Turkey’s President Recep Tayyip Erdogan has spoken about the primary objectives during the first 100 days of his new administration. Speaking of western financial speculation against the Turkish Lira, Erdogan reiterated that the country is “facing an economic war, but we will win it”. As part of his strategy to win the western war against Turkey’s monetary policies and existing economic growth model, Erdogan announced that for the first time in history Ankara will issue state bonds in Chinese Yuan Renminbi and that the country looks forward to opening up new credit lines with China as a viable and sustainable alternative to borrowing from European or American financial institutions. In hailing the beginning of a “new era” for Turkey, Erdogan further stated that in the future, Turkey’s most important export partnerships with be with China, Russia, Mexico and India. The Turkish President also stated that the country plans to build special trade centres in 35 major cities across the globe.
These new actions by the Turkish President are consistent with the recommendations I published prior to Erdogan’s recent re-election. On the 15th of June I wrote the following:
“The Central Bank of the Republic of Turkey has thus far managed to succeed in walking a fine line between hiking interest rates in order to stave off further inflation while managing to maintain an atmosphere of accessible capital which is necessary for Turkey’s rapidly growing economy.
Turkey continues to follow this Keynesian growth pattern, but in the last several weeks, western currency speculators including in organisations under the leadership or influence of George Soros have been speculating against the Lira in what the Turkish President saw as a clear attempt to meddle in Turkey’s electoral process prior to Turks going to the polls in a Presidential and parliamentary election on the 24th of June.
Despite hiking rates and working to streamline variable interest rates across the Turkish banking sector, the hybrid monetary war being waged against the Turkish economy by major western financial institutions continues with ever increasing aggression. The US based credit rating agency Moody’s has threatened to downgrade Turkey based on recent trends in the Lira and what is deceptively being called the political situation prior to Presidential and parliamentary elections on 24 June….
The solution for Turkey is clear: Ankara should begin to gradually divest its financial assets from western institutions and consider the prospects of developing stronger bonds with the financial sector in Shanghai. Turkey has already expressed a keen interest in trading with countries as diverse as Russia, China and Iran in a combination of national currencies as opposed to the US Dollar, but so long as Turkey is even partly beholden to the western financial system, the US and some EU countries will continually try to meddle in Turkey’s sovereign affairs.
President Erdogan’s overt enthusiasm for China’s One Belt–One Road initiative has also raised eyebrows in the West, as has Turkey’s unflinching commitment to purchase Russia’s S-400 missile defence systems. In recent days, Erdogan even proposed working with Russia to jointly manufacture the forthcoming S-500 missile defence system in a move that would be a first for a major NATO member.
Erdogan has thus far demonstrated great skill at getting the most from partnerships on all sides of the wider geopolitical ‘east-west’ divide, but when it comes to finance and Turkey’s monetary stability, Ankara must develop the tools to leverage western currency speculators like George Soros as well as credit agencies with a clearly hostile agenda.
‘God willing, we will conduct an operation against Moody’s after June 24. Moody’s is making unnecessary statements despite the fact that we are not a member of it. What a shame’.
In Turkey’s case, the best defence against western financial and monetary meddling is the good offence of weening Turkish trade off of US Dollar transactions, all the while working on new partnerships with financial institutions from China and other Asian nations, including Russia. Turkey’s destiny as an independent power is at stake. When western financial institutions declare war, one must respond with vigour”.
Erdogan has continued calling for ordinary Turkish savers to sell off their US Dollars and Euros while now at a sovereign level, the government is pivoting its own monetary policy towards one working more cooperatively with Shanghai than with Wall Street, London or Frankfurt.
President Erdogan was among the earliest and most enthusiastic backers of the Chinese One Belt–One Road initiative which was originally introduced in 2013. Since then, the China-Pakistan Economic Corridor (CPEC) has flourished as a modern superhighway which seamlessly links China’s Pacific coast with the Afro-Indian Ocean region via the Arabian Sea port of Gwadar. At the same time, China and Russia are working on new corridors of trade between the neighbouring superpowers, while the prospect of a peaceful Korean peninsula opens the possibility of another north-east Asia trading route into central and western Eurasia. As Turkey is the country in western Eurasia that lies at the boundary of north-western and south-western Eurasia, Ankara has a clear role to play on the win-win model in terms of being a global junction where Chinese goods and those from other eastern One Belt–One Road participants can meet with incoming goods from the wider Mediterranean region headed towards south Asia and east Asia.
Turkey’s rapidly growing economy is likewise a substantial point of interest for Chinese investors looking for growing, young and dynamic markets in western Eurasia. A recent report from Turkey’s Daily Sabah details how over 1,000 Chinese firms are now active in Turkey across a variety of sectors. According to the report,
“Chinese firms that have been operating in Turkey’s logistics, electronics, energy, tourism, finance and real estate sectors are expanding their businesses in the country. With the entry of Bank of China and Industrial Commercial Bank of China (ICBC), the flow of Chinese companies into Turkey has accelerated and also expanded into the e-commerce sector in the recent period.
The world’s second largest trader, China invests $120 billion annually in various countries across the world and Turkey has been enjoying China’s overseas investments in the recent decade.
Accordingly, the number of Chinese firms operating in Turkey had neared 1,000 by April, according to the data of Economy Ministry.
Drawing attention to the significance of Turkey within the “Belt and Road Initiative” (BRI), an infrastructure development project designed and launched by Chinese President Xi Jinping in 2013 and spanning over 65 countries, Foreign Economic Relations Board (DEİK) Turkey-China Business Council Chairman Murat Kolbaşı stressed that the entry of two Chinese banks to the Turkish financial sector and the acquisition of a port by Chinese investors indicate the country will expand its investments and business operations in Turkey in other sectors, as well, including in energy, logistics, tourism, transportation, infrastructure and e-commerce.
Turkey’s unique position in the BRI makes the country a gate to Europe and Africa for China’s trade operations on the project’s route. Therefore, Kolbaşı highlighted that Turkey will naturally become a logistics hub for trade on the three continents.
With the aim of expanding Turkish-Chinese cooperation in the logistics sector, Turkey’s national flag carrier Turkish Airlines (THY) announced that it will form a logistics company in Hong Kong in partnership with China’s ZTO Express and Hong Kong’s PAL Air.
The partners aim to make the new joint venture one of the world’s largest integrator, and generate revenue of $2 billion within the first five years of its operation. They expect growth performance in proportion to the rising demand in the e-commerce sector.
The new joint venture and Istanbul as a mega transport hub is expected to enable THY to deliver to its customers around the world with excellent service quality“.
The report goes on to detail further Chinese investment in Turkey’s shipping and rail sectors while China and Turkey are also cooperating in the energy sector.
The following major Chinese projects in Turkey look to help elevate both Turkey’s internal economic connectivity and energy independence while readying the west Eurasian power to play a vital role as a key hub in One Belt–One Road:
–A high-speed Ankara to Istanbul railway
–A third nuclear power station to compliment those presently being constructed by Turkey’s Russian partner
–The modernisation of Turkey’s Kumport container port which is now operated by the Chinese company Cosco Pacific
–Working cooperatively to expand Turkish eCommerce platform Trendyo which just received an investment from Chinese global eCommerce leader Alibaba.
Additionally, China and Turkey plan to conduct bilateral trade in a combination of Lira and Yuan in a move that will ultimately make the growing trade between the two nations Dollar free and thus sanctions proof. In 2017, China sold $23 billion worth of goods to Turkey while China imported $3 billion worth of goods from Turkey. Officials in both countries have expressed their desire to rapidly increase these numbers.
Furthermore, while Russians continue to represent one of the biggest single national groups to visit Turkey as tourists, Ankara and Beijing are working to expand the number of Chinese tourists in the country who last year increased their spending in Turkish businesses by 166%. Turkish authorities have already begun work to make the country increasingly appealing to both Chinese visitors and investors. Last year, Ankara ordered a clampdown on provocative Sinophobic media outlets who seek to stir unnecessary tensions in China’s Xinjiang province.
Today, Turkey is taking the next logical step in strengthening its already strong and growing economic partnership with China. On the 1st of July I further stated,
“The next big step for Turkey is to gradually divest financial assets from the US and EU and move them towards Shanghai and other Asian financial centres that are more comfortable with working with Turkey as a partner for mutual development throughout future decades.
While the American military-industrial complex is keen not to alienate Turkey further, other forces of the broader US deep state including intelligence agencies, the financial sector and many powerful ethno-confessional groups have already begun acting and speaking as though Turkey is a rival or adversary of the US”.
Just over one month later, this suggestion has now become the new status quo for Turkey’s economic relations and its monetary strategy. With Erdogan further stating that small and medium sized businesses are the economic engine of the Turkish economy, this helps give an indication that there will be no immediate plans for rapid hikes in domestic interest rates. Instead, Turkey is opting to continue existing policies aimed at economic growth while further encouraging foreign investment including and especially from China in order to off-set inflationary spirals caused by a combination of normal Keynesian growth trends, a surprisingly strong US Dollar and moreover, western financial speculators looking to weaken the Lira.
Turkey now has at its disposal a well thought out sustainable development model that will draw the country closer to China than at any time in modern history. For other countries experiencing a similarly frosty relationship with western financial institutions including Pakistan, Turkey’s way forward serves as a crucial example of how to open up new lines of credit while establishing long term sustainable economic partnerships and all without having to rely on western financial institutions.