CONTENT PREVIEW
CBRN Assessment

US sanctions on Turkish ministers probably intended for US domestic political consumption; broader economic sanctions highly unlikely

03 August 2018

Key Points

  • President Donald Trump is likely to have calculated that retaliatory action over the detention of Andrew Brunson – an issue which carries importance for the US evangelical community, a key pro-Trump constituency – would increase Republican votes leading up to the midterm US elections.
  • The sanction decision renders reconciliation less likely, denying Erdoğan a face-saving way to release Brunson without being perceived as capitulating to the US.
  • The further depreciation of the Turkish lira, which had already lost one-quarter of its value since the start of the year, is likely to deepen pressure on Turkish corporates burdened with foreign currency debt, while exacerbating inflation, which accelerated rapidly to 15% in June 2018.

Event

On 1 August, the US announced sanctions against the Turkish Justice and Interior ministers, Abdülhamit Gül and Süleyman Soylu, in retaliation for the continued detention of American pastor Andrew Brunson in Turkey.

Brunson was charged by a Turkish court with what the US has described as “unfounded” claims of terrorism and espionage. The Turkish government most likely intended to use him as a bargaining chip to extract concessions from the US over various issues, including the extradition of the US-based Turkish Islamic cleric Fethullah Gülen, who the Turkish government accuses of having masterminded the 2016 coup attempt. However, Turkish President Recep Tayyip Erdoğan appears to have underestimated Trump’s willingness to escalate measures against a NATO ally.

US President Donald Trump and Turkish President Recep Tayyip Erdoğan attend the opening ceremony at the 2018 NATO Summit at NATO headquarters in Brussels, Belgium, on 11 July 2018. (Sean Gallup/Getty Images)US President Donald Trump and Turkish President Recep Tayyip Erdoğan attend the opening ceremony at the 2018 NATO Summit at NATO headquarters in Brussels, Belgium, on 11 July 2018. (Sean Gallup/Getty Images)

In practical terms, the sanctions are targeted at the individual ministers, with the US Treasury Department freezing their US assets while prohibiting US individuals from engaging in transactions with them. Nevertheless, the sanctions have shaken confidence in Turkey’s already fragile economy, with the Turkish lira sliding by 3.5% to a historic low of TRY5.08/USD1 after the announcement, and the cost of credit-default swap insurance on Turkish risk moving to a six-and-a-half year high according to IHS Markit data.

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