ANALYSIS
"Latin American Left's Strong Endorsement of Erdogan" by Imdat Oner, Institute for Diplomacy and Economy
President Erdogan's recent re-election victory in Turkey's runoff election against his main opposition candidate, Kemal Kilicdaroglu, has garnered widespread attention. What is particularly intriguing is the show of support for Turkey's conservative politician Erdogan from leftist leaders in South America, including Nicolas Maduro of Venezuela, Lula da Silva of Brazil, and Evo Morales of Bolivia.
This unexpected but strong support from leftist leaders, who would ideologically align more closely with Erdogan's opponent, Kemal Kilicdaroglu, a left-leaning candidate, raises compelling questions about their underlying motivations.
One key factor that contributed to the resonance of Erdogan's message with leftist leaders in Latin America is his anti-Western and multipolar worldview, which he has actively cultivated in his foreign policy. Erdogan's anti-establishment rhetoric and his anti-systemic positioning as a political outsider align with the perspectives of these Latin American leaders. Maduro, for instance, has hailed Erdogan as the "leader of the new multipolar world."
The convergence of anti-establishment, anti-Western, and multipolar worldviews provides a foundation for dialogue and cooperation between Erdogan and Latin American leaders. While each country's specific contexts and circumstances may differ, the general sentiment of challenging Western hegemony and pursuing alternative avenues for cooperation and development creates a basis for common ground between Erdogan and Latin American leaders.
Another factor strengthening the bond between Erdogan and Latin American leaders is their shared perception of Western involvement in domestic problems. This perception of Western involvement in their internal affairs further solidifies the bond between these leaders and Erdogan, as they see themselves as victims of similar attempts to undermine their positions of power.
Erdogan enters his new term, it is important to follow these dynamics of Turkey's foreign policy, particularly in relation to Latin America.
"President Erdogan shifts towards sane economics", The Economist
"Turkey has no choice left but to return to a rational basis" for policymaking, Mr Simsek said on June 4th, a day after his appointment to the cabinet. Such words will be music to the ears of many foreign investors, who have given up on Turkey over the past couple of years. But they will not count for much unless they are backed up by concrete steps to fix the country's economy. The question is whether Mr Simsek's appointment is a sign of a genuine policy U-turn, or window dressing to please foreign investors.
Rumours of Mr Simsek's appointment failed to check the lira's slide last week. That is because investors believe that the central bank has run out of money to intervene in currency markets. Analysts expect the currency to lose up to a third of its already much-depleted dollar value by the end of the year.
Whether and when the lira stabilises depends on Mr Simsek's ability to convince Mr Erdogan of the need for interest-rate raises. That may be a tall order. Turkey's leader has sworn on many occasions, most recently on the eve of the elections, that he would keep rates low as long as he is in power. The need to overhaul the economy may soon take a backseat to Mr Erdogan's political interests. Local elections are due next March.
"Why Turkish Pollsters Didn't Foresee Erdogan's Win", by Can Selcuki, Foreign Policy
The uneven playing field alone is not enough to explain the loss of the six-party opposition in the face of almost 50 percent inflation and an increasingly one-man rule that is failing to deliver in governance like it used to. Noteworthy is the fact that not only did Erdogan not lose, but his support seems to have remained solid over the past decade.
In the rural parts of the country that represent roughly 20 percent of the population, Erdogan managed to get 65 percent of the popular vote against Kilicdaroglu's 35 percent. In the remaining 80 percent that represents the urban parts, Kilicdaroglu surpassed Erdogan by getting 51 percent of the popular vote. In other words, in places where life is relatively simple and the increasing cost of living is not felt as ferociously, Erdogan performed much better.
Second is the unprecedented fiscal expansion that the government opted for in the lead-up to the election. The fiscal expansion indeed helped mitigate the discontent of Erdogan supporters. However, it was the polarizing identity politics that carried him over the 50 percent threshold into a third-term victory.
Second was the anti-LGBT, anti-Western, pro-conservative family values propaganda. The opposition should have recognized the misinformation trend earlier and focused on prebunking these claims. The disorganized appearance of its leaders and a campaign that completely missed out on the rising nationalistic sentiment caused the disgruntled Erdogan supporters to stay on the other side of the aisle. The opposition did not manage to overcome the distrust created by the Erdogan campaign.
"Who is Hafize Gaye Erkan, Turkey's first female central bank chief?", by Karin Strohecker, Reuters
Erkan holds degrees from Bogazici University in Istanbul, graduated from Harvard Business School's Advanced Management Program and holds a PhD in Operations Research and Financial Engineering from Princeton University.
She joined Goldman Sachs in 2005 as an associate and was named a managing director in 2011, making her one of many alumni of the Wall Street bank who have taken up prominent positions in the world of monetary policymaking.
From Goldman she joined First Republic Bank, where she eventually took over as co-CEO in June 2021. Her resignation there in December 2021 surprised investors, who had expected her to eventually take the reigns at the major U.S. lender, which collapsed in late April this year.
Widely seen as a respected figure in the financial industry and featuring on Crain's Notable Women in Banking & Finance list, Erkan sits on the board of Marsh McLennan.
"Turkey eases forex controls, rate hikes next as Simsek takes charge" by Mustafa Sonmez, Al-Monitor
By entrusting the economic management to Simsek, a former Merrill Lynch economist in London, Erdogan hopes to restore Ankara's credibility and encourage disenchanted foreign investors to return to Turkey's financial markets. The authorities have since scaled back their interventions on the foreign exchange market, letting the lira hit record lows. The currency has tumbled to about 23.5 versus the dollar, losing nearly 15% of its value since May 29.
Ankara is eager to lure foreign funds into Turkish stocks and sovereign bonds. Such portfolio investments had peaked at $134 billion in 2012, but stood at a mere $24 billion in early June. The revival of foreign investments depends on improving the investment environment, including higher yields. Thus, all eyes will be on interest rates in the coming days.
A revamped bank is expected to deliver a rate hike of seven or eight percentage points initially and reassure markets that further increases will follow.
Ankara hopes to see the country's risk premium drop further, which would facilitate external borrowing in larger amounts and at lower costs and ease the rollover of the existing debt.
POLITICS
Kilicdaroglu reportedly decides not to seek CHP leadership again
According to journalist Fatih Altayli, Kemal Kilicdaroglu, the leader of the main opposition Republican People's Party (CHP), informed close associates that he would not put himself forward as a candidate for the party leadership or the presidency in the future.
Altayli's article, based on behind-the-scenes reports, states that trusted CHP executives sought clarity on the party's direction and Kilicdaroglu's intentions. In response, Kilicdaroglu unequivocally stated that his recent presidential candidacy was his first and last, expressing no intention to pursue any other position, including the presidency.
Altayli also noted that Kilicdaroglu does not plan to step down from the CHP leadership until the scheduled local elections in March 2024.
National Security Council discusses return of Syrian refugees for the first time
Turkey's National Security Council, in its first meeting on June 8 following the formation of President Recep Tayyip Erdogan's new cabinet, publicly addressed the issue of Syrian refugees for the first time. The council emphasized the importance of international support to facilitate the voluntary return of Syrians to their homeland.
This statement marks a notable departure for the council, as it openly acknowledges discussing the return of Syrians during its regular bi-monthly gatherings.
Massive data breach exposes private information of Turkish residents
A significant data breach occurred, resulting in the leak of personal information belonging to millions of individuals residing in Turkey, including prominent political figures President Erdogan and opposition leader Kemal Kilicdaroglu. The leaked data is accessible to the public through free membership on a website, while additional details are available to paid subscribers.
The compromised information includes names, surnames, names of relatives, addresses, phone numbers, bank account details, and property ownership documents such as house and land deeds.
ECONOMY
Turkish State Lenders Rally to Bolster Lira Amid Steep Decline
In response to a significant plunge in the value of the Turkish lira, state lenders in Turkey have stepped in to provide support and stabilize the currency. This move comes after the lira experienced its most substantial drop in over a year on June 7.
Under a protocol established in 2018 between the Turkish Treasury and the central bank, the latter has the authority to instruct state lenders to sell foreign exchange to safeguard the lira's stability.
Earlier this week, the Treasury temporarily suspended the protocol to reinstate the interventions, allowing state lenders to resume their efforts to shore up the lira, Bloomberg claimed.
Hakan Kara, the former chief economist of the Central Bank, stated that the Central Bank sold $2.5 billion on June 7th. However, despite this, the Turkish Lira depreciated by nearly 8 percent.
The economic writer Ugur Gurses also claimed that the former governor of the Central Bank, Sahap Kavcioglu, sold an additional $1.5 billion on his last day in office, thus leaving the Central Bank with a net open position of $63.5 billion to be inherited by the new Central Bank Governor Hafize Gaye Erkan.
Erdogan appoints Hafize Gaye Erkan as head of Turkey's central bank
President Erdogan appointed Hafize Gaye Erkan, a finance executive based in the United States, as the new head of Turkey's central bank. This appointment is expected to mark a change in policy direction, moving away from previous rate cuts and addressing the cost-of-living crisis.
However, Erkan's stance on monetary matters remains unclear, as her professional background primarily revolves around Wall Street and U.S. corporate boardrooms, lacking formal experience in monetary policy.
Erkan's appointment and the decision to appoint Kavcioglu as the head of the BDDK, the banking regulator, was announced in the Official Gazette. Investors express concerns about the potential continuity of unorthodox practices after Kavcioglu's appointment to the BDDK.
New finance minister to engage with banking sector next week
Turkey's newly appointed Finance Minister, Mehmet Simsek, is set to meet with top executives from the banking sector amidst speculation of potential policy reversals. According to sources in the banking industry, the meeting is scheduled for next week and will involve discussions between Simsek and member banks of the Banks Association of Turkey (TBB).
A senior banker emphasized the necessity of such a meeting, pointing out that similar gatherings have taken place in the past following the appointment of Treasury and related ministers. The sources revealed that the meeting will focus on conducting a comprehensive assessment of the banking sector and addressing the current economic challenges with the minister.
Inflation declines to 39.6% with zero price for natural gas
Official data released on June 5 revealed that Turkey's annual inflation rate dropped to 39.59% in May. The significant factor behind this decrease was the government's strategy of compensating price increases in various goods by supplying natural gas free of charge.
To calculate the Consumer Price Index (CPI) for May, the Turkish Statistical Institute (TUIK) adopted a "zero price" approach for natural gas. The government promised free gas in May and an additional monthly allocation of 25 cubic meters at no cost until May 2024.
Goldman Sachs says rates may rise to 40%
Goldman Sachs stated on June 9 that the appointments of Mehmet Simsek as Turkish finance minister and Hafize Gaye Erkan as central bank governor indicated a broad consensus within the new administration regarding the necessity of monetary and fiscal adjustments.
While the monetary policy framework still lacks clear guidance at this stage, the bank emphasized that a "fully orthodox policy-maker" would allow the exchange rate to adjust initially and raise the repo rate to a level that effectively anchors interest rates in the economy. In a note to clients, the bank stated that an orthodox policy would allow rates to rise to the current 40% of deposit rates.
Turkish security forces seize $1 billion counterfeit money in Istanbul
Turkish authorities seized $1 billion counterfeit money destined for Africa in Istanbul. In a coordinated operation, security forces arrested six individuals, including a citizen of Ghana and three Swedish nationals, who were allegedly involved in this illicit activity.
Gendarmerie forces acting on valuable intelligence traced the suspects to a storage facility in Istanbul's Kagithane district. Gendarmerie discovered a substantial quantity of counterfeit $100 bills intended for distribution in various African countries.
HUMAN RIGHTS
ECHR once again rules rights violations in Demirtas and Yuksekdag case
The European Court of Human Rights (ECHR) once again ruled that Turkey violated the rights of former Peoples' Democratic Party (HDP) co-chairs Selahattin Demirtas and Figen Yuksekdag. According to the ECHR, Turkey violated Article 5, Clause 4 of the European Convention on Human Rights, which guarantees the right to a speedy review of the lawfulness of detention.
As a result of this ruling, Turkey was ordered to pay 5,500 euros each to Demirtas and Yuksekdagas compensation for non-pecuniary damage and 2,500 euros jointly to cover costs and expenses.
Turkish court acquits former Amnesty Head of terrorism charges
In a longstanding case on terrorism charges, a Turkish court acquitted Taner Kilic, the former local head of Amnesty International, along with three other human rights activists.
Previously sentenced to over six years in prison in 2020, Kilic's case was referred back to a first-instance court by Turkey's Court of Cassation due to an "incomplete investigation" last year. The lower court reached a verdict of acquittal for all four defendants, citing insufficient evidence.
High school student arrested for drawing a mustache on Erdogan's election banner
In the southern province of Mersin, a 16-year-old high school student was arrested for drawing a mustache and writing offensive words on a campaign banner featuring President Erdogan. Police examined the surrounding security cameras and identified the student responsible.
Following the student's statement at the police station, the court ordered him arrested on charges of "insulting the President" and "insulting a public official."
FOREIGN POLICY
Erdogan Calls Putin and Zelenskyy, Offers Mediation in Ukraine Dam Crisis
Turkish President Recep Tayyip Erdogan called Russian President Vladimir Putin and Ukrainian President Volodymir Zelenskyy, proposing a joint investigation into the collapse of the Nova Kakhovka dam in southern Ukraine. The dam's collapse has resulted in the displacement of tens of thousands of people.
During his phone conversations with Putin and Zelenskyy on June 7, Erdogan suggested establishing a mechanism involving experts from Russia, Ukraine, the United Nations, and Turkey. He referred to the Black Sea grain deal initiative as a basis for this proposal.
Zelenskyy emphasized the urgent need to address the aftermath of the dam's destruction and prevent further disaster.
In his conversation with Putin, Erdogan emphasized the importance of conducting a thorough investigation into the dam explosion to eliminate doubts. Additionally, Erdogan expressed Turkey's unwavering commitment to actively pursue a fair and lasting peace between the two conflict-affected countries.
Blinken calls his newly appointed counterpart, reiterates Sweden's NATO bid
U.S. Secretary of State Antony Blinken called Turkey's newly appointed Foreign Minister Hakan Fidan to congratulate him. Their conversation revolved around regional affairs and the significance of the US-Turkey relationship, particularly emphasizing their longstanding defense cooperation.
The importance of NATO unity was underscored, with Blinken urging Sweden to join the alliance at the earliest opportunity. Additionally, Secretary Blinken reiterated the significance of the Turkey-sponsored Black Sea Grain Initiative. The normalization of relations between Turkey and Armenia was also discussed during the call, with Fidan raising concerns about Turkey's security and urging Stockholm to address them.
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