Questionable economic policies aggravated by ongoing tensions with the United States are impacting Turkey's economy and its currency. Ankara is searching for a foreign benefactor to help right the ship, hoping that a change in rhetoric that will calm investors even though a major change of course is out of the question.
An Attempt at Damage Control
Amid continuing efforts to stabilize the Turkish lira, Economy and Finance Minister Berat Albayrak spoke with 3,000 investors on Aug. 16, attempting to address some of the issues facing the economy. During the call, he stated that Turkey was economically stable and that the country won't resort to capital controls or assistance from the International Monetary Fund. He also noted that the government is working to reduce inflation. Investor reactions have so far been positive, albeit cautious. Now, Albayrak needs to move beyond the rhetorical space and take definitive action, potentially through the implementation of a new economic program, set to be unveiled in September.
It remained unclear, though, why Albayrak does not expect one of Turkey's largest banks, Halkbank, to face penalties for evading sanctions against Iran. Easing penalties on Halkbank were meant to be part of a deal between Ankara and Washington to release American pastor Andrew Brunson, but the White House has hinted that it will escalate punitive measures against Turkey. Talks between Turkey and the United States are ongoing, however, and a breakthrough is still possible at this stage.
When it Comes to Qatar's Support, the Devil is in the Details
Turkey was quick to broadcast a Qatari pledge to directly invest $15 billion into Turkey after Qatar's emir visited on Aug. 15. Qatar is a strategic regional partner to Turkey because of its ideological alignment and Doha's need for alliances as a result of the Gulf Cooperation Council's isolation campaign. Qatar has been downplaying its public support for Turkey — currently at loggerheads with Washington — as it attempts to manage its relationship with the United States. Though the mooted investment is impressive, it has yet to be revealed how the $15 billion will stabilize Turkey's currency and ease the country's debt burden in the short term. Hurriyet Daily News claims that Qatari investment will provide rapid funds to Turkish banks and financial markets.
Kuwait publicly denied that it would provide Turkey with an emergency cash injection, but it may be discussing other means of support. Like Qatar, Kuwait would also prefer to avoid drawing attention to its support for Turkey. Antagonizing the United States is not something Kuwait wants to do, despite the value it places on a working relationship with Ankara. China could swoop in to provide financial assistance, but Beijing must also act carefully because of the ongoing trade spat with Washington.
What Can Europe Do for Turkey?
Turkish President Recep Tayyip Erdogan met with German Chancellor Angela Merkel on Aug. 16, and the pair agreed to have their finance ministers meet separately. Erdogan has also spoken with French President Emmanuel Macron and will meet with Merkel again in Germany in late September. As U.S.-Turkey relations deteriorate, Germany is taking the lead in trying to maintain stability in Turkey's relationship with Europe and NATO. While Turkey and Ankara appear to be discussing financial aid, there are plenty of roadblocks in the way. Turkey is highly resistant to IMF aid, and Ankara will refuse any human rights conditions that accompany a deal for financial aid from Europe. Despite many potential options for outside support, Turkey will have a difficult time finding a single, viable avenue out of its current economic predicament.