Turkey’s president, Recep Tayyip Erdogan, and his ruling Justice and Development Party (AKP) say they wish to push for a new constitutional system, arguing that the current document has, according to one presidential aide, “lost its essence and become full of details”.
Yet while constitutions tend to use broad strokes to outline how a government should operate, in a pluralistic society they also require the detail that only a codified bill of rights can provide. Read more
The Republic of Turkey is going through one of its most challenging periods since its foundation in 1923, directly exposed to severe regional crises that are spiralling into serious geopolitical tensions.
Inevitably, this is not helping the economy. The new government’s commitment to reform has been welcomed; the key test will be to transform intentions into concrete measures. This is now more urgent than ever, and acting quickly will be as important as acting decisively. Read more
There has been much focus on the price of iron ore recently, and understandably so. Cooling Chinese demand at a time of surging Australian supply saw spot prices fall to a new nadir of $44 a tonne CFR (cost and freight) for delivery in North China on Tuesday, November 24, according to Platts data.
In an effort to survive this price environment, smaller iron ore miners are trying to diversify their portfolios, with some buying up cattle and dairy businesses to cash in on rising Asian demand for other commodities. At the same time, steel mills have been using this cost advantage, and structural supply surplus, to pour steel into the global market, as has been well publicised.
However, ferrous scrap – which accounts for around a third of steel production outside China – has been comparatively overlooked by commentators. Read more
Formerly a darling of emerging market investors, Turkey has come under a lot of scrutiny in recent months, as the political and economic environments have deteriorated. Turkey’s stock market has underperformed emerging markets by 12.4 per cent this year, and valuations for the market are cheap on both an absolute basis, with single-digit P/E ratios, and a relative basis, where the P/E is at a substantial 25 per cent discount to EM.
Despite this, there are several reasons why now is not a good time to buy Turkish equities. Read more
The 2014 Ukraine crisis reinforced the EU’s quest for security of gas supply. The European Commission released an Energy Union Communication in February, calling for intensified work on the Southern Gas Corridor (SGC) and for the establishment of a new strategic energy partnership with Turkey.
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Turkey’s recent initiatives within Nato are remarkable but, even so, may not be enough to secure the trust of its western partners. In the current geopolitical context, the new Turkish government’s ability to address deep-routed concerns over its foreign policy will be limited unless it takes comprehensive action. A loss of trust brings costs for Turkey, limiting its capacities in the transatlantic community.
At the Nato meeting of foreign ministers in Antalya last month, Turkey took the opportunity to demonstrate its commitment to the transatlantic alliance by offering to be a lead nation for Nato’s Very High Readiness Joint Task Force by 2021 – an initiative designed to deter Russian aggression after its annexation of Crimea. Turkey has recently donated $800,000 to Nato trust funds for defence capacity building in Iraq, Moldova and Jordan. In normal times, such initiatives would be seem as commonplace for a country known for its staunch commitment to Nato. This time, they weren’t. Turkey’s actions positively surprised its western partners, who have grown sceptical about its place in the alliance. Read more
This Sunday, Turkey heads to the polls for its parliamentary election. The outcome will be pivotal for the country’s future.
The election is the culmination of a political race started 13 years ago by the Justice and Development Party (AKP) and its leader Recep Tayyip Erdogan, who is seeking to change the constitution and make Turkey a presidential regime. Read more
Blink and you missed it. The day after the US Federal Reserve appeared on Wednesday to put back the date of its long-awaiting interest rate rise, analysts at Bank of America Merrill Lynch wrote to clients: “Emerging market currencies temporarily halted their losing streak with a dovish Federal Open Market Committee sending the USD lower.”
“Temporarily” is right. The Brazilian real closed at about R$3.21 to the dollar on Wednesday from its open of R$3.24, a rare day’s gain in a two-month slide. But on Thursday it was back on course, falling quickly beyond R$3.30 before recovering a bit, an intraday move of nearly 3 per cent. In less dramatic manner, the Turkish lira, Russian rouble and South African rand all resumed their downward slides, too. Read more
A long awaited plan by the European Union to import Caspian gas moved forward this week as construction work began on the Trans Anatolian Natural Gas Pipeline (Tanap) in Turkey.
Tanap is the central link in the EU-backed Southern Gas Corridor, a jigsaw of existing and planned pipelines designed to diversify Caspian energy export routes and reduce European dependence on Russian gas. Initially, the 3,500km SGC network will transport gas from the giant, BP-led Shah Deniz field in offshore Azerbaijan, but could in future draw supplies from other Caspian and central Asian countries and even the Middle East, changing the energy map of the whole region. Read more
The Turkish government’s decision last month to ban a metalworkers’ strike on the grounds that it endangered national security is part of an familiar pattern in the country. At least nine other strikes have been similarly stopped since the year 2000.
This time, though, the Turkish government outdid itself in explaining how the labour action could be considered an issue of national security. It said that the strike by Birleşik Metal-İş (United Metal-Work), a union representing just two per cent of Turkey’s million-plus metal workers, would jeopardise production of the Turkish police’s water cannon trucks – the very vehicles that are used to suppress labour unrest and other protests. Read more
Is it time to quit as central bank governor if the president of your country suggests you could be a foreign agent? The answer to this not necessarily run-of-the-mill question may well help determine Turkey’s economic prospects.
On Wednesday, President Recep Tayyip Erdogan all but accused Erdem Basci, the central bank chief, of working for Turkey’s enemies. Read more
Turkish lira per US dollar, 3 months to Feb 4. Source: Thomson Reuters
The Turkish lira went on a fresh slide on Wednesday, adding to its losses over the past fortnight. Investors have no doubt been alarmed by the pressure piling on Turkey’s central bank from the luscious new presidential palace in Ankara. But the lira’s new weakness may also signal an unwinding of some strongly bullish positions on Turkish local debt taken by foreign investors in recent months. Read more
Turkey’s exports are down – not exactly the most welcome piece of news as the country casts around for a new economic model to take over from its largely debt-fuelled growth of the last half-decade. A single month’s worth of data does not a trend make, particularly when the figures concerned come from an industry body rather than the official statistics institute (which takes about a month to compile its own tally).
But the press release issued on Monday by the Turkish Exporters’ Assembly makes for grim reading all the same. It indicates that the European Central Bank’s recent experiment with quantitive easing, and the euro’s accompanying weakness, may not be all good news for Turkey, which relies on the EU as by far its biggest market. Read more
TRY per USD, week to Jan 16. Source: Thomson Reuters
Turkey’s President Recep Tayyip Erdogan has got embroiled in interest rates again – and the country’s currency immediately felt the impact.
Erdogan’s allergy to high interest rates is well known, as is his insistence that there is something out there called “the interest rate lobby” that drives rates up in a bid to enfeeble the Turkish economy. But all the same he was in fine form in a speech on Friday. Read more
The Turkish lira rounded off the week by tumbling to its lowest levels against the dollar for almost a year, amid investor nervousness about
By evening trade in Istanbul the currency had fallen beyond TL2.30 to the US dollar, more than 1 per cent down on the day and the weakest level since January, when the Turkish central bank moved to increase
interest rates – a dramatic shift in policy that at the time halted a
precipitous drop in its value. Read more
With its hefty energy import bill and high inflation, Turkey is an obvious winner from the drop in oil prices, which economists expect to help improve its current account deficit. But will other troubles neutralize the benefit of lower oil prices?
The country’s energy import bill last year of about $50 bn – roughly equivalent to the size of its 12-month running current account deficit – puts Turkey firmly on the right side of the slide in oil prices, which have declined 25 per cent from this year’s peak in June.
But Turkey’s dependence on foreign capital, which makes it particularly sensitive to changes in global liquidity, could offset this advantage. This dependence led Morgan Stanley to put Turkey in its “fragile five” last year. Read more
By Riccardo Puliti of the EBRD
Until recently the Nabucco pipeline, just like the chorus in Verdi’s opera of the same name, was a symbol of freedom. It was designed as an alternative route for large quantities of natural gas coming into Europe, reducing the continent’s dependency on the Soviet-built pipeline system that runs from East to West.
But the Nabucco dream did not become reality, mainly because it would not transport enough gas to make it viable and especially because Turkmenistan, a big producer of natural gas, was not part of the project. However, this vision of independence could yet live on in another guise – but only if there is the political will to drive it forward. Read more
Perhaps only President Recep Tayyip Erdogan of Turkey would exclaim “I am increasingly against the internet every day” in the middle of a private meeting on press freedom.
That indeed is what the outspoken Turkish leader just did, according to the Committee to Protect Journalists (CPI), which met Erdogan in Ankara this week, together with the International Press Institute (IPI). Read more
Turkey is in an uncomfortable place. Amid a general turn away from emerging markets, fuelled by the rise of the dollar and expectations of US rate rises, the Turkish economy is, if not in investors’ crosshairs, close to the centre of concerns.
The lira is skirting seven month lows, undermined by worries about the country’s fundamentals (notably its high current account deficit), its geopolitical position (bordering Iraq and Syria, not to mention the jihadis of Isis) and more besides.
That makes the difference between what appear to be two schools of thought within the Turkish government particularly important. Read more
Poor forward planning and political manipulation of energy prices look likely to leave Turkey facing gas shortages this winter, even before the prospect of regional gas cuts due to the on-going hostilities in Ukraine.
Turkey last week experienced an unexplained drop in pressure in its western import line, through which it receives 14bn cubic metres (bcm) of gas from Russia, or about 30 per cent of Turkish demand. That sparked fears of further cuts during the peak mid winter demand period should a working ceasefire not be concluded.
But Turkey’s gas woes are not confined to one import line through Ukraine. Read more