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Tag: Turkey

  • Sweden is in the final stretch to NATO membership. But Turkey could yet derail it

    Sweden is in the final stretch to NATO membership. But Turkey could yet derail it

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    Turkish President Tayyip Erdogan arrives for a NATO summit in Madrid, Spain June 29, 2022.

    Nacho Doce | Reuters

    NATO is convening a summit in Vilnius, Lithuania, on July 11 to approve new defense plans, and — its leaders hope — announce the full approval of a new member to the alliance, Sweden. 

    But more than a year after the Nordic country made its application to join the defense organization, Turkey — which has been a member since 1952 and boasts NATO’s second-largest military — stands in the way.

    Hungary, an EU and a NATO member, is the only other holdout, though its stance on the issue is expected to follow Turkey’s. Countries need unanimous approval from NATO’s existing 31 member states in order to join. 

    Turkey is leveraging its strength as a member of the alliance to extract concessions from other countries. It’s a bet that could pay off handsomely for Ankara — or it could further stress relations with the West, backfiring and hurting the country’s already fragile economy. 

    U.S. President Joe Biden has already told Turkish President Recep Tayyip Erdogan that Washington wants the objection to Sweden’s NATO bid dropped, while Erdogan is pushing the administration for a sale of F-16 fighter jets for the Turkish military. The jets could be something Turkey gains in exchange for a potential approval for Sweden, although Biden officials say the two demands are “totally unrelated.” 

    With much at stake for Turkey, Sweden, and the NATO alliance, whichever direction Turkey moves in will have significant consequences for them all.   

    The beef with Sweden

    Turkey’s objection stems from Sweden’s support for Kurdish groups that Ankara deems to be terrorists. Kurds, an ethnic minority in Turkey constituting some 20% of the country’s population, have a tumultuous history with the Turkish government, which classifies some Kurdish political groups to be a severe threat. Sweden has made efforts to adjust its policies to Turkey’s demands, but Erdogan says that he isn’t satisfied.

    Turkey’s position is also essentially a flex, some observers say, using its role in NATO to win concessions and remind the West that it is a partner whose demands must be taken seriously.

    “There’s still a chance that Turkey will allow Sweden to enter NATO in time for the July summit,” Ryan Bohl, a senior Middle East and North Africa analyst at Rane, told CNBC. “But there’s clearly a realistic chance that Erdogan will continue to play this thing out well past that deadline.”

    Finland and Sweden announced their intentions to apply for NATO membership in May of 2022, reversing a historic policy of nonalignment in the wake of Russia’s bloody invasion of Ukraine in February of that year.

    While official partners of the alliance since the 1990s, the idea that the Nordic states might actually join the group made Moscow bristle — NATO expansion is something it has previously cited to justify invading Ukraine. 

    This move is part of a broader dance Ankara is performing between Russia and NATO, using its unique position to leverage advantages.

    Guney Yildiz

    Researcher on Turkey and Syria

    Erdogan meanwhile has a friendly relationship with Russian leader Vladimir Putin, operating as a mediator of sorts between Moscow and Kyiv and refusing to adopt Western sanctions against Russia.

    Erdogan eventually approved Finland’s accession to NATO in March, which added a whopping 830 miles of NATO territory along Russia’s western land border. But he says that Sweden has yet to make the progress that Ankara is looking for, accusing it of allowing Kurdish protests in Stockholm that support the PKK, or Kurdish Workers’ Party, which both states designate as a terrorist group.

    Many Kurdish activists living in Sweden say they do not support terrorism but oppose Erdogan and his policies, and now fear Stockholm may sell them out for NATO membership. Turkey’s demands of Stockholm controversially include extraditing certain Kurdish activists to Turkey, some of whom are Swedish citizens and have been protected from extradition under Swedish law.

    “President Erdogan said Sweden has taken steps in the right direction by making changes in anti-terrorism legislation,” a statement from the Turkish presidency said on July 5. “But supporters of the PKK (Kurdish Workers’ Party) … terrorist organization continue to freely organize demonstrations praising terrorism, which nullifies the steps taken,” it added.

    Turkey is using this opportunity to send an important message about its national security interests, explained Kamal Alam, a non-resident senior fellow at the Atlantic Council.

    A participant jumps onto a banner showing a portrait of Turkish President Recep Tayyip Erdogan during a demonstration organised by The Kurdish Democratic Society Center against the Turkish President and Sweden’s NATO bid in Stockholm on January 21, 2023.

    Christine Olsson | Afp | Getty Images

    “A lot of Turkey’s stance is a direct message to Europe that whilst this may look like posturing, Ankara has not gotten over the EU support to the YPG/PYD in north East Syria which also translates into indirect support to the PKK,” he said, referencing Kurdish militant and political groups in Syria that have links to the PKK, but who were vital in the fight against ISIS there. 

    “This stance is a direct result of the fallout of the war in Syria when Turkey drifted apart from the EU on many fronts,” Alam said. “Whilst the headlines might be of tactical blocking of joining NATO, the overall strategic messaging is don’t mess with Turkey’s national security.” 

    He also noted the decades-long refusal by the EU to let Turkey into the bloc, adding: “Turkey is saying we are the second largest army in NATO and after all the blackmailing and stalled EU accession, we will now reverse the process of who comes in or out.”

    ‘Playing with fire’

    While the bet could pay off for Turkey, it also threatens to rupture already tense relations with Western allies and even backfire economically. 

    “Turkey’s blockade on Sweden’s NATO progression isn’t a clear-cut ticket to economic fallout, but it is playing with fire,” said Guney Yildiz, a researcher focused on Turkey and Syria.  

    “This move is part of a broader dance Ankara is performing between Russia and NATO, using its unique position to leverage advantages,” he told CNBC. 

    “With subtle alignment with the West on other fronts like Russian sanctions, Turkey feels it can take the heat over Sweden for a while. But it’s a ticking clock,” Yildiz warned. “The window to exploit Sweden’s membership for gain is closing. When it does, Turkey will pay a price, especially as the cost of managing its Russian relations escalates, inevitably tipping the scale towards more compromise and less gain.”

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

    Anadolu Agency | Anadolu Agency | Getty Images

    Turkey’s economy has been on a rollercoaster the past several years, with inflation veering between 40% and 80% in the last year and a currency that’s lost some 80% of its value against the dollar in the last five years. 

    In such a precarious setting, Turkey can’t afford to take any more risks, says Timothy Ash, senior emerging markets strategist at BlueBay Asset Management.  

    “Either Turkey approves Sweden’s NATO membership at Vilnius or it risks a major break in relations with the West and at a time when Turkey’s macro is on the edge. It’s decision time,” Ash wrote in an email note.  

    “It will go to the last minute, the 11.5th hour,” he said. “But if it does not happen there will be a major crisis in Turkey-NATO relations — at a time when the Turkish macro looks particularly vulnerable.”

    NATO summit begins in Vilnius this week

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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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  • Greece’s conservatives win election majority to secure second term

    Greece’s conservatives win election majority to secure second term

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    ATHENS — Greece’s conservatives won big on Sunday’s parliamentary elections, securing an outright majority. Far-right parties also made gains, while the left struggled, giving Greece’s parliament its most rightward slant since the restoration of democracy in 1974.

    The New Democracy party of Kyriakos Mitsotakis managed to widen its double-digit lead over its main rival, the left-wing Syriza party, and secured 158 seats in the country’s 300-seat parliament, under the new electoral system which awards the winning party 50 bonus seats.

    “Our goals are high and must be high in a second term that can transform Greece with dynamic growth rates that will raise wages and reduce inequalities,” Mitsotakis said in his first message from his party’s headquarters.

    “People gave us a safe majority. The major reforms will therefore proceed with speed as this is the choice of the Greek people and I will honor it in full.”

    Sunday’s elections were the second held in the country in five weeks, after New Democracy came first on May 21 but fell short of an outright majority.

    New Democracy got 40.5 percent of the vote on Sunday, while Syriza was lagging with only 17.8 percent and 47 seats, according to official results. The socialist PASOK party had 11.9 percent and 32 seats, and the communists KKE had 7.6 percent and 20 seats. The participation rate was at 52.7 percent, the Interior Ministry reported.

    Far-right gains

    Four fringe parties — mainly from the far-right — also managed to top the 3 percent threshold to make it into parliament.

    Last-minute contender the Spartans party — which recently added a jailed MP from the neo-Nazi Golden Dawn party, Ilias Kasidiaris, to its list of backers — saw its support rise to 4.7 percent within days and secured 13 seats in parliament. The conservative government had passed an amendment aiming to ban him from parliament.

    New Democracy’s dominance is another sign of how Southern European countries are moving to the right, after a decades-long financial crisis in the eurozone that led the rise of left-wing parties.

    Ultra-nationalist, pro-Russian Greek Solution got 4.5 percent and 12 seats, while anti-abortion, religious party Niki got 3.7 percent and 10 MPs. To the left, Course of Freedom, led by former member of Syriza Zoi Konstantopoulou, got 3.1 percent and 8 seats.

    The far right has performed well in recent elections in Finland and Spain, and is polling particularly well in Germany. Its savvier elements — like Italian Prime Minister Giorgia Meloni — are beginning to assert themselves at the European level.

    But the main story of Sunday’s election was New Democracy’s dominance, which is another sign of how Southern European countries are moving to the right, after a decades-long financial crisis in the eurozone that led to the rise of left-wing parties.

    “This is a clear victory for Kyriakos Mitsotakis, for [New Democracy] and for the EPP,” said Thanasis Bakolas, the center-right European People’s Party secretary general.

    “In politics, what you stand for matters. This is what we see in Greece, also what we saw earlier this year in national elections in Finland and regional elections in Spain. And this is precisely what we will see again in upcoming parliamentary elections in Spain in July and Poland in October. EPP parties are dominating the centre, while the centre-left is barricaded to its fringes.”

    The election outcome is considered market-friendly and puts Greece firmly on track to regain an investment-grade rating towards the end of the year, analysts say.

    Mitsotakis has promised that his first two bills will include a further reform of the public administration and the economy. He has also promised overhauls in the judicial, health and education sectors and expressed his intention to create a family ministry to help address Greece’s shrinking, and ageing, population.

    “The resounding victory will provide ND with a comfortable majority, putting Mitsotakis in a good position to push through investor-friendly reforms,” said Wolfango Piccoli, co-founder of risk analysis company Teneo.

    But the fringe parties will have a platform to broadcast their populist message and attempt to disrupt the government’s agenda, exploiting politically toxic issues like migration, the relationship with Turkey, abortion, the role of religion in education, Russia sanctions, he added.

    “It remains to be seen how Mitsotakis — often perceived to be more vulnerable to attacks from the far-right given his distinct liberal, center-right orientation — will manage to deal with the possible challenge posed by far-right opposition lawmakers.”

    Main opposition Syriza performed very poorly, raising questions about whether its status as the main opposition could now be challenged by Pasok party. It also means that conservatives could govern without particular scrutiny.

    “Although the danger of collapse was avoided and Syriza remains the official opposition, we have suffered a serious electoral defeat,” the party’s leader Alexis Tsipras said, setting the European elections next year as a goal for the party’s reimposition and adding that he will put his leadership to the judgment of the party members.

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    Nektaria Stamouli

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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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  • How US-made sniper ammunition ends up in Russian rifles

    How US-made sniper ammunition ends up in Russian rifles

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    Voiced by artificial intelligence.

    As gear reviews go, it was a glowing one: In a 60-second video clip posted on Telegram, a masked sniper sporting the death’s-head insignia of the Wagner mercenary army sings the praises of the Russian-made Orsis T-5000 rifle.

    “The equipment comes very well recommended,” the soldier, pictured in the charred interior of a building, tells a war reporter from the Zvezda TV channel run by the Russian Ministry of Defense.

    Pulling out the clip of the weapon at his side, he continues: “It uses Western .338 caliber ammunition. It works very well. It can penetrate light cover if the enemy is behind it. And, in the open, it can strike the enemy at a range of up to 1,500 meters.”

    The Orsis T-5000 is made by a company based in Moscow called Promtekhnologiya that has been sanctioned by the United States.

    And the “Western” ammunition?

    Filings obtained by POLITICO indicate that Promtekhnologiya and another Russian firm called Tetis have acquired hundreds of thousands of rounds made by Hornady, a U.S. company that trademarks its wares as “Accurate. Deadly. Dependable.” Hornady, founded in 1949, sums up its philosophy with the phrase: “Ten bullets through one hole.”

    The findings add to a growing body of evidence that supplies of lethal and nonlethal military equipment are still reaching Russia despite the West’s imposition of unprecedented sanctions in response to President Vladimir Putin’s invasion of Ukraine last year. The exigencies of war have exposed Russia’s lack of capacity to manufacture high-end sniper rounds, say defense experts, and that is fueling a flourishing black market for Western ammunition.

    Information on the procurement of such gear is hiding in plain sight: Details of deals — importers, suppliers and product descriptions — can be found online by anyone with access to the Russian internet and a grasp of international customs classification codes.

    Anything but bulletproof

    In a “declaration of conformity” filed with a Russian government registry and dated August 12, 2022, Promtekhnologiya stated that it planned to source a batch of 102,200 Hornady lead bullets for the assembly of “hunting cartridges” used in “civilian weapons with a rifled barrel.” The specifications — .338 Lapua Magnum bullets weighing 285 grains — match those of a product in the Hornady catalog.

    A second declaration bearing the same date is for a batch of “uncapped cartridge cases for assembling civilian firearms cartridges” made by Hornady with the same .338 Lapua Magnum specification.

    The description is misleading: The .338 Lapua Magnum isn’t a “hunting cartridge;” it’s a high-powered, long-range projectile that was developed by Western militaries in the 1980s and used by their snipers in Iraq and Afghanistan.

    Reached by POLITICO, Steve Hornady, CEO of the family company based in Grand Island, Nebraska, denied selling ammunition to Russia in wartime.

    “The instant Russia invaded Ukraine, we were done,” Hornady said in a brief telephone call.

    Hornady declined at first to elaborate and, when asked to review the evidence, requested that it be sent by fax or courier as he did not use email. He eventually responded after POLITICO sent written requests for comment with supporting documentation by courier.

    “We categorically are NOT exporting anything to Russia and have not had an export permit for Russia since 2014,” he replied. “We do not support any sale of our product to any Russian son-of-a-bitch and if we can find out how they acquire, if in fact they do, we will take all steps available to stop it.” 

    Hornady added that he had contacted the U.S. authorities following POLITICO’s inquiry. He pointed out that current U.S. law required that customers must obtain permission from the Department of Commerce to re-export articles made in the United States. “To the best of our knowledge, none of our customers violate that law,” he said.

    Wagner chief Yevgeny Prigozhin, asked which ammunition his troops used, told POLITICO they had “a huge amount of NATO-issue ammunition left over from the Ukrainian army.” In a sarcastic voice message sent to a POLITICO journalist, the Russian warlord also asked for help procuring F-35 combat jets and U.S.-made sniper rifles, machine guns and grenade launchers.

    Promtekhnologiya denied filing any customs declarations to import ammunition; said it had no relationship with Hornady; and that it had the capacity to manufacture its own ammunition. The company also said in emailed comments to POLITICO that the Orsis rifle and the ammunition the company makes are intended for “hunting and sporting” purposes and are freely available on the civilian market.

    Both Promtekhnologiya and Alexander Zinovyev, listed as the company’s general director in the filings, have been sanctioned by Ukraine, which cites evidence that its Orsis rifles “have been used in Russian military operations in Eastern Ukraine.”

    Promtekhnologiya is also in Washington’s sights: “We take any allegation of sanctions violation or evasion seriously and are committed to ensuring that sanctions are fully enforced,” a spokesperson for the National Security Council said in response to a request for comment from POLITICO.

    “We have taken steps to hold Russia accountable for its war in Ukraine and have imposed an unprecedented sanctions regime to disrupt Russia’s ability to access funds and weapons that fuel Putin’s war machine. That includes sanctioning companies like Promtekhnologiya.”

    Criminal, or wilful, violations of U.S. sanctions can trigger penalties of up to $1 million per violation, as well as up to 20 years’ imprisonment for individuals. Civil penalties can run to the higher of either twice the value of the underlying transaction or around $350,000 per violation.

    Describing military-grade ammunition as for hunting or sporting use, as the filings do, amounts to a thinly veiled ruse to evade targeted “smart” sanctions aimed at starving the Russian military of the means to fight the war, said defense analyst Maria Shagina.

    “Strictly speaking, smart sanctions are not supposed to target anything civilian to avoid humanitarian collateral damage,” said Shagina, a research fellow at the U.K.-based International Institute for Strategic Studies. “But the targets in authoritarian countries will really exploit this.”

    Steve Hornady, CEO of the family company based in Grand Island, Nebraska, denied selling ammunition to Russia in wartime | Leon Neal/Getty Images

    Russia reloaded

    Another Russian buyer of Hornady ammunition is a company called Tetis, which has disclosed two shipments since Russia’s full-scale invasion of Ukraine began on February 24, 2022. The most recent was in April for more than 300,000 “units” comprising a wide range of products that checked out with the Hornady catalog.

    The main owners of Tetis, Alexander Levandovsky and Sergey Senchenko — who each own stakes of 41.1 percent — have links to the Russian military.

    Both were previously listed as shareholders in another company called Kampo, which according to company filings holds licenses to make weapons and military equipment and has done business with the Ministry of Defense and the Special Flight Detachment that operates Putin’s presidential plane.

    Although Tetis doesn’t offer Hornady ammo on its website, it does advertise itself as an international distributor for RCBS, a U.S. maker of reloading equipment. This is used to assemble cases, primer, propellants and projectiles into cartridges that can then be fired — as seen in this video posted by a Russian gun enthusiast.

    A database check revealed that the most recent declaration of conformity filed by Tetis for RCBS, for electronic weighing scales, predated Russia’s full-scale invasion on February 24 of last year by just over a month.

    Russia’s trade bureaucracy allows local firms to vouch for the goods they are importing by filing declarations of conformity, such as those that mention the Hornady products. This means that the supplier listed on the form may not be aware of specific shipments that could have been handled by an intermediary.

    Tetis did not respond to an emailed request for comment. 

    Matt Rice, a spokesman for RCBS owner Vista Outdoor, said Tetis was no longer an international distributor for RCBS. “Following Russia’s invasion of Ukraine, our business made the decision to end all sales of goods with the country,” Rice said in an email, adding that RCBS would remove the listing for Tetis from its website.

    Doing the rounds

    Hornady ammunition or its components are freely available in Russia, along with other high-end foreign military gear.

    Take the “Sniper Shop” on Telegram, an encrypted messaging app that is popular in Russia: It features a current offer for a full range of Hornady products, with the seller inviting buyers to visit a showroom in Sokolniki, a Moscow district, and offering delivery throughout Russia by courier or post. Contacted by POLITICO, the poster confirmed the Hornady ammo was in stock but declined to comment further on how it was sourced.

    Then there is “Anton,” who advertises products from Hornady and RCBS on his profile. He also touts gear from Nightforce, maker of thermal optical sights; Lapua, which helped design the eponymous .338 ammo; MDT, a maker of chassis systems, magazines and accessories for rifles; and precision gunsmith AREA 419. All are American with the exception of Lapua, which is based in Finland and owned by a Norwegian company called Nammo.

    Western high-end foreign military gear seems to be freely available in Russia | Leon Neal/Getty Images

    “Anton” posted an offer for Hornady cartridges last October 24. Contacted via Telegram to ask whether he was still stocking Hornady, he replied: “We don’t do ammunition.”

    POLITICO has, in the course of its research, also found declarations from several other Russian companies for ammunition made in Germany, Finland and Turkey.

    The thriving black market reflects a structural deficit in Russia’s war economy. Its military-industrial complex can produce good small arms, like the Orsis rifle, but lacks the capacity to churn out the amount of ammunition needed by an army fighting a war across a front stretching hundreds of miles.

    “Despite the quality of the rifles produced, a successful hit directly depends on the components used in the cartridges, and they, unfortunately, are imported,” a correspondent lamented in a post on a Russian military news site a few months into the war. Gunpowder produced in Russia lacks stability, the correspondent added, saying this is “unacceptable in the framework of high-precision shooting.”

    The continuing access to specialized rifle cartridges made in the West, such as the .338 Lapua Magnum, by a sanctioned Russian small arms manufacturer like Orsis maker Promtekhnologiya is “egregious,” said Gary Somerville, a research fellow at the Royal United Services Institute (RUSI), a British defense think tank.

    “At present, there is only one manufacturer of this cartridge in Russia,” he added. “Preventing the shipment of these types of ammunition from Western countries to Russia is an easy win for those seeking to constrain Russia’s ability to wage war in Ukraine.”

    Balkan route

    It’s not just ammunition from the U.S. that is reaching the battlefront around Bakhmut in eastern Ukraine, recently captured by Prigozhin’s mercenaries after a bloody, months-long battle.

    There also appear to be cartridges from the European Union, which has imposed no fewer than 10 rounds of sanctions against Russia in a so-far inconclusive attempt to starve Putin’s war machine of the means to fight on.

    Promtekhnologiya has filed four declarations since October covering shipments of 460,000 units described as “Orsis hunting cartridges” — most are of the .338 Lapua Magnum type. These identify a Slovenian company called Valerian as the supplier.

    The first of the filings, dated October 13, 2022, includes an air waybill number whose first three digits — 262 — indicate that the shipper was Ural Airlines, a Russian carrier. It was not immediately possible to trace the route of the flight, however.

    Valerian was founded on the eve of Russia’s invasion of Ukraine with paid-in capital of €7,500 by Gašper Heybal, who previously worked for U.S. military outfitter Voodoo Tactical. On its home page, Valerian says: “Our goal is to equip you for your mission, whatever it might be, and wherever you are going.”

    In online posts over the past decade  — including on a Facebook Group called EU Guns with a declared mission of “easier transfer of weapons between European gun owners” — Heybal has done little to dispel the impression that he is an active small arms dealer.

    Bakhmut was recently captured by Prigozhin’s mercenaries, the Wagner mercenary group| Olga Maltseva/AFP via Getty Images

    The telephone number Heybal shared publicly in those posts is the same as the one for Valerian, which is registered at an address in a village around 40 minutes’ drive southeast of the Slovenian capital Ljubljana.

    Reached at that number, Heybal denied that Valerian had shipped ammunition to Russia: “We don’t sell any … firearms or ammunition, and also there is an embargo on Russia,” said Heybal.

    In a follow-up email on the declarations of conformity, Heybal said: “Firstly, we must stress that we do not know, nor do we understand how the name of our company, Valerian d.o.o., appears on the document.” 

    “Secondly, Valerian is not listed there as a supplier but as the producer, and this is not possible, as we do not produce ammunition. That being said, it still makes absolutely no sense to us as to how our name could appear on it. We are glad you brought this to our attention so we can figure out what is going on.”

    A Slovenian diplomat said that, while Valerian had never applied for authorization to export weapons or ammunition to Russia, it had shipped “individual parts” to Kyrgyzstan. 

    The Central Asian state is one of the countries that the EU has in mind as it discusses an 11th round of measures targeting third countries that are suspected of helping Russia evade sanctions.

    “The competent services in the Republic of Slovenia have already initiated the appropriate procedures to investigate the facts concerning the company,” the diplomat told POLITICO, adding that they would verify the possible diversion of goods to the Russian Federation. “Slovenia is firmly committed to supporting Ukraine, we have been supportive of all sanctions packages and especially this anti-circumvention one.”

    An official at the European Commission deflected a request for comment, saying the bloc’s member countries were responsible for implementing sanctions. “As this seems like a very specific case, these allegations need to be investigated further by the competent authorities,” the official said.

    Sergey Panov reported from Spain, Sarah Anne Aarup from Brussels and Douglas Busvine from Berlin. Additional reporting by Steven Overly in Washington.

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    Sergey Panov, Sarah Anne Aarup and Douglas Busvine

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  • Man City edge out Inter to win Champions League for first time

    Man City edge out Inter to win Champions League for first time

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    Manchester City win the first Champions League in their history and secure the treble by beating Inter Milan 1-0.

    Manchester City have won the Champions League title for the first time by beating Inter Milan 1-0 in Istanbul’s Ataturk Olympic Stadium, making them the second English team to complete the treble.

    Spaniard Rodri struck in the 68th minute on Saturday to see the Premier League champions and FA Cup winners complete a treble of trophies this season.

    While it is the first time City have won European football’s biggest club competition, it is the third time Pep Guardiola has lifted the trophy as a coach.

    City triumphed despite losing inspirational midfielder Kevin De Bruyne to an injury in the first half.

    Erling Haaland, scorer of 52 goals this season, went a fifth straight match without finding the net but City still had enough to edge out opponents who had never been expected to get this far in the first place.

    The victory means City finally achieved their ambition of reaching the summit of European football, 15 years after Abu Dhabi’s ruling family transformed it into one of the richest teams in the world.

    Owner Sheikh Mansour bin Zayed Al Nahyan was in attendance to see City’s crowning moment. It was only the second time he has watched his team in person in 15 years.

    Rodri scores the only goal of the match for City [Molly Darlington/Reuters]

    City’s winner came when Rodri collected Bernardo Silva’s cutback and fired through a crowded penalty box.

    The relief was unmistakable as he raced towards City’s fans and slid on his knees in celebration.

    Romelu Lukaku had the chance to score a late equaliser but headed straight at Ederson from about four metres out.

    Inter almost evened the score within minutes of that goal when Federico Dimarco hit the bar from close range.

    He then looked like turning in the rebound but saw his shot come back off teammate Lukaku.

    It completed a treble for City, making them only the second English club to complete it after Manchester United also won the Premier League, FA Cup and Champions League in 1999.

    “Unbelievable night, I’m so happy. Difficult to put into words. I think today we made history,” City captain Ilkat Gundogan told BT Sport.

    “It was clear it was going to be difficult for both teams. We weren’t our best in the first half. It was a 50-50 game. One goal made the difference as it often does in finals. We feel very fortunate it was for us.

    “We knew everyone was talking about the treble. The pressure was there but I think this team is built to handle pressure in the best possible way.”

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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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  • After Turkey election win, what problems does Erdogan face next?

    After Turkey election win, what problems does Erdogan face next?

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    Istanbul, Turkey – Following his third presidential victory, Recep Tayyip Erdogan will sit down at his desk to tackle a host of immediate issues facing Turkey.

    Foremost in the president’s in-tray will be the economy and how to tackle the country’s ongoing financial crises.

    Erdogan successfully took the focus away from a cost-of-living crisis during the election campaign – making significant hikes to pensions and salaries, providing discounts to household energy bills, all while moving the debate to issues such as security and family values.

    But the Turkish economy is in bad shape, and in his victory speech on Sunday night, Erdogan highlighted inflation as the primary problem facing the country.

    “Resolving the problems caused by the price increases and by inflation is the most urgent topic of the coming days,” he told supporters outside the presidential palace in Ankara.

    “Solving them is not difficult for us. Weren’t we the ones who proved this during my time as prime minister?” Erdogan added, referring to his 11-year spell as premier before he became president in 2014.

    Inflation peaked at 85 percent late last year, dropping to 44 percent last month, although independent economists dispute the official figures and say it is at 105 percent.

    Interest rate policy

    The value of Turkey’s currency, which the government had protected through selling foreign currency reserves, is dropping.

    The lira hit a record low on Monday morning of 20.06 to the United States dollar, having lost almost 80 percent of its value over the last five years.

    Many economists blame this largely on Erdogan’s unorthodox policy of lowering interest rates, which have been nearly halved since the end of 2021, as a means of fighting inflation.

    Timothy Ash, a Turkey expert at London’s BlueBay Asset Management, said the currency’s current level was “just not sustainable”.

    He added that the central bank “has been blowing through reserves to keep the lira relatively stable in the run-up to the election to ensure an Erdogan win … With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy”.

    But Emre Peker, Europe director at the Eurasia Group, said Erdogan is likely to see Sunday’s victory as an endorsement of his economic policies, which the president argues will make Turkey’s economy stronger in the long run.

    “Despite the highest inflation we’ve seen in years, despite significant pressure on the lira, despite high unemployment and people’s concerns, [in] winning the election he will feel quite vindicated,” Peker said.

    Foreign inflow

    Peker added that Erdogan was motivated by a “desire to wean Turkey off its overall economic dependency on Western partners”.

    Turkey has been helped in recent months by money from Russia and Gulf countries. Qatar, Saudi Arabia and the United Arab Emirates have deposited billions of dollars with the Turkish central bank or set up multibillion-dollar investment funds.

    Russia has deferred payments for natural gas as well as providing billions towards Turkey’s first nuclear power station.

    “The economy has relied on financing from Russia, investments from the Gulf and that’s an area where Erdogan’s going to continue to focus,” Peker said.

    He added that the next three to four months would be relatively calm for the economy as summer tourism revenues flow, a weakening lira makes exports more competitive and there is low domestic energy demand.

    But by the autumn, Erdogan may face pressure to switch his economic policies.

    “The current economic dynamics won’t be able to sustain Turkey’s needs,” Peker said. “Turkey will need more foreign inflows to manage its external payments and, given the negative interest rates, that’s hard to sustain.”

    Western relations

    Another subject requiring the president’s urgent attention as he starts his five-year term will be Turkey’s relations with its Western partners, in particular the issue of Sweden joining NATO.

    Turkey and Hungary are the only NATO members holding up Stockholm’s bid to join the defence alliance, made in the wake of Russia’s invasion of Ukraine in February last year.

    Sweden and the US have said they expect the membership issue to be resolved by the time NATO leaders meet in Lithuania in July.

    Less than two weeks ago, Erdogan reaffirmed his opposition to Sweden joining. “We’re not ready for Sweden right now,” he said, citing Ankara’s concerns over Stockholm’s stance on what Turkey has labeled “terrorist” groups.

    “If Erdogan continues to stall sign-off, I expect a major crisis in relations with the West,” said Ash, although he added that he anticipates a compromise on Sweden’s accession.

    Erdogan “extracted whatever political capital he could from this pre-election, now he has won there is only downside by delaying the inevitable. So I expect Sweden to get NATO membership at the NATO summit,” Ash said.

    Disputes with the West are also likely over human rights.

    In his victory speech, Erdogan showed no sign of compromising over those considered “terrorists” by his government, and said he would not release Selahattin Demirtas, a leading Kurdish politician imprisoned since 2016.

    The European Court of Human Rights ruled in 2020 that Turkey must free Demirtas, saying his incarceration was for political reasons, but the Turkish government alleges that Demirtas has ties to the Kurdistan Workers’ Party (PKK), which has fought a war against the Turkish state since 1984.

    The PKK is considered a “terrorist” group in Turkey, the European Union and the US.

    On the domestic front, Erdogan faces the huge task of rebuilding the southern provinces hit by earthquakes in February that killed more than 50,000.

    The cost of the disaster has been put at more than $100bn by the United Nations Development Programme. Erdogan, who was backed by most of the region in the elections, has pledged to build 319,000 homes within a year.

    Given a significant showing by nationalist voters in the elections and the widely held desire for the repatriation of Syrians to their home country, Erdogan will also be under pressure to show signs of returning refugees.

    “It is our duty to fulfill our citizens’ expectations about this issue through ways and methods that befit our country and nation,” he said on Sunday night.

    Turkey’s migration agency has said some 554,000 Syrians had been returned and Erdogan said another million would go to Syria within a year as new housing is built.

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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?

    Many analysts expect that Erdogan’s opposition to Sweden joining the alliance was largely a strategy to gain pre-election clout and that his stance will change following his victory. Turkey takes issue with Sweden over what it says is the country’s support of Kurdish groups that Ankara considers to be terrorists.

    For Timothy Ash, an emerging markets strategist and Turkey expert at BlueBay Asset Management, a continued pushback against NATO goes against Turkey’s best interests.

    “If Erdogan continues to stall sign off (on Swedish NATO membership), I expect a major crisis in relations with the West,” he said Monday.

    “Because of pressure on the lira I expect Erdogan to compromise on Sweden’s NATO bid,” Ash said, referring to the Turkish currency that’s lost some 80% of its value against the dollar in the last five years, largely due to unorthodox monetary policies directed by Erdogan.

    “He extracted whatever political capital he could from this (Sweden pushback) pre-election, now he has won there is only downside by delaying the inevitable,” he added. “So I expect Sweden to get NATO membership at the NATO summit next month.”

    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 warheads, hosts 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

    Previously, Erdogan’s top rival had been running on a platform of reclaiming economic stability, democratic values and better relations with Europe and NATO.

    Kilicdaroglu’s new strategy appeared to be in response to the fact that a third party hardline nationalist candidate, Sinan Ogan, won just over 5% of the vote on May 14, essentially making him a kingmaker. Whoever Ogan endorsed would likely gain a potentially decisive portion of his voters – and despite Kilicdaroglu cranking up the nationalist and anti-refugee rhetoric, Ogan ultimately endorsed Erdogan.

    “Kilicdaroglu has adopted a harder line on immigration and security ahead of the run-off … is unlikely to be enough,” Kinnear said.

    Erdogan’s supporters, meanwhile, circulated numerous fake posters and videos aimed to look like Kilicdaroglu’s party, the CHP, supported Kurdish militant groups that Ankara classifies as terrorists. 

    German news outlet DW reported that the posters were fake, citing Turkish fact-checking organization Teyit.org.

    And in a televised interview on Tuesday, Erdogan admitted to screening doctored footage during his campaign rallies of Kilicdaroglu that falsely portrayed the latter convening with Kurdish militants.

    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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  • Japan’s Koji Yakusho and Turkey’s Merve Dizdar win best actor and actress awards at Cannes

    Japan’s Koji Yakusho and Turkey’s Merve Dizdar win best actor and actress awards at Cannes

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    Turkish actress Merve Dizdar and Japan’s Koji Yakusho won the best actress and actor awards on Saturday at the 76th edition of the Cannes Film Festival.

    Turkey’s Merve Dizdar won best actress at the Cannes Film Festival on Saturday for “About Dry Grasses”, the latest from festival favorite Nuri Bilge Ceylan.

    She said she played “someone who is fighting for her life and she has overcome a lot of difficulties.”

    “Under normal circumstances, I would have to work hard on this character in order to understand her but I live in a part of the country which enabled me to fully understand who she is,” she said.

    “I understand what it is, being a woman in that area.”

    The film focuses on a dejected schoolteacher frustrated with his life in a remote Anatolian village.

    Shot in Ceylan’s visually arresting style, it looks at teacher-pupil relations and the roots of political engagement.

    Ceylan previously won the Palme d’Or for “Winter Sleep”, among multiple awards he has received over the years at the Cannes Film Festival.

    Japan’s Koji Yakusho won best actor at Cannes for “Perfect Days” by German director Wim Wenders, a touching tale about a Tokyo toilet cleaner.

    “I want to specifically thank Wim Wenders… who truly created a magnificent character,” he said as he received the award.

    The festival, which closed on Saturday evening, sometimes felt like a dream retirement home populated by aging male icons.

    There was a glitzy out-of-competition premiere for the new Indiana Jones movie, with an 80-year-old Harrison Ford getting weepy when he received an honorary Palme d’Or.

    Martin Scorsese, also 80, premiered his much-anticipated Native American epic “Killers of the Flower Moon” with Robert De Niro, 79.

    European auteurs Marco Bellocchio, 83, Wim Wenders, 77, and Victor Erice, 82, all brought new films.

    The oldest of all, 86-year-old Ken Loach, showed he still had fighting spirit with the final entry in the competition on Friday, “The Old Oak”, a moving homage to working-class solidarity.

    Loach has had no fewer than 15 films in competition at the Cannes Film Festival, and a win on Saturday would give him a record-breaking third Palme d’Or.

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