From possible US sanctions to electing a new economic tsar, Erdogan has his hands full after Sunday’s elections
Turkish president Tayyip Erdogan won yet another election this past Sunday, gaining a new mandate under Turkey’s soon-to-be instituted presidential system with 52.5 percent of support. Erdogan has been elected for a 5-year term under the new system, and as the executive president will have sweeping powers to appoint a cabinet to shape many of Turkey’s institutions.
Despite Erdogan’s win, his ruling party, Justice and Development (AKP), has seen a decline in votes since the November 2015 elections ending at 42.5 percent, thereby making the Turkish president dependent on his ultra-nationalist ally, the Nationalist Action Party (MHP) in the parliament and in governance. AKP and MHP had entered the elections on a joint ticket and this coalition arrangement will continue to be the fundamental dynamic in Turkey’s domestic and foreign policy. Nationalism will be the dominant color in the Turkish body politic.
The main opposition candidate, Muharrem Ince, exceeded expectations Sunday by scoring 30.5 percent – well above CHP’s average 25 percent – within the seven-week period since declaring his candidacy. If he manages to attain the chairmanship of the main opposition party, the People’s Republican Party (CHP), he will be a critical player in Turkish politics for some time.
The 4 main takeaways from the Turkish elections on Sunday:
1. A country still divided
Even though election results point to a decisive win for Erdogan, they also underline the ongoing deep polarization evidenced during last year’s referendum. Erdogan was elected president for the first time in 2014 with 51.8 percent of support. Last year’s referendum results were essentially a vote of confidence on his presidency, which he won with 51 percent. This time, in an official alliance with the ultra-nationalist MHP, Erdogan garnered 52.5 percent of the vote.
All of that indicates that the “divided” political map of Turkey is still a reality, with the secularists, Alawites, urban professionals and the pro-Kurdish party—Peoples’ Democratic Party—in the non-Erdogan camp. Even though there are different ideological priorities within the opposition, their numbers almost add up to “the other half” of the Turkish population.
2. Economy is the top concern
The top priority for the Turkish president will undoubtedly be fixing the country’s economic woes, which include a declining Turkish currency, the lira, but also massive foreign debt in the private sector (approximately $ 340 billion). Most economists warn that Turkish economy is “too hot,” due to the government’s high-growth model and fondness for large infrastructure projects. A slow-down and structural reform is necessary to avoid a hard landing or further depreciation of the lira – already down by 20 percent since the beginning of the year.
There is also unanimous agreement within the financial community that the state of emergency needs to be lifted in order to boost investor confidence and attract foreign funds. Erdogan has pledged to lift the state of emergency in the final stretch of his election campaign, in part due to pressure from the opposition, and this would send the right signal to the markets. But it would not be enough.
Debates about consolidation of power under the new presidential system also involve economic concerns. The Turkish president’s abhorrence of high-interest rates and efforts to apply pressure to the central bank to keep the interest rates low has at times led to market trepidations and currency decline. The markets will continue to play a “moderating” role on Erdogan’s power. The new system stipulates the creation of an “economy tsar”, combining the Treasury and the ministries of Economy, Finance, and Customs under one large ministry. Most analysts suggest that the markets would respond more favorably to a technocrat or an economist, such as the current economy minister Mehmet Simsek or Naci Agbal, as opposed to a close Erdogan confidant like his son in law, Berat Albayrak. Who Erdogan picks as his economy tsar will also give a clear indication to Turkey’s banking sector and markets about the direction of his economic policies.
3. Expect conciliatory gestures toward Europe
Unlike previous elections, the Turkish government was careful during this campaign not to pick public fights with Turkey’s western allies – largely out of a sense of economic vulnerability and the volatility of the lira. Turkey’s president will likely take a conciliatory approach towards his European partners and the United States over the next term. Presidential spokesman Ibrahim Kalin is among the names considered for a foreign ministry position.
While embarking on a reform process in order to resuscitate Turkey’s beleaguered accession process to the European Union is not a likely scenario or a strategic priority, the start of customs union modernization talks will be. Ankara believes that such an announcement would send the right message to financial markets in Turkey and in Europe – and would likely lift the state of emergency as a concession.
Turkey’s relations with the European Union and the United States will remain highly transactional over the next term. While the migration deal with Europe and the frozen state of the accession process have created a homeostasis of sorts with the EU, bilateral and trade relations will be a priority for Ankara.
4. US sanctions are on the table, but could be negotiated away
Meanwhile, the outstanding issues between Ankara and Washington will likely result in a difficult but necessary give-and-take over the next term.
For Washington, the fate of imprisoned US citizens in Turkey including pastor Andrew Brunson, and dissuading Ankara from acquiring Russian S-400 anti-missiles system are key priorities. Even though the US Congress is ready to slap Turkey with sanctions on the Brunson case, it is likely that the hearing on July 18th would lead to the American missionary’s release or transfer from prison to house arrest. As such, the case is similar to the German journalist Deniz Yucel’s incident and the negotiations with Germany for his release.
While the resolution of the Brunson case will win the Turkish government some time, the intended purchase of S-400s will continue to be a low-simmering issue over the summer. Once again, US Congress regards this purchase sanctionable and has already signaled that it would bar Turkey’s purchase of F-35 fighter jets if the sale were to go through. It is possible, but by no means guaranteed, that in return for leniency on US Treasury’s fine on Turkey’s Halkbank for violating Iran sanctions, Ankara would consider either not installing S-400s or purchasing US-produced Patriots missiles alongside the Russian hardware.