Streetwise Professor

December 22, 2021

Levitating the Lira–For How Long? Or, Erdo Promises the Impossible (Trinity)

Filed under: Economics,Turkey — cpirrong @ 7:01 pm

The Turkish lira is now about 12, a big recovery from its nadir on Monday. I expressed skepticism that Erdoğan’s announced policy of guaranteeing some Turkish bank deposits against an adverse move in the TRY was the cause. As we’ll see in a moment there is something to that. But even if the policy announcement caused all or some of the rebound, my skepticism about the viability of this mechanism remains.

As to the logic behind the policy. In essence, there was a run on the lira, and one way of running was to sell lira on deposit, and buy dollars. A typical bank run is to sell deposits for currency. One reason bank runs are far less frequent today in places like the US is deposit insurance, which is basically a mechanism to ensure that a dollar on deposit will always be worth a dollar of currency. That short-circuits the run dynamics, in which fear that a dollar of deposits will be worth less than a dollar of currency, which induces people to race to convert deposits into currency, which can cause banks to fail . . . leading to deposits being worth less than the equivalent amount of currency.

What Turkey has announced–and note, it has not announced the details so this isn’t really a plan but a sketch of a plan–is equivalent to a form of deposit insurance. Except that here the government is promising the TRY value of deposits will be worth at least a fixed amount of USD or Euros. But the idea is the same. If people are convinced that their deposits will remain pegged to the dollar, they have less incentive to run.

There is a key word in the prior sentence: “convinced.” It might work if people believe it will work. It won’t work if people don’t. So how can they have confidence? This confidence is necessary, but not sufficient, for success.

The confidence depends on the reliability and solvency of the guarantor. It’s not quite clear who that is in this situation. Is it the banks? The government? The former would be ludicrous, so let’s go with the latter.

So how is the government going to fund the guarantee? It’s likely hoping that the mere fact that people believe it can and it will will mean that the government is never on the hook for anything.

But that’s not realistic. The value of the TRY will fluctuate for the same reasons that currencies always fluctuate. Macro shocks. Balance of payment issues. Capital flows. Whatever. The Turkish government is short a put on the currency (that’s essentially what the guarantee is–a put on the TRY). Sometimes these factors are going to push the TRY down, obligating the government to make good on its promise.

So how is it going to pay for that? And note that it will have to pay a good fraction of the time. Roughly 50 percent of the time if the floor is set at the current exchange rate.

Print lira? LOL. So the lira declines, and the government prints more lira to pay off on its short put. Which will depress the lira further. Requiring more printing, etc. etc. etc.

Short put=short gamma. Short gamma can create an unstable positive feedback mechanism, and positive feedback mechanisms in economics very often have extremely negative consequences. Lira declines feed further declines. And again–as with any currency, lira declines are always a major risk. This is especially true with a country like Turkey. And resorting to this mechanism would likely destroy the trust that it depends on.

OK. The printing option seems pretty dumb–though don’t put it past Erdo! So, to meet its obligation to top up lira-denominated accounts to compensate for a decline in the TRY, instead of printing lira Turkey could sell dollars and Euros for lira which it then gives to depositors. At least this would potentially create a beneficial (negative/stabilizing) feedback mechanism, with the $ and € sales tending to increase the value of the lira.

But where is Turkey going to get the dollars and euros? That’s what I meant the other day when I said don’t trust a madman whose mouth writes checks his wallet can’t cash.

This second mechanism can be viewed another way: as a commitment device. Specifically, a device committing Turkey to defend the lira. Effectively, a way of committing to a peg: it has to buy lira/sell $ or € when the lira declines. And if Erdo’s other promise–not to raise interest rates–is believed, committing to a peg and foregoing the option to raise interest rates to defend the currency.

And if this is the real plan, it faces all the risks that pegging inevitably entail. Pegs are always at risk to speculative attack. Turkey is particularly so, given its paucity of foreign exchange reserves and its bizarre government policies. No doubt George Soros’ interest has been piqued.

This is why I am skeptical. Skeptical as to the announcement of this sketch of a plan leading to a 33 percent rally–FX traders no doubt have figured out what I just laid out. Skeptical as to the feasibility and stability of this mechanism, even if it did levitate the lira.

And as I alluded to at the outset, it may well be the case that the plan didn’t raise the lira on Monday and keep it there–traditional government intervention has. The FT reports that the central bank has spent billions of dollars in recent days to stabilize the TRY. This suggests that the plan is basically just propaganda to (a) conceal what is really going on behind the scenes, a traditional defense of the currency, and (b) allow Erdo to take credit for the rally without admitting that more dollars are going out the door.

Regardless of the mechanism, defending the lira puts strains on Turkey’s public finances. The fact that Turkish credit spreads have widened even as the currency has strengthened suggests that Mr. Market has figured that out.

Turkey, like all countries, faces the “impossible trinity.” A country cannot have a fixed exchange rate, an open capital account, and an independent monetary policy. But Erdoğan is promising all three. Fixing interest rates at low levels as he promises, because he’s on a mission from Allah=independent monetary policy. He has promised to maintain free movement of capital. And now, he is implicitly promising to fix the exchange rate.

We know with metaphysical certainty that this is impossible–the “impossible trinity” phrase came about for a reason. So it’s going to end badly. The only question is which part of the trinity is Erdoğan going to jettison. Based on form, I predict the lira.

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December 20, 2021

The Turkish Lira–Murdered by a Theory, and a Theology

Filed under: Economics,Politics,Turkey — cpirrong @ 2:00 pm

The Turkish Lira has crashed, down over 50 percent since September, and now trading at less than a third of the value it had when I was in Turkey in 2018. It would be unfair to apply Jefferson Davis’ epitaph for the Confederacy: “Died of a Theory.” Instead, “Murdered by a Theory” would be more accurate.

And the murderer is readily identifiable: Turkish president Recep Tayyip Erdoğan. His theory is that high interest rates cause inflation, so as inflation accelerated and the Lira plummeted, rather than allowing the central bank to tighten monetary policy and raise interest rates, he pushed it to cut rates–which only accelerated the TRY’s crash.

Sunday, even Erdoğan apparently realized that his economic rationale was risible, so he switched gears, saying that this policy was dictated by Allah and the Koran:

“What is it? We are lowering interest rates. Don’t expect anything else from me,” Erdogan said Sunday in televised comments from Istanbul. “As a Muslim, I’ll continue to do what is required by nas,” he said, using an Arabic word used in Turkish to refer to Islamic teachings.

Meanwhile, Erdoğan has been telling his largely religious (and poor) political base (which is being devastated by inflation) that this is just a test from Allah. That the Koran says that Allah is seeing whether you can bear such trials in silence and faith, and that if they vote for him again in 2023 he will fix inflation. Whip Inflation Then (Insallah). Or something.

So now, the Lira is being murdered by theology instead of a theory.

The chaos became extreme on Friday, with Borsa Instanbul shutting down due to a crash in Turkish shares that triggered circuit breakers. The chaos continued on the open, with the USDTRY breaching 18 and the stock market shutting down again:

Note the big rally earlier today. Though it is rather sobering that 15 is, relatively speaking, good news.

The recovery was driven by an Erdoğan statement to the cabinet today in which he pledged to defend the currency and to protect Turkish depositors against currency declines. To be honest, I find it hard to take his announcement seriously, although the markets apparently have. He has made commitments, but their credibility is dubious at best, especially since he pledged to continue his Crazy Erdo interest rate policy.

To carry through on these promises, Erdo needs dollars and Euros. Which he doesn’t have.

So I would be short the TRY at 15. Relying on a madman’s mouth writing checks that his wallet can’t cash is foolish.

There are larger lessons here.

The first is that this demonstrates the extreme dangers of presidentialism and highly personalized political systems. A “leader” with no checks and balances can indulge in insane policies at a whim. Erdoğan has gutted every institution in Turkey that could counter his ambitions–and his flights of policy fantasy. The press is suppressed, with more journalists in jail in Turkey than anywhere in the world. Civil society figures (and ordinary people) are muzzled due to the threat of being arrested for “insulting the president.” (The friend of a friend, the head of the Ataturk Institute, has been convicted of this and has the sword of Damocles hanging over his head.) The courts are packed with his goons, and the military was neutered after the abortive coup of 2016 (which in retrospect looks more and more like a false flag operation, given how it has redounded to Erdo’s benefit).

(Erdoğan’s careening into megalomania actually makes Putin look good by comparison. Russian macroeconomic policy under Putin has actually been rather responsible. Perhaps because Putin is uninterested in the subject and willing to delegate, or because he realizes that he is not especially competent in the subject. Either way, his forbearance looks wise especially in contrast to Erdoğan.)

Another lesson is that fakakta economic policies can do incredible damage in short order, yet “leaders” may recklessly implement nonetheless. In the United States, the Biden administration’s continuing attempt to spend additional trillions in the face of the worst inflation of the last 40 years is economic insanity: here the United States is at risk of dying from ignoring a theory (the fiscal theory of the price level). Even non-righties like Larry Summers realize the danger

Fortunately, a semblance of checks and balances remains in the US, and Joe Manchin has played Horatio at the Bridge, holding off BBB for now. But for how long? The specter of presidentialism hangs over the US too: Manchin is being assailed viciously by the left as a threat to “our democracy” for his temerity in resisting the president’s will–even though said president’s mental incapacity is manifest.

The US should take heed of what is going on in Turkey, and not gut checks and balances, give carte blanche to presidents, and engage in reckless economic policies. Alas, given the sway that turkeys hold in politics and the media, this may be a vain hope.

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April 24, 2021

Two Self-Inflicted Diplomatic Wounds. But At Least We Don’t Have to Worry About Mean Tweets, Right?

Filed under: China,History,Politics,Russia,Turkey — cpirrong @ 9:07 pm

The Biden administration self-inflicted two serious diplomatic wounds in the space of a single day.

First, even though India is experiencing a wave of covid infections and deaths, its worse so far, the administration refused to relent on a ban (imposed by the Trump administration) on the export of vaccine ingredients.

Yes, the policy was originally Trump’s, but (a) you’d think that would be a bug not a feature with this administration, (b) India’s circumstances are far more dire today than they were when the ban was implemented, and (c) in the US, vaccine usage has nearly reached a saturation point, with many providers having shots wanting for arms.

India (both the government but especially the citizenry) has reacted extremely negatively due to this refusal, which is not surprising given the state of covid panic in the country. The United States should be courting India, not alienating it. After decades of hostility to the US (due not least because of US support for Pakistan, India’s post-independence antipathy to colonial powers or their allies, and dependence on Soviet/Russian weapons), India’s existential conflict with an aggressive China had created an opportunity to make India if not an ally, a country with which the US could cooperate on issues of common interest–most notably containing China.

That underlying dynamic is still there, but this thoughtless refusal fuels the latent suspicions of the US among many Indians and makes such cooperation far, far more difficult. It benefits the health of Americans virtually not at all, but alienates a country we should be courting.

The second self-inflicted wound involves Biden’s official recognition of the Armenian genocide by the Ottoman Empire during the depths of WWI. (Do not underestimate how this war scarred Turkey. The Ottoman Empire suffered a greater percentage loss of population during the war than any other nation, even if one deducts the Armenian dead. The Ottoman Empire was dismembered, and Turkey itself was almost devoured in the aftermath. Only Ataturk’s miracles in the War of Independence saved Turkey from being divided among the Western powers and the Greeks, and left as an Anatolian rump that no one else wanted.)

Yes, the fate of Armenians was horrible. Well over a million died. Numberless others were displaced, often to desolate camps in the Syrian desert. If you meet someone whose name ends in “ian” they are almost certainly the descendants of the Armenian diaspora. (Those with names ending in “yan” are usually post-Soviet emigres). Their martyrdom was widely acknowledged in the US. In my parents’ era, children were told to eat their vegetables, because of the starving Armenians.

Like all historic episodes, especially those that occurred in the crucible of WWI, the story is complicated. But regardless of where the guilt lies, it happened more than a century ago. Those who committed the atrocities, and those who suffered them, have long since died.

But living Turks of all political persuasions are neuralgic about being blamed for these long-ago events. Even ardent Erdoğan haters in the CHP are of one mind with him on this issue: calling what happened in the long-dead Ottoman Empire a genocide is a red line. Those who do so are Turkey’s enemies.

Turkey’s response was immediate. It recalled its ambassador to the US, and its foreign minister gave a bitter statement, claiming that this will irreparably harm Turkish-US relations. He also said that the US should not cast stones, given its historical treatment of Native Americans. (The administration’s repeated condemnations of America’s historical actions make it a particularly attractive target for such barbs.)

Many in the US, particularly in the Armenian community, dismiss this. They say that it will blow over.

Don’t be so sure. Under Erdoğan Turkey has been wobbling away from the American (and Nato) orbit. Given Erdoğan’s dicey domestic circumstances, stoking the resentment and taking real steps to distance the country from the US are natural political moves. Russia will clearly notice–and seize upon–the opportunity. Erdoğan will be quite open to their blandishments.

And do not underestimate the power of Turkish nationalism. In my experience, they are among the most chauvinistic people in the modern world. (Han Chinese are the only rivals for the title.) They are not postmodern or post-nationalist, like most Europeans. This is deadly serious to them. It will not blow over.

Turkey has geopolitical importance, not least because of its geographic position. It has been a difficult country for the US in recent years, in large part because of its mercurial and grandiose leader. Provoking it unnecessarily will bring the US many policy headaches. Virtually at the same moment as Biden’s announcement, Turkey escalated its conflict with America-aligned Kurds in Iraq. The genocide announcement will make it all the more difficult to try to manage that conflict.

And for what? This gesture will not bring anyone back from the dead. It will not undo what has been done. America helped in the best way possible–by welcoming tens of thousands of Armenians. (Including the Kardashians. Isn’t that sacrifice enough?) It is moral preening that will not reverse past atrocities, nor prevent future ones. And it is contrary to US national interests.

And Turks–including in particular Turks in the US–believe that Biden’s action does not even rise to the level of moral preening. In their eyes it is corruption, political venality, repaying Armenian-Americans (in California in particular) for massive campaign contributions, given in exchange for his promise to do what he just did. Given the absence of any other plausible explanation, this seems very reasonable. And very despicable

One day, two pointless gestures that do significant damage to relationships with two geopolitically important nations with which the US has had difficult relations. I see zero upside for US interests in these actions, and much downside. God help us if these are harbingers of US policy over the next four years–which alas is extremely likely.

But hey. At least we don’t have to worry about mean tweets, right?

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January 18, 2021

The Next Institution the Ruling Class Intends to Bring to Heel: The US Military

Filed under: History,Military,Politics,Turkey — cpirrong @ 1:43 pm

The US military is the most highly respected institution in America today. It is also filled with many ardent supporters of Trump, and Trumpism. Therefore, in today’s febrile and vengeful political environment, it is being targeted.

Case in point. Politico reports that the “FBI is vetting [National] Guardsmen amid fears of an insider attack.” What an appalling slur–and another act in the Security Theater in the “Green Zone”. (Note: that appellation is not hyperbole: that’s how the government is labeling it.)

How much of a slur? This much:

Insider threats have been a persistent law enforcement priority in the years after the Sept. 11, 2001, attacks. But in most cases, the threats are from homegrown insurgents radicalized by al-Qaida, the Islamic State group or similar groups. In contrast, the threats against Biden’s inauguration have been fueled by supporters of President Donald Trump, far-right militants, white supremacists and other radical groups. 

The National Guard. Just like ISIS and al Qaida. Because Trump.

Utterly disgusting.

More evidence of what the ruling class thinks of the military, because it has a lot of white men who like Trump and don’t like Biden:

In other words, political reliability is the criterion by which the military will be evaluated. The military has stayed out of politics, but the politicians will definitely not stay out of the military.

If you’ve been paying attention, you’ll have seen a variety of articles in the last few weeks where government officials and journalists have expressed deep concern about extremist/insurrectionist/white supremacist networks and sympathies within the military.

The military–not so much the flag ranks, or even O6 types, because they have to have been politically tamed to make it that far, but lower grade officers, and senior and junior enlisted–is going to be intensely scrutinized for political reliability. I daresay that something resembling a purge may occur. Political officers, a la the Red Army during various periods? Not inconceivable.

It is very revealing that the FBI is in charge of the “vetting” of National Guardsmen. As we have seen in spades since 2016, they are the domestic enforcers of the ruling class. It is particularly apropos to be writing this on MLK day, because the FBI’s targeting of King provides a telling case study of its immense capacity for political hatchet jobs and witch hunts.

This is something one would expect to see in, say, Turkey, where Erdoğan targeted the military. And no, I’m not referring to the period after the 15 July, 2016 coup, but his actions to tame the military that culminated in the Sledgehammer trial in 2012. Tayyip may have had some justification for his actions. After all, the Turkish military had a well-established record of overthrowing governments–including the hanging of the leaders thereof (e.g., the hanging of Menderes in 1961, in the aftermath of the 27 May coup).

There is no such reason–not by the remotest stretch–to suspect the US military. The aspersions being cast on it and its members, and the clear hints of an impending cleansing, provide a chilling testament to the paranoia of the ruling class, and its bloody minded determination to subjugate anyone and anything that shows anything but abject fealty towards it.

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October 18, 2020

Eight Is Not Erdo’s Lucky Number

Filed under: Economics,Military,Politics,Russia,Turkey — cpirrong @ 5:58 pm

Tayyip Erdoğan has been on a real tear. Most recently, the Turkish military test fired S-400 missiles that Turkey had bought from Russia over strenuous US objections. This is a real Kim Jung Un move, the kind of provocative acts that unhinged dictators under pressure undertake. This puts him even more on the bad side of the US.

Moreover, Erdoğan has stoked the fires of conflict between Azerbaijan and Armenia, clearly having given the green light to Azerbaijan to escalate the Nagorno-Karabakh conflict, and providing extensive military support to Azerbaijan. This puts him on the bad side of Russia.

He has ramped up conflict with the EU, and with France in particular, through his provocative drilling expeditions in waters claimed by Greece. Today, according to a connection in Turkey–who sent pictures–this involved sending a Turkish warship to the waters outside of Patara–and therefore close to the Greek island of Kastellorizo.

Which raises the question of why Erdoğan would pick fights with forces far more powerful than he. Perhaps he figures that neither Russia nor the US nor the EU are in a position to do anything to him. (The EU–totes understandable!) The US is embroiled in a contentious election. Russia is facing numerous problems, including covid, protests in the Far East, and the fallout from the Navalny poisoning.

But I think that is only part of the picture. If you’ve watched the Turkish Lira recently (USDTRY) you’ll see that it has plummeted to all-time lows, flirting with 8: it reached 7.94 on Friday. When I was in Turkey a few years ago, it was around 4. This is a good indicator of how parlous Turkey’s economic position is. Eight is a lucky number in China, but not for Turkey, when the lira is involved.

So what’s on the first page of the autocrat’s playbook? When facing domestic economic trouble, create international incidents. This is an especially important play in a non-post-modern country like Turkey, in which nationalism–chauvinism, really–is a potent political force, unlike in Old Europe and wide swaths of the US.

Perhaps a more interesting question relates to Putin’s extremely passive reaction to Erdo’s provocation in a region that Russia considers part of its post-Soviet space. Especially given the large Russian military presence in Armenia. Contrast Putin’s current passivity to Russia’s growling reaction to Turkey’s downing of a Russian Su-24 over Syria in 2015. Putin made harsh threats, and Erdo folded almost immediately.

Today, with Erdo romping in Russia’s backyard–nothing.

Perhaps this reflects Putin’s own problems. While the lira is flirting with 8, the ruble is flirting with 80, having fallen dramatically in recent months. Russia’s economy is stalled, and there is widespread discontent with its handling of covid. Putin has retreated to not so splendid isolation (though he is no doubt isolating in splendor), requiring those who wish to see him to quarantine for 14 days–a dramatic contrast with his “don’t worry, be happy” message to the public on covid. He’s also at loggerheads with Europe over Navalny, though given Europe’s anger at Erdo, Putin could probably earn Brussels brownie points by standing up to him.

Or maybe Putin wants to teach Armenia a lesson. But frankly, it would be stupid to encourage conflict in the post-Soviet space merely to chasten a recalcitrant satrap–especially when that chastening comes largely due to the intervention of a foreign power. I would have thought that a major red line for Putin.

So Erdoğan’s behavior, though extremely rash, is fairly understandable in conventional terms. Putin’s, not so much.

Would that the American establishment pay more attention to that puzzle, rather than descend into another frenzy of allegations about “Russian disinformation campaigns,” this one involving Hunter Biden’s laptop.

Just how would that work exactly? In 2016, Russia allegedly interfered in US elections by buying less than $100K cheesy Facebook ads. Yet apparently within a mere 4 years Russian disinformation has reached such levels of sophistication that it can create a laptop filled with forged material about Joe and Hunter Biden–including lurid photos of the latter doing what the latter is known to do, i.e., smoke crack and patronize hookers, not to mention incriminating emails–get it to some repair guy in Delaware who just happens to give a copy of the hard drive to Rudy Giuliani (after he had told the FBI about it).

Amazing tradecraft, if true. But to anyone who shaves with Occam’s Razor, it’s not true. The story that passes the Occam’s Razor test is that a drug addled Hunter–who, recall, in the past left a crack pipe and cocaine in a rental car because he saw an owl flying over him and thought it was following him so that he figured he might be hallucinating–dropped off the laptop and didn’t pick it up. Probably because he was distracted by too many lap dances, and paternity litigation involving lap dancers.

But what matters now to Biden and the establishment–including the traditional media and especially Twitter, Facebook, and Google/YouTube–is that Joe is able to dodge this until past the election.

At which time this October surprise could turn into the national November hangover.

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July 23, 2020

What To Do With With Erdo?

Filed under: History,Military,Politics,Russia,Turkey — cpirrong @ 6:06 pm

Turkish President Recep Tayyip Erdoğan seems hell-bent on making enemies. Indeed, other than Qatar, it’s hard to point to any nation that is allied with Turkey. Turkey doesn’t even seem to have frenemies, only real enemies.

The FT had a long piece detailing how Erdoğan is using force and threats of force to prevent other nations, notably Cyprus, from drilling for gas in the eastern Mediterranean. He has also entered into a deal for what passes for a government in Libya to develop its offshore gas, and to build pipelines that deny that Crete is part of Greece. (Hey, it was Ottoman once, right?)

Speaking of Libya, Erdo has intervened in the conflict there. Turkey has supplied advisors, drones (including armed UAVs), anti-air defenses, and electronic warfare systems to support the “government.” Further, Turkey haas shipped in thousands of Syrian jihadi-types to provide the ground forces to fight against the force led by warlord Khalifa Haftar, who is trying to overthrow the UN-recognized government.

This has led to a confrontation between French and Turkish ships off the Libyan coast. Turkey has demanded an apology, and Macron trumpeted a call with Trump during which Libya was discussed–a clear indication to Turkey that the US was leaning towards France and against Turkey.

To make things even more complicated, Egypt supports Haftar and is threatening to intervene with its ground forces to combat the Turkish-supported troops. Turkey has made stern warnings to Egypt to stay on its side of the border.

To make things even more complicated, Russia is Haftar’s biggest backer. Russian mercenaries operate there. So in Libya Erdoğan is risking conflict with Russia, France (and hence the rest of the EU–yeah, I know), and Egypt.

The correlation of forces here is definitely not in Turkey’s favor, especially if Egypt intervenes on the ground. Egypt shares a border with Libya, and as the Desert Campaigns of 1940-41 showed, an armored force can race across Libya and achieve operational dominance. Egypt’s logistics would also be relatively simple, and it would be operating well within range of its air forces. Turkey, on the other hand, has no direct land route to Libya, and would have to reinforce and supply by sea. If shit gets real, it is highly doubtful that such a supply line would be sustainable. It would certainly be highly vulnerable to attack from air and sea.

Turkey has some submarines, some frigates (including some old US Perry Class ships) and corvettes, and some small landing craft. Egypt’s forces are comparable, with the big difference being the French-built (originally for Russia) Mistral assault ship, for which Turkey has no counterpart.

So Turkey would be in a very weak position if it indeed attempted to challenge an Egyptian incursion.

Libya is not the only country where Turkey and Russia are at loggerheads. They are also on opposite sides in Syria, and Russian-supported forces have killed well over 100 Turks. There is an uneasy coexistence between Russian and Turkey in Syria, nothing more.

But there’s more! The conflict between Armenia and Azerbaijan (which has been going on since 1988 or thereabouts) is heating up again. Armenia is close to Russia, but Erdo is rallying behind Azerbaijan.

It’s not surprising, then, that Russian helicopters flew along the Turkish border soon after the initial Armenian-Azeri clash in mid-June, and Turkey’s condemnation of Armenia for that fighting.

Erdoğan also has a very strained, and strange, relationship with the US generally, and Donald Trump in particular. Given Trump’s mercurial nature, Erdoğan would be a fool to expect Trump to pull his irons out of the fire in a Turkish dust up with Russia. Or France. Or Greece. Or Egypt.

The Turkish economy is also in a parlous state, meaning that the country is extremely vulnerable to economic pressure. The lira has depreciated badly in recent years, is near all time lows against the dollar, and could easily tip–or be tipped-off a cliff. Turks of a certain age remember the extreme privations that followed US sanctions imposed in the aftermath of the Turkish invasion of Cyprus in 1974. Younger generations don’t have that experience, and have (at least in the big cities) attained a degree of affluence that could be gone in a trice. It is an open question whether they would, in a fit of nationalist pride, forgive Erdoğan for that.

Erdoğan also outraged much of the Christian world with his conversion (on extremely dubious legal grounds) of the venerated Aya Sophia/Hagia Sofia from a museum (established by Ataturk) back to a mosque.

Erdoğan’s political situation is shaky–which may be why he is engaged in so much adventurism. He lost the big cities–Istanbul and Ankara notably–to the opposition CHP. He still has very strong support in the Anatolian heartland, especially among devout Muslims there (and in the cities as well). But the country is divided and Erdoğan has a lot of domestic enemies, and is making more by the day.

In sum, Erdoğan has picked a fight with pretty much everyone with a stake in the eastern Mediterranean. Why he’s doing so is not completely clear. In part, it’s delusions of grandeur: he envisions himself as the emerging dominant power in that region. But he can be so only at the sufferance of the US and Russia in particular. He is appealing to a highly chauvinistic populace–Turks are arguably the most chauvinistic nation in the world–in order to bolster his political situation.

But strategically his actions appear to be incredibly foolhardy and shortsighted. It is hard to see the upside, especially in Syria and Libya. The downsides are huge. He must be counting that the big boys in the neighborhood are willing to put up with his bumptiousness. But if he’s wrong, Turkey will be in a world of hurt.

He needs to be most careful about the Russians. After Turkey shot down a Russian jet over Syria, the furious Russian reaction forced Erdoğan to back down. Now he is risking confrontation with them not only in Syria, but in Libya and Armenia/Azerbaijan. With Putin too perhaps needing a wag the dog moment again (given the uninspiring results of his constitutional referendum, growing discontent as illustrated by open protests in the east, and chronic economic difficulties), Erdoğan could be made to order.

Fools rush in where angels fear to tread. Erdoğan is rushing in where angels avoid, and doing so very likely because he is a fool.

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March 8, 2020

Erdoğan Harvests the Fruits of His Strategic Genius

Filed under: Military,Politics,Russia,Turkey — cpirrong @ 6:20 pm

Apropos my earlier post on Erdoğan’s strategic brilliance, after Turkey’s army inflicted some serious damage on Assad’s armed forces, the Russians evidently made it clear that he would not be allowed to have his way in Idlib. So Erdoğan scuttled to Moscow, and emerged with a ceasefire agreement (not that he wanted one) which basically brought his campaign to a screeching halt.

The optics tell all. The fact that Erdo had to go to Moscow for one thing. But it was worse than that. Putin really rubbed the would-be sultan’s nose in it.

The same week a delegation from Zimbabwe–yes, Zimbabwe–visited Putin in the Kremlin. The entire delegation was seated. There was no statuary in sight.

When the Turkish delegation visited, all except Erdoğan were forced to stand. In front of a statue of Catherine the Great, no less, which had been moved into the room specifically for the Turkish delegation.

Catherine, of course, waged war against the Ottomans during her entire reign, and seized vast territories from them. Catherine epitomizes Russian domination of Turkey. As Russians well know–as do Turks.

After leaving the Turks to shuffle cravenly before Catherine’s bronze gaze for a few moments, Putin beckoned them to approach with a dismissive wave of his fingers, like he was calling his dogs. He was trying to humiliate. He succeeded.

Erdoğan has been flailing desperately for US and European support to counter Russia. Trump acknowledged that Turkey and Syria were fighting, but said he didn’t care.

In so many words: You’re on your own, Erdo! You made your bed with Putin, hope you stocked up on the KY.

The refugee gambit has only infuriated the Europeans. Not as if they would be willing to risk confronting Russia anyways.

Yes. Quite the genius Erdo is. Quite the genius.

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February 29, 2020

The Sultan’s New Clothes

Filed under: History,Military,Politics,Russia,Turkey — cpirrong @ 12:28 pm

Turkey’s president Recep Tayyip Erdoğan imagines himself to be a modern Ottoman sultan. Presumably he has in mind, say, Suleiman I (“The Magnificent”), but if he keeps it up he is more likely to be a reincarnation of Osman II.

The first object of Erdo’s imperial ambitions is nearby Syria, all but destroyed after 9 years of civil war–not that it was a paradise before 2011. Erdoğan supported the Muslim Brotherhood/Sunni jihadi anti-Assad forces early on, and worked hard to overthrow Assad. He failed: the Russian intervention in particular turned the tide in favor of Assad.

Erdoğan’s air force shot down a Russian SU-25 in November, 2015. This led to a tense standoff with Putin, and given the correlation of forces, Erdoğan was forced to back down. This led to a rapprochement with Russia, resulting in gas deals and most importantly an agreement to purchase S-400 air defense systems.

This mightily irritated the United States. Tensions between the ostensible Nato allies were already high in the aftermath of the July, 2016 coup, which Erdoğan blamed in large part on the US because of its giving asylum to erstwhile ally and subsequent arch enemy, Fethullah Gülen: Erdoğan believes that the coup was a FETO (Fethullah Terrorist Organization) plot.

Relations between Turkey and the US had been fraught since Erdoğan’s decision (when he was prime minister) to deny the use of Turkey to stage the 4th Infantry Division for the offensive against Iraq. Things have gotten progressively worse, as Erdoğan’s Ottoman pretensions have become progressively more grandiose. Moreover, the war on ISIS, which required the US to rely on the Kurds–the only force in the region that can fight its way out of a piss-soaked paper bag–further aggravated the relationship, because Erdoğan considers all Kurds terrorists too.

In sum, Erdoğan has been burning his bridges with the US for years. Decades even.

But now he needs us. The war in Syria has turned sharply against Turkey’s jihadist (Al Qaeda, actually) allies. Regime forces have made steady gains against the last rebel stronghold, Idlib. To try to stave off complete defeat, Erdoğan sent Turkish army units into the neighboring country.

Assad has responded predictably. He has bombed and shelled Turkish army outposts, killing dozens: last week, an airstrike killed 33 Turkish soldiers.

Assad’s calculus is quite simple and quite rational. He knows Russia has his back. Push comes to shove, if Erdoğan launches a full-scale offensive against Syrian Arab Army forces and their supporting militia units, Putin will almost certain order Russian forces (air forces in particular) to strike hard at Turkish units. So Assad has no compunctions about bombing Turkish forces. Indeed, he has an incentive to do so because this may bring the Russians in even more forcefully on his side.

Caught in a trap of his own making, Erdoğan is now spinning desperately–and pathetically–to find a way out. Amusingly, yesterday he asked Putin to “step aside” in Syria. Quite a plan there, Erdo! I’m sure Vova will graciously respond to your request!

Erdoğan is now appealing to the US for help–after years of chest thumping denunciations of the country. Most amazingly, he asked the US for Patriot air defense systems–presumably to shoot down Russian airplanes. (This further convinces me that the real purpose for the S-400s is to use against his own air force in the event of another coup.)

The Pentagon is adamantly opposed to this–good! But elements of the (Deep) State Department insanely and inanely want to accede to this request. FFS:

A senior State Department official is at odds with the Pentagon over sending additional military equipment to help Turkey fight against Russian-backed Syrian government forces, four people familiar with the matter tell POLITICO.

James Jeffrey, the U.S. special representative for Syria engagement, has been pressing the Defense Department to send Patriot missile defense batteries to Turkey to help it repel the Syrian government’s assault in Syria’s Idlib province, the people said. But Pentagon officials are worried about the global ramifications of a move they see as reckless.

Just to be clear: Jeffrey wants to run the risk of an armed confrontation with Russia to protect “rebels”–who happen to be, to a man, Sunni jihadis who are basically just rebranded Al Qaeda.

I have still to hear a remotely persuasive argument as to why the US should give a tinker’s damn about Assad winning in Syria, especially since the alternative is Al Qaeda in all but name. To risk a confrontation with Russia over this is beyond insane.

Erdoğan is also playing the refugee card in an attempt to force the pusillanimous Europeans to intervene on his behalf. What they would do–or are even capable of doing–is a mystery. But Erdoğan is desperate, and flailing about in the hope something or someone will save him.

All he is succeeding in doing is making the Europeans even more sick of him than they already are. Oh, and risking a naval conflict with Greece. As if he didn’t have enough fights on his hands.

Oh, and as if he didn’t have enough problems, Erdoğan has intervened militarily in the only country in the Middle East that could make Syria look at least somewhat functional–Libya. Moreover, he has intervened in opposition to the faction that Russia supports, thereby aggravating Putin either more, and making it less likely that Putin will “stand aside” in Syria.

There’s an acronym in the military–PPPPPP. Prior planning prevents piss-poor performance. Turkey’s new sultan is obviously unfamiliar with this. He plunged into Syria with little thought, and apparently no prior planning regarding Russian and Syrian countermoves, and his ability to counter those countermoves. And predictably, piss-poor performance has been the results.

It will be interesting to see how the US responds. Presuming that Trump overrules the lunatics in the State Department, I am guessing that the administration will give Erdoğan lip service, but leave him twisting in the wind.

Which raises the question of the political reaction within Turkey. A humiliated Erdoğan should be politically vulnerable, but he has succeeded in de-fanging the military and so the historical response to political failure in Turkey–a coup–is probably out of the question. The opposition in Turkey is divided, and its national leadership is hardly inspiring. The country is divided between the Rumelian fringe and the Anatolian heartland. Erdoğan still has strong support among the religious portions of the populace, especially in Anatolia. Meaning that I expect that he will be weakened, but will survive.

Indeed, I anticipate a crackdown on the opposition. The threat to dispossess the opposition CHP of its stake in İşbank  is perhaps a harbinger of such a move.

Watching Erdoğan’s pathetic, incompetent performance also highlights the pathetic, incompetent performance of the United States’ foreign policy elite, which viewed him as a harbinger of an enlightened political Islam that would prove a model for improved governance throughout the region.

They sure can pick ’em, can’t they?

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October 20, 2019

Howdy Doody Dilanian Reports All the “News” the Intelligence Community Wants You to Believe

Filed under: Military,Politics,Turkey — cpirrong @ 4:11 pm

The conventional wisdom in the US is that Turkey’s president Erdogan totally pwned Trump over Syria. The most extreme example of this is a Tweet by NBC’s Ken Dalanian, aka the Howdy Doody to the CIA’s Buffalo Bob Smith:

You wouldn’t know it from the US media, especially from reporters like Dilanian who are nothing but conduits for what the anti-Trump elements in the intelligence community (i.e., pretty much the entire intelligence community) wants you to hear, but the view from Turkey is somewhat different.

A Turkish friend tells me that the boastful Erdogan’s mien changed notably after Vice President Pence’s visit last weak. Whereas Erdo was at his chest thumping best (or worst) prior to that, he has been restrained and sheepish since. Moreover, there are many in Turkey who claim that Erodgan is (in the words of my friend) “Trump’s dog” and that Trump is the actual president of Turkey.

Now, there may be some sample selection bias here. My friend’s father was a leader of the May 27, 1960 coup against the proto-Erodgan (Menderes) and was on the tribunal that sentenced Menderes to hang. My friend is an ardent Kemalist and has a social network that is rooted in Rumelian Turkey and in the CHP. So what he sees (on Facebook, for instance) or hears (from friends and colleagues) is not necessarily representative of Turkish opinion.

It is interesting to note, however, that things look very different to many Turks than they do to American journalists. So don’t take the vaporings of the likes of Ken Dilanian at face value, and keep in mind that he (and most of the rest of the media claiming to report on views of those in the defense and intelligence communities) is essentially the ventriloquist’s dummy–and the ventriloquists are carrying out guerilla warfare against Trump.

Another Howdy Doody report illustrates how intense this war is:

A review launched by Attorney General William Barr into the origins of the Russia investigation has expanded significantly amid concerns about whether the probe has any legal or factual basis, multiple current and former officials told NBC News.

. . . .

Durham has also requested to talk to CIA analysts involved in the intelligence assessment of Russia’s activities, prompting some of them to hire lawyers, according to three former CIA officials familiar with the matter. And there is tension between the CIA and the Justice Department over what classified documents Durham can examine, two people familiar with the matter said.

In other words, Barr and Durham have many in the intelligence community shitting themselves.

Well it’s about ‘effing time.

“Concerns about whether the probe has any legal or factual basis.” LOL. Just who is concerned, Howdy? Your IC buddies? Good!

How many times during the Mueller probe did we hear “if Trump has nothing to hide, why should he fear an investigation?”

What’s the expression? Oh yeah. Turnabout is fair play. And payback is a bitch.

As if Barr or Durham (amazing isn’t it how their like are characterized as “career federal prosecutors” when investigating Trump or other Republicans, but not when they are investigating Democrats or deep staters?) would engage in baseless probes.

So things are heating up. And this means that the stream of leaks to the likes of Ken Howdy Doody Dilanian will build into a torrent in the coming weeks. Ignore their content, and take them as a positive signal that some people are afraid, very afraid.

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June 23, 2019

You Should Have Been Careful What You Asked For, Recep. You Got It.

Filed under: Economics,Politics,Turkey — cpirrong @ 6:07 pm

I ask for very few things in life, because I am a firm believer in unintended consequences, as summarized by the adage: “Be careful what you ask for–you might get it.”

Recep Tayyip Erdoğan should have heeded this adage when he asked for–and got–a rerun of the Istanbul mayoral election. I guarantee he hadn’t bargained for the way his wish was granted–a humiliating loss to CHP (pronounced “jay hey pay”) candidate Ekrem İmamoğlu.

İmamoğlu had won by a mere 14,000 votes in the 31 March election that Erdoğan claimed was tainted by fraud (in a first where the opposition allegedly won by fraud, rather than the party in control): he won by over 700,000 votes today. Meaning that by insisting on a mulligan, Erdoğan succeeded in increasing his opponent’s margin of victory by a factor of a mere 50. That takes talent!

There is rejoicing in the streets of İstanbul, and elsewhere in Turkey, especially in places like İzmir. But there is no joy in Mudville, er, the massive (as in 3.2 million square feet) presidential palace in Ankara, which is symbolic of Erdoğan’s sultanic pretensions. So far, over 8 hours after the polls closed, he has been silent. Only his hapless and comically uncharismatic candidate in İstanbul, former prime minister Binali Yildirim, has made a monotone concession speech.

Erdoğan has straddled Turkish politics like a colossus for almost 20 years. This is his first major defeat, which raises questions about his future.

In the near term, İmamoğlu’s control of government in İstanbul will allow him to uncover and publicize the massive corruption of AKP/Erdoğan rule there. Further, money the the lifeblood of politics, and the CHP victory will allow it to sharply reduce the flow of this lifeblood to AKP’s pockets.

Over the longer run, there is now a credible personality to oppose Erdoğan. The national CHP leader Kemal Kılıçdaroğlu (who was almost lynched by an AKP mob near Ankara recently) is not a threat, for many reasons. He is deemed an elitist, and worse, he is Alevi, a religious group that is scorned by most Turks.

İmamoğlu’s biography has eerie parallels to Erdoğan’s. Both are from the Black Sea region who moved into national politics in İstanbul. Erdoğan gained considerable sympathy as a result of his jailing 20 years ago: denying İmamoğlu victory in March gained him considerable sympathy too. Both figures have a common touch. Unlike many in the CHP, İmamoğlu is not viewed as a hard-core secularist, or anti-Islam. Indeed, his name denotes a Muslim heritage. (An ardent secular Turk I know says he is glad that is not HIS name.)

Meaning that Erdoğan like faces the biggest political threat in his life, and it comes at a time when Turkey’s economy is teetering, and its international position is fraught.

Top at the very long list of Erdoğan’s foreign policy headaches is his testy (to say the least) relationship with the US. Matters are coming to a head here, with Erdoğan swearing that Turkey will cross a US red line, and buy S-400 SAMs from Russia.

I have been wondering for some weeks whether Erdoğan’s chest thumping on this issue has been driven by his need to look tough before a largely anti-US Turkish electorate in the runup to the rerun of the İstanbul election, and that he would back down once the results are in. He has backed down before after claiming he would never concede to Trump (on the issues of the American missionary and the NSA employee imprisoned in Turkey). It’s hard to know how the crushing defeat will affect his calculations. Will he realize that in his weakened domestic situation he can’t afford to confront the US? Or will he figure that he can’t afford to look weak now?

I don’t know, but I do know that as consummate a domestic politician as Erdoğan has been, internationally he has been a disaster for Turkey. Turkey has alienated the US and Europe, has bungled in Syria, and is at odds with Saudi Arabia and Egypt. Turkey literally has no friends or allies now, except for Qatar, which is itself isolated in the Arab world. Given this record, I think it is highly likely that Erdoğan will make the wrong choice.

We should see within days. He is to meet Trump at the G-20 this week. Perhaps Trump will offer him a face-saving way out of the dilemma he has put himself in. Whether Erdoğan is wise enough to take it is another matter.

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