKenna forecasts that the lira will reach a new record low of 23 against the dollar by end of the second quarter, and then 25 as early as next year. It has lost some 77% of its value against the dollar over the last five years. He expects Turkey’s unorthodox monetary and economic policy frameworks to remain in place going forward.

    Turkey’s monetary policy places an emphasis on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unconventional view that raising interest rates increases inflation.

    “The current set up is just not sustainable,” said BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash via email.

    “With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy,” Ash continued.

    Istanbul’s main index, the Turkey ISE National 100 gained roughly 2% in its first hour of trade.

    Credit default swaps, which measure the cost of insuring exposure to Turkish debt, also spiked.

    Five-year CDS were trading at around 664.18 basis points, marking a 20% climb from the 550 basis point level prior to the run-offs, according to Refinitiv data.

    These developments reflect market participants’ belief that orthodox policies, which were promised by the political opposition, were the only way to get the Turkish economy out of a potential crisis, said Selva Demiralp, a professor of economics at Koç University.

    Meanwhile, MarketVector’s CEO Steven Schoenfeld wrote in an e-mail. “If the Lira continues to plunge and inflation surges again due to the policy of inappropriately-low interest rates, we could see a repeat of the ‘flight to safety’ allocation to Turkish equities by local investors which moved the market sharply higher in 2022.”

    ‘Bleak economic outlook’ ahead

    “It’s a very bleak economic and markets outlook for Turkey,” Wells Fargo’s McKenna added.

    He noted that the “one silver lining” in the whole scenario could be the Turkish central bank’s ability to secure currency reserve swap lines with countries in the Middle East and China.

    “If they can continue to draw on those lines and possibly extend and enhance those reserve currency lines, maybe there’s some support in the central bank FX intervention,” he added.

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  • Turkey’s President Erdogan seals election victory to enter third decade in power

    Turkey’s President Erdogan seals election victory to enter third decade in power

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    Turkey’s President and leader of the Justice and Development (AK) Party Recep Tayyip Erdogan delivers a speech during his partys group meeting at the Turkish Grand National Assembly (TGNA) in Ankara, on May 18, 2022.

    Adem Altan | AFP | Getty Images

    Turkey’s Election Board on Sunday confirmed that Recep Tayyip Erdogan has won Turkey’s 2023 presidential election, extending his rule into its third decade in power after facing the tightest race of his career.

    Erdogan won Turkey’s presidency in a runoff election with 52.14% of the votes, the High Election Board head Ahmet Yener said, making the results official.

    With 99.43% of ballot boxes opened, Erdogan’s rival Kilicdaroglu received 47.86% of the votes, Yener said. With a gap of more than 2 million votes between candidates, the rest of the uncounted votes will not change the result, he added.

    Earlier Sunday, Turkish public broadcaster TRT had called the presidential election for incumbent Erdogan.

    Analysts saw the 69-year-old Erdogan’s victory as all but in the bag after the first vote on May 14, which saw him come out five percentage points ahead of his rival, in a giant blow to the opposition.

    Kilicdaroglu and his party CHP had pledged change, economic improvement, the salvaging of democratic norms and closer ties with the West — something many expected to take them to victory, especially as years of Erdogan’s economic policies helped create a cost-of-living crisis in Turkey. But in the end, it wasn’t enough.

    The AK Party leader’s popularity remains alive and well, even despite public anger at a slow government response following a series of devastating earthquakes in February that killed more than 50,000 people.

    Many in Turkey — and the Muslim world more widely — see Erdogan as a protector of faithful Muslims who elevates Turkey globally and pushes back against the West, despite being a longtime Western ally.

    By contrast Kilicdaroglu’s party, the CHP, strives for the fiercely secular model of leadership first established by Mustafa Kemal Ataturk, founder of the modern Turkish state. It’s known for being historically more hostile to practicing Muslims, who form an enormous part of the Turkish electorate, although the CHP under Kilicdaroglu has softened its stance and was even joined by former Islamist party members.

    Big decisions ahead

    Erdogan has no shortage of work ahead of him — and his decisions will continue to have impacts far beyond Turkey’s borders. The country of 85 million people boasts NATO’s second-largest military, houses 50 American nuclear warheadshosts 4 million refugees and has taken up a key role in Russia-Ukraine mediation. Western allies will also now be waiting to see whether Erdogan finally agrees to accept Sweden’s application to join NATO.

    Erdogan served as Turkey’s prime minister from 2003 to 2014 and president from 2014 onward. He came to prominence as mayor of Istanbul in the 1990s, and was celebrated in the first decade of the new millennium for transforming Turkey’s economy into an emerging market powerhouse. 

    Can Gulf money save Turkey's economy?

    Recent years, however, have been far less rosy for the religiously conservative leader, whose own economic policies have contributed to inflation surpassing 80% in 2022 and Turkey’s currency, the lira, losing some 77% of its value against the dollar over the last five years.

    International and domestic voices alike also sound the alarm that Turkey’s democracy under Erdogan is looking less democratic by the day.

    The frequent arrests of journalists, forced closures of many independent media outlets and heavy crackdowns on past protest movements — as well as a 2017 constitutional referendum that vastly expanded Erdogan’s presidential powers — signal what many say is a slide toward autocracy. 

    The Turkish president rejects the criticisms. But with a fresh mandate to lead and previous reforms consolidating presidential power, very little stands in the way of a stronger Erdogan than ever before.

    Reuters contributed to this report.

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  • Turkey votes in runoff election after candidates double down on nationalism and fear

    Turkey votes in runoff election after candidates double down on nationalism and fear

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    People walk past an election campaign poster for Turkey’s President Recep Tayyip Erdogan on May 25, 2023 in Istanbul, Turkey. The country is holding its first presidential runoff election after neither candidate earned more than 50% of the vote in the May 14 election.

    Chris Mcgrath | Getty Images News | Getty Images

    Millions of Turks are casting their ballots Sunday for the second time in two weeks to decide the outcome of what has been the closest presidential race in Turkey’s history.

    The powerful incumbent President Recep Tayyip Erdogan, 69, faced off against opposition leader Kemal Kilicdaroglu in what many described as a the most serious fight of Erdogan’s political life and a potential death blow to his 20-year reign. But the initial round of voting – which saw a tremendous turnout of 86.2% – proved a disappointment for the opposition, with the 74-year-old Kilicdaroglu trailing by roughly 5 percentage points.

    Still, no candidate surpassed the 50% threshold required to win; and with Erdogan at 49.5% and Kilicdaroglu at 44.7%, a runoff election was set for two weeks after the first vote on May 14. The winner will preside over a divided country in flux, a cost-of-living crisis, complex security issues, and – as the second-largest military in NATO and a key mediator between Ukraine and Russia – an increasingly crucial role in global geopolitics. 

    Country analysts are all but certain of an Erdogan victory.

    “We expect Turkey’s President Erdogan to extend his rule into its third decade at the run-off election on 28 May, with our judgment-based forecast assigning him an 87% chance of victory,” Hamish Kinnear, senior MENA analyst at risk intelligence firm Verisk Maplecroft, wrote in a research note.

    In the span of two short weeks, some of the candidates’ campaign messaging has changed dramatically, and both contenders have doubled down on malicious accusations, hard-core nationalism, and scapegoating.

    ‘Send all refugees home’

    Kilicdaroglu, known for his more conciliatory, soft-spoken demeanor, made a stunning lurch toward xenophobia and fear-mongering as part of his runoff campaign strategy, tapping into widespread Turkish discontent toward the country’s more than 4 million refugees.

    He promised to “send all refugees home” if elected, and accused Erdogan of flooding the country with them. He also claimed that Turkey’s cities would be at the mercy of criminal gangs and refugee mafias if Erdogan were to stay in power. The vast majority of refugees in Turkey are from neighboring war-torn Syria.

    Kemal Kilicdaroglu, the 74-year-old leader of the center-left, pro-secular Republican People’s Party, or CHP, delivers a press conference in Ankara on May 15, 2023.

    Bulent Kilic | Afp | Getty Images

    In a surprise twist, a far-right wing, anti-migrant party called Victory Party threw its support behind Kilicdaroglu on Wednesday, due to his pledge to return refugees to Syria — splitting right-wing groups between the two presidential contenders.

    “Now we have two anti-refugee political leaders supporting the rival candidates,” Ragip Soylu, Turkey bureau chief at Middle East Eye, pointed out in a Twitter post.

    Economy, earthquakes

    Erdogan’s continued and seemingly unshakeable popularity comes despite several years of economic deterioration in the country of 85 million.

    Turkey’s lira lost roughly 80% of its value against the dollar in five years and the country’s inflation rate is around 50%, thanks in large part to the president’s unorthodox economic policy of lowering interest rates despite already high inflation.

    And a series of devastating earthquakes in February killed more than 50,000 people, a tragedy made worse by a slow government response and reports of widespread corruption that allowed construction companies to skirt earthquake safety regulations for buildings.

    People carry a bodybag as local residents wait for their relatives to be pulled out from the rubble of collapsed buildings in Hatay, on February 14, 2023, after a 7.8-magnitude earthquake struck the country’s south-east.

    Bulent Kilic | Afp | Getty Images

    But Erdogan appears largely politically untouched; he still won the most votes in Turkey’s eastern earthquake-hit provinces, which are overwhelmingly Islamically conservative. Additionally, his powerful AK Party won the majority in Turkey’s Parliament, meaning his opponent would have far less power as president.

    “Erdogan wasted no time in calling on voters to back him to avoid a destabilizing split between the parliament and president,” Kinnear said. Kilicdaroglu, meanwhile, has appealed to the 8 million Gen Z and Kurdish voters who did not vote in the first round to come out and back him.

    Already, though, his anti-refugee rhetoric has angered many of his supporters and prompted resignations from some of his campaign allies.

    With the incumbent’s victory looking ever more secure, analysts aren’t holding their breaths for a return to economic normality. Already Turkey’s central bank is aggressively imposing new regulations to stifle local lira purchases of foreign currency, in an effort to prevent further falling of the lira. The currency dipped to its lowest level against the dollar in six months after the first round of voting, when Erdogan’s lead became clear.

    Can Gulf money save Turkey's economy?

    “Investors shouldn’t expect a fundamental shift to Turkey’s unorthodox approach to economic policymaking anytime soon. Erdogan’s belief that lower interest rates lead to lower inflation, which influences monetary policy, will continue to spook the markets,” Kinnear wrote.

    Amid speculation on the lira’s direction after the vote, Timothy Ash, emerging markets strategist at BlueBay Asset Management, said that the only question now is “how weak the lira goes and how, without the ability to use higher interest rates, the CBRT (Turkish central bank) can prevent a devaluation-inflation spiral again.”

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  • Turkey’s Erdoğan wins again

    Turkey’s Erdoğan wins again

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    Recep Tayyip Erdoğan is set for another five years as Turkey’s president after winning a divisive election that at one point seemed to threaten his hold on power.

    The 69-year-old, who has dominated his country’s politics for two decades, was on track to win the runoff vote by 52 percent to 48 percent, with more than 99 percent of ballot boxes counted, beating opposition candidate Kemal Kılıçdaroğlu, according to preliminary official results from Turkey’s Supreme Election Council.

    In the first round of voting on May 14, the president also came out on top, defying the polls, but fell short of an outright majority, which triggered the runoff vote.

    Erdoğan declared victory in front of his residence in Istanbul, singing his campaign song before his speech. “I thank our nation, which gave us the responsibility of governing again for the next five years,” he said. 

    “We have opened the door of Turkey’s century without compromising our democracy, development and our objectives,” he added.

    Erdoğan also called on his supporters to take Istanbul back in the next local elections in 2024. His AK Party lost the city to the opposition in the 2019.  

    The triumphant president continued his campaign tactic of targeting LGBTQ+ people. “Can LGBT infiltrate AK Party or other members of the People’s Alliance [the broader coalition backing Erdoğan]? Family is sacred to us,” he said.

    Russia’s President Vladimir Putin and French leader Emmanuel Macron were among the first world leaders to congratulate Erdoğan on his victory. Both leaders emphasized working together on world affairs. The government of Qatar and Viktor Orbán, Hungary’s prime minister, also congratulated the re-elected president.  

    Erdoğan’s victory follows a campaign in which he accused his rival of being linked to terrorism and argued that the country faced chaos if the six-party opposition alliance came to power.

    He has ruled Turkey since 2003, first as prime minister and then as president, and the election has been widely seen as a defining moment for the country. 

    Erdoğan’s supporters say he has made the country stronger, but his critics argue that his authoritarian approach to power is fatally undermining Turkey’s democracy.

    Kılıçdaroğlu said it had been “the most unfair election process in years” in his own post-election speech.

    “All the resources of the state have been mobilized for one political party. They have been spread at the feet of one man,” he said. 

    The opposition candidate gave no indication that he was planning to resign, adding that the struggle would go on. 

    Erdogan taunted his rival, saying: “Bye, bye, bye Kemal.”

    By contrast with earlier elections in which the president and his Islamist-oriented AK party easily beat their secular rivals, Erdoğan headed into this May’s contest behind in the polls.

    His reelection campaign had to contend with economic problems such as painfully high inflation — currently 43 percent — and a weak currency, as well as the legacy of February’s devastating earthquake. At least 50,000 died in the disaster and the government was criticized for poor construction standards and its own slow response.

    But Erdoğan’s first round performance on May 14 put him five percentage points ahead of Kılıçdaroğlu and just a few hundred thousand votes short of an absolute majority.

    The opposition candidate then shifted to a more nationalist stance, promising to deport millions of Syrians and Afghans, but that move proved ultimately unsuccessful. Sinan Oğan, the nationalist candidate who won 5 percent in the first round then endorsed Erdoğan, not Kılıçdaroğlu.

    Political analysts say Erdoğan’s victory highlights the polarization in Turkish society, particularly divisions between Islamists and secularists. While much of Turkey’s coastline, the big cities and the largely Kurdish southeast voted for Kılıçdaroğlu, the heartlands strongly favored Erdoğan.

    Opposition supporters also argue that the election reflected Erdoğan’s grip on power, including his near-total influence on the country’s media, which is largely controlled by groups friendly toward the governing party.

    After Kılıçdaroğlu’s candidacy was backed by Turkey’s main pro-Kurdish party, Erdoğan accused his rival of being in league with Kurdish terrorists, showing a doctored video in the closing days of the campaign to make his case.

    This article has been updated to include reaction from Erdoğan.

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    Elçin Poyrazlar

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  • With Erdoğan back, Sweden presses Turkey again on NATO bid 

    With Erdoğan back, Sweden presses Turkey again on NATO bid 

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    LULEÅ, Sweden — Sweden has met all of its commitments to join NATO and expects to become part of the transatlantic military alliance by July, Tobias Billström, the country’s foreign minister, told POLITICO.

    Speaking on the sidelines of the EU-U.S. Trade and Technology Council summit, Billström said Stockholm had assuaged all of the concerns from Turkey, an existing NATO member which has held up Sweden’s application over concerns about its support for Kurdish groups which Ankara considers to be terrorist entities. Longtime leader Recep Tayyip Erdoğan secured a new term as Turkish president on Sunday.

    Sweden’s tweaks included updating its domestic terrorism legislation, which will come into effect on June 1, to include lengthy prison terms for individuals convicted of participating in extremist organizations in ways that promote such groups. That is a veiled reference to the Kurdistan Workers’ Party (PKK), which has a following in Sweden but is banned in Turkey.

    Billström said he now expected Sweden to join the alliance ahead of a NATO meeting in Vilnius on July 11.

    “We have delivered everything that we said that we were going to do,” Billström said. “There is a high expectation that we will be a member before Vilnius.”

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    Mark Scott

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  • Turkey’s Erdogan touts ‘special relationship’ with Putin, stands by his refusal to impose sanctions

    Turkey’s Erdogan touts ‘special relationship’ with Putin, stands by his refusal to impose sanctions

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    Russian President Vladimir Putin is expected to meet Turkey’s President Recep Tayyip Erdogan on Thursday.

    Anadolu Agency | Anadolu Agency | Getty Images

    Turkish President Recep Tayyip Erdogan touted his country’s “special relationship” with Russian leader Vladimir Putin, speaking to CNN during an interview broadcast Friday.

    “We are not at a point where we would impose sanctions on Russia like the West have done. We are not bound by the West’s sanctions,” Erdogan told the network. “We are a strong state and we have a positive relationship with Russia.”

    “Russia and Turkey need each other in every field possible,” Erdogan said.

    He added that the U.N. and Turkey-brokered Black Sea Grain Corridor Initiative, in which he played a key role helping to unlock crucial Ukrainian grain exports blocked by Russia’s invasion, “was possible because of our special relationship with President Putin.”

    “The West is not leading a very balanced approach. You need a balanced approach towards a country such as Russia, which would have been a much more fortunate approach,” he said.

    The powerful Turkish leader’s closeness to Putin, despite its membership in NATO, has made many Western leaders and diplomats nervous.

    The comments came ahead of Turkey’s runoff presidential election vote, the second round in a highly-charged and tense race being held on May 28 because neither Erdogan nor his rival Kemal Kilicdaroglu won more than 50% of the vote in the first round.

    Erdogan finished ahead by a few points in the initial vote, and is leaning into his image of a strong nationalist leader that pushes back against Western dominance, despite Turkey being a member of NATO. Kilicdaroglu, meanwhile, has pledged to strengthen Turkey’s ties with the West and NATO. Turkey is home to the alliance’s second-largest military after the United States, and houses 50 American tactical nuclear warheads.

    Erdogan has played a mediating role between Ukraine and Russia since the war began, sending aid and weapons to Ukraine and brokering prisoner swaps, but has also significantly expanded its trade ties with Russia.

    His decision not to abide by Western calls to sanction Russia has served Turkey’s economy well so far; its trade with Russia doubled to $68.19 billion in 2022 from $34.73 billion in 2021, according to the Turkish Statistical Institute. Russian tourists and expatriates, including billionaire oligarchs escaping sanctions, have poured into the country as their options for travel became severely limited.

    Earlier in 2023, Putin waived the cost of Russian gas exports to Turkey, a move broadly seen as an effort to help Erdogan’s election chances.

    Turkey's opposition is unlikely to gain ground on May 28, economist says

    Turkish imports from Russia also nearly doubled last year to $58.85 billion, pushing Russia ahead of China as Turkey’s top trading partner. Turkey is now the destination for 7% of Russian exports, up from 2% in 2021.

    Erdogan is also accused of stymying NATO’s expansion with his refusal to approve the membership of Sweden, which applied to join the bloc in the aftermath of Russia’s invasion of Ukraine.

    Approving a new country into the alliance requires unanimous approval by its existing members. Turkey accepted Finland’s membership in March after much negotiation, but is holding out against Sweden over Ankara’s conviction that Stockholm backs terrorist groups that have harmed Turkey. Whether Erdogan will relent on Sweden if he wins the May 28 election is an open question.

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