ANALYSIS
"Recent Unrests Show Turkey is a Powder Keg" by Mustafa Enes Esen, The Institute for Diplomacy and Economy
In several cities in Turkey, mobs have attacked Syrian refugees and ransacked their businesses. This chain of events was apparently sparked by the abuse of a child by a Syrian man in Kayseri. Syrians in northern Syria within Turkey’s sphere of influence burned Turkish flags, attacked trucks coming from Turkey, and in a few instances exchanged fire with Turkish troops.
Many Turkish citizens wrongfully blame their economic and social woes on refugees, believing that unemployment and inflation would not be as high if there were fewer refugees in the country. Those who cannot express their dissatisfaction with government policies due to political repression channel their anger toward refugees, as it has been a hallmark policy issue of the AKP since the beginning of the Syrian civil war in 2011. In Kayseri, some protesters even chanted slogans demanding the resignation of President Erdoğan.
The protests against Turkey in northern Syria are, however, mostly related to a recent statement by President Erdoğan. On June 28, Erdoğan stated that he did not rule out the possibility of meeting with Syrian President Bashar al-Assad to help restore bilateral relations between Turkey and Syria. Normalization of relations between Ankara and Damascus is literally a life-and-death issue for Syrians who oppose Bashar al-Assad.
Additionally, for millions of Syrians who are stuck in Idlib and its surroundings, life conditions are extremely harsh. They lack the necessary infrastructure for shelter, health, and education, and their economic opportunities are quite limited. It is no wonder that protests easily turn violent in this impoverished part of war-ravaged Syria.
The issue of Syrian refugees is a powder keg for Turkey and is likely to worsen. Many in Turkey wrongfully blame the worsening economic and social crisis on Syrians and Afghans in the country. Pogroms against Syrians may occur repeatedly, putting the country's fragile social harmony at risk.
"Turkey Bond Inflow Figures Swell With Local Banks Buying Abroad" by Kerim Karakaya, Tugce Ozsoy, and Beril Akman, Bloomberg
Turkish banks have found a roundabout way to access cheaper lira liquidity abroad, and in doing so are inflating figures for foreign purchases of lira-denominated government bonds.
Lira-denominated government debt has attracted a net $8.3 billion in overseas purchases in the past three months alone, data from the central bank shows. While some of that can be attributed to a revival of foreign interest in Turkey following a policy turnaround last year, bond traders say a sizeable proportion of the apparent inflows is actually coming from Turkish banks.
That’s because the banks have been selling or lending bonds to foreign counterparts, then buying them back via forward trades, according to traders who spoke to Bloomberg on condition of anonymity. Such transactions help the lenders to access lira liquidity at cheaper rates than they can at home.
Meanwhile, foreign investors are still exhibiting caution in taking on duration in Turkish bonds, with many positions for now focused on the currency instead, either via forward contracts and the carry trade, or shorter-term debt. Bank of America strategists calculate that positioning in forwards could now exceed $20 billion.
POLITICS
CHP Criticizes Syria and Refugee Policy, Ozel Hopes to Meet Assad This Month
Turkey’s main opposition, the Republican People’s Party (CHP), criticized the Turkish government’s Syria and refugee policy. The party blamed President Recep Tayyip Erdogan and the ruling Justice and Development Party (AKP) for violence against Syrians in Turkey, sparked by an alleged incident of child abuse in Kayseri province.
The CHP held Erdogan responsible for the deteriorating situation and urged the government to address the crisis urgently. It called for a new Syria policy, stating that the current approach is unsustainable. The party also called on the government to publish a realistic plan to repatriate refugees and to continue efforts toward normalization with Damascus.
On July 4, Victory Party Chairman Umit Ozdag met with CHP Chairman Ozgur Ozel at CHP Headquarters. After the meeting, they held a joint press statement. Ozdag said they shared their suggestions on the immigration issue with Ozel. Ozel said they would consider the Victory Party's suggestions.
In an interview, Ozgur Ozel, the party leader, expressed his hope for an official meeting with Syrian President Bashar al-Assad in Damascus this month. Ozel mentioned that party officials are working on arranging the meeting and have already had informal contact with Assad. Ozel said he plans to travel to Damascus through Lebanon for the meeting.
President Erdogan Reshuffles Cabinet, Appoints New Ministers
President Recep Tayyip Erdogan has replaced two ministers in a minor cabinet reshuffle, nearly one year after they were appointed following the May 2023 general election.
Health Minister Fahrettin Koca was replaced by Kemal Memisoglu, a medical doctor who served as the provincial health director in Istanbul. Mehmet Ozhaseki, the Environment, Urbanization, and Climate Change Minister, was replaced by Murat Kurum, a former environment minister and AKP's mayoral candidate for Istanbul in the March 31 local elections.
Trial Begins for Murder of Former Grey Wolves Leader Sinan Ates, Widow Accuses MHP Lawmakers
On July 1, an Ankara court began the trial of 22 suspects accused of the murder of Sinan Ates, former leader of the Grey Wolves, who was killed in 2022. Ates, 38, was shot in Ankara on December 30, 2022.
Ates’s widow, Ayse Ates, attended the hearing along with prominent opposition politicians. Ayse Ates, fearing for her safety, wore a bulletproof vest.
The indictment names 22 people, including Dogukan Cep, accused of instigating the murder, and Eray Ozyagci, accused of firing the fatal shots. Cep claimed he only ordered Ozyagci to shoot Ates in the feet as a warning, not to kill him.
Lawyers were barred from questioning the former Nationalist Movement Party (MHP) deputy Olcay Kilavuz, a suspect with parliamentary immunity. Ayse Ates criticized the indictment for not addressing the masterminds or motives behind the assassination, hinting at possible government interference.
The court denied a request by MHP lawyers to be co-plaintiffs in the trial.
On the fourth day of the hearing, Ayşe Ateş accused MHP lawmakers İzzet Ulvi Yönter and Semih Yalçın of orchestrating her husband Sinan Ateş's murder. She testified that her husband had named them as the ones who ordered his killing. Ayşe also expressed frustration, describing a criminal network she believed was beyond even the president's control.
In a related development, former Ankara Police Department chief Kerem Gokay Oner filed a criminal complaint challenging the official account of the detention of Tolgahan Demirbas, a defendant in the case. Oner claims that Demirbas was actually apprehended at the home of former MHP deputy Olcay Kilavuz in Mersin, not on the street as police reports stated.
On July 5, the court ordered the release of 10 detained defendants in the Sinan Ates murder trial, subject to judicial control. The court also requested missing information and documents from the prosecutor's office and postponed the hearing to July 19.
After the court's decision, Ayse Ates accused Turkish authorities of falsely attributing her husband's murder to the Gulen movement to shield the true masterminds behind the killing, describing it as a conspiracy. "The conspiracy play ended today. They want to close this case by saying 'FETO did it.” she said.
ECONOMY
TurkStat Announces Lower June Inflation as DISK Protests Official Figures
Turkish Statistical Institute (TurkStat) announced June's inflation figures on July 1, showing a 1.64 percent monthly increase in the consumer price index (CPI). Annual inflation dropped from 75.45 percent last month to 71.6 percent in June.
TurkStat reported a 24.73 percent inflation rate for the first six months of the year, setting the rise for civil servants and retirees. SGK and Bag-Kur retirees will receive a 24.73 percent increase, matching the six-month inflation rate. Civil and retired civil servants will also get a 19.3 percent raise in July, combining a 10 percent collective agreement increase and an additional amount for inflation exceeding 15 percent.
The independent Inflation Research Group (ENAG) reported a different inflation rate, with a 4.27 percent increase in June and an annual rate of 113.08 percent. ENAG calculated a 41.16 percent inflation rate for the first six months of the year.
Finance Minister Mehmet Simsek announced on social media that the disinflation process has begun, noting progress in financial stability, sustainable current account deficit, reserve accumulation, and Turkey's removal from FATF's grey list.
The Confederation of Progressive Trade Unions (DISK) protested outside TurkStat in Ankara on July 1, claiming the official inflation figures don't reflect the real economic challenges citizens face. DISK Chairwoman Arzu Cerkezoglu led the demonstration, highlighting the discrepancy between official statistics and the public's daily experiences.
Finance Minister Criticizes Early Retirement Law for Straining Budget
Turkey’s finance minister, Mehmet Simsek, criticized a law passed last year that allows millions to retire despite not meeting the age requirement, stating it has severely strained the budget. The Law on Early Retirement Despite Failing to Meet the Age Requirement (EYT) was published in the Official Gazette on March 3, 2023.
Speaking at a camp with mayors from the ruling Justice and Development Party (AKP), Simsek said 2.3 million people have benefited from the law so far, with numbers expected to reach 6 million by the end of the year. He estimated the law's burden on the budget to be TL 742 billion ($22.7 billion) for 2024 and TL 1.2 trillion ($36.8 billion) in 2025.
Simsek also defended the country's minimum wage during a TV program on July 1, saying, "The minimum wage is not low in Turkey,". He stated that the minimum wage has increased by 5.5 percent in real terms over the last 20 years, compared to Turkey’s real growth of 5.4 percent. He added that, even with inflation projected at 42 percent by the end of the year, the minimum wage increase is higher than the growth rate.
Finally, Simsek said the law was passed before last year's elections due to a “populist push by the opposition.”
Chinese Electric Car Maker BYD Announces $1 Billion Investment in Turkey
In a recent development, Turkey introduced an exemption from the additional tax on Chinese car imports for those made with investment incentives. The decision, published in the Official Gazette on July 5, exempts these imports from the 40 percent additional tax imposed on June 7.
Following this decision, Chinese electric car manufacturer BYD announced a $1 billion investment. BYD will establish its second factory in Manisa, Turkey, after its first factory in Hungary. The official announcement will be made on July 8, with President Erdoğan attending the ceremony.
Turkish Banks Boost Bond Inflow Figures with Overseas Buys
Turkish banks have found a way to access cheaper lira liquidity abroad, inflating the figures for foreign purchases of lira-denominated government bonds, Bloomberg reported.
Data from the central bank shows a net $8.3 billion in overseas purchases of lira-denominated government debt over the past three months. While some of this is due to renewed foreign interest in Turkey after last year's policy changes, bond traders say a significant portion is actually coming from Turkish banks.
The banks have been selling or lending bonds to foreign counterparts and then buying them back via forward trades. This approach allows them to access lira liquidity at lower rates than domestic rates.
Foreign investors remain cautious about long-term Turkish bonds, focusing instead on the currency through forward contracts, the carry trade, or shorter-term debt, Bloomberg claimed. Bank of America strategists estimate that positions in forwards could now exceed $20 billion.
HUMAN RIGHTS
House Lawmakers Urge Biden to Address Turkey's Human Rights Abuses Ahead of NATO Summit
A bipartisan group of House lawmakers, led by Reps. Chris Smith (R-N.J.) and Lloyd Doggett (D-Texas), along with 140 other members, sent a letter to President Biden on July 2. The lawmakers urged Biden to press Turkey to adhere to international law regarding ongoing human rights abuses while Turkish President Recep Tayyip Erdoğan is in Washington for the NATO Summit from July 9 to 11.
In their letter, the lawmakers called for urgent action to address Turkey's violations of international law and systematic human rights abuses. They specifically asked Biden to prioritize human rights issues and demand that Turkey stop its campaign of repression abroad, release political prisoners, and restore the rule of law.
The lawmakers also accused Turkey of misusing Interpol, citing instances where over 100 Turkish nationals allegedly involved in the 2016 coup were forcibly transferred, reportedly experiencing torture, denial of legal rights, and coerced confessions.
Turkish Police Detain 108 Suspects for Alleged Gulen Movement Links
Turkish police detained 108 people across 29 provinces on July 4 for alleged links to the Gülen movement, Interior Minister Ali Yerlikaya announced on his X account.
Yerlikaya stated that the detainees included suspects involved in the movement’s infiltration of the police and military. They were accused of communicating with their contacts within the movement via pay phones or had sentences related to Gülen links upheld by the Supreme Court of Appeals.
205 Women Killed in First Half of 2024 in Turkey
In the first six months of 2024, Turkish men killed at least 205 women in acts of domestic violence, while 117 others died under suspicious circumstances, according to the We Will Stop Femicide Platform. Fidan Ataselim, the platform's secretary-general, announced these figures at a news conference in Istanbul on July 4.
Ataselim highlighted that news reports of murdered women appear daily and criticized the government for not maintaining accurate records of domestic violence victims. She noted that 57 percent of the women were at home when they were murdered, and 59 percent were killed by a gun.
Ataselim also mentioned that the number of women killed by men in Turkey has increased since the country withdrew from the Istanbul Convention.
FOREIGN POLICY
Turkey Mediates Talks Between Somalia and Ethiopia Over Controversial Port Deal
On July 1, Turkey began mediating talks between Somalia and Ethiopia over a port deal that Addis Ababa signed with Somaliland earlier this year. Mogadishu deemed the agreement illegal.
Turkey's foreign ministry stated that Foreign Minister Hakan Fidan hosted his Ethiopian and Somali counterparts in Ankara. The three ministers signed a joint statement following "candid, cordial, and forward-looking" discussions.
The Somali and Ethiopian ministers explored ways to address their differences "within a mutually acceptable framework" and agreed to hold another round of talks in Ankara on September 2, the statement added.
A spokesperson for Somaliland said it was not involved in the talks. The goal of the negotiations remains unclear, and expectations for a resolution are low, two officials familiar with the matter said.
Iraq Arrests Three PKK Suspects Planning Attacks Across The Country
Iraq's Interior Ministry officials announced on July 1 that they had arrested three people linked to the outlawed Kurdistan Workers Party (PKK), who were suspected of planning attacks across the country, including targeting a critical oil export pipeline in the north.
Interior Ministry spokesman Brigadier General Muqdad Meeri said at a press conference in Baghdad that an investigation revealed the PKK members' plans to attack the Ceyhan oil pipeline linking Kirkuk, Erbil, and Duhok to Turkey. Meeri added that the three had confessed to setting sabotage fires at commercial markets in the Kurdistan region, including in Kirkuk, over the past few months.
The PKK denied the interior ministry's accusations and involvement in the arson attacks.
Turkey and USA in Talks Over New Nuclear Power Plants and SMRs
Turkey is in talks with the United States about building large-scale nuclear power plants and small modular reactors (SMRs), Yusuf Ceylan, a senior Turkish Energy Ministry official, announced on July 2.
"The USA is very interested in Turkey's goal to increase its nuclear energy capacity and construct new power plants," Ceylan told Reuters at a nuclear power plant conference. He mentioned that discussions include both existing and new power plant sites.
Ceylan also noted ongoing negotiations with South Korea and Russia for a second nuclear power plant in the Black Sea region of Sinop and with China's SPIC for a third nuclear power plant in the Thrace region of northwest Turkey.
Erdogan Open to Inviting Assad to Ankara Amid Diplomatic Talks with Putin
President Erdogan and Russian President Vladimir Putin met on July 3 during the Shanghai Cooperation Organization Summit in Astana, Kazakhstan, marking their first face-to-face meeting since last September. The meeting highlighted ongoing cooperation between Turkey and Russia, particularly in strategic energy projects like the Akkuyu nuclear power plant.
Erdogan extended an invitation to Putin to visit Turkey, which Putin accepted, confirming his intention to make the trip.
Erdogan also reportedly offered to help end the Ukraine-Russia war during his meeting with Putin. Erdogan expressed his belief that a fair peace benefiting both sides was possible, according to the Turkish presidency.
Putin's spokesman, Dmitry Peskov, dismissed the idea of Erdogan playing a mediator role. "No, it's not possible," Peskov told a Russian television interviewer, as the Russian Tass news agency reported. The report did not provide a reason for the Kremlin's opposition to Erdogan's involvement.
President Erdogan, speaking to journalists during his return flight from Astana, expressed readiness to extend an invitation to Assad anytime.
"We are ready to extend an invitation to Bashar Assad whenever he takes steps to improve relations with Turkey. We previously had friendly relations with Syria; we were meeting with Assad as a family. Our aim with this invitation is to restore relations to their previous state. The invitation could be extended at any time," Erdogan said.
Erdogan also stated that he could invite Syrian President Bashar al-Assad to Ankara along with Putin.
Saudi Arabia Partners with Turkish Defense Firms to Boost its Defense Technology
Saudi Arabian Military Industries (SAMI) signed three memorandums of understanding (MoUs) with Turkish defense firms Baykar Technology, Fergani Uzay, and ASELSAN in Istanbul on July 3. The agreements aim to jointly develop and produce defense technologies in Saudi Arabia.
The signings were attended by Saudi Defense Minister Prince Khalid bin Salman bin Abdulaziz Al Saud and Haluk Görgün from Turkey’s Presidency of Defense Industry (SSB).
Germany-Turkey Tensions Escalate Over Footballer Gesture; Erdogan Cancels Azerbaijan Trip for Euro 2024
Germany summoned Turkey's ambassador in Berlin on July 4 amid escalating tensions following an alleged ultra-nationalist gesture by Turkish footballer Merih Demiral during a Euro 2024 match against Austria.
"The Turkish ambassador was summoned this morning," stated the German foreign ministry. Turkey had taken a similar action the previous day by summoning the German envoy in Ankara.
Demiral's gesture, linked to the Turkish ultra-nationalist group Grey Wolves, prompted UEFA to launch an investigation for "inappropriate behaviour" and drew condemnation from German leaders. Ankara swiftly criticized Berlin's response as "xenophobic."
Germany's Interior Minister Nancy Faeser emphasized that "symbols of Turkish right-wing extremists have no place in our stadiums".
Following the latest developments, President Tayyip Erdoğan reportedly decided to cancel his trip to Azerbaijan to attend the Informal Summit of Heads of State of the Organization of Turkic States (TDT) and instead travel to Germany to watch the Netherlands-Turkey match scheduled for July 6.
On July 5, UEFA handed Demiral a two-match ban for his "wolf" celebration. Shortly after UEFA's announcement, Devlet Bahceli, leader of Turkey’s far-right Nationalist Movement Party (MHP), called on the national team to leave the Euro 2024 tournament to protest the ban. On July 6, Turkey lost 2-1 to the Netherlands, with Demiral missing the game.
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