Erdogan’s Escalating Feud with US Hammers Turkish Markets


By Tugce Ozsoy and Selcan Hacaoglu

ISTANBUL (Bloomberg) — Markets in Istanbul tumbled after the US and Turkey stopped issuing visas for each other’s citizens in a spat related to last year’s failed coup against President Recep Tayyip Erdogan, deepening divisions between NATO members already at odds over the war in Syria.

The Trump administration halted visa services for Turks on Sunday, October 8, citing the October 4 arrest of a Turkish citizen employed at the US consulate in Istanbul for alleged involvement in the July 2016 putsch attempt. Erdogan’s government responded in kind within hours, repeating verbatim much of the US statement.

“The implementation of a such a decision by the US ambassador in Ankara is very saddening,” Erdogan said at a televised press conference in Kiev, Ukraine. He said that he ordered Turkey’s foreign ministry to reciprocate the move. “Turkey is a state of law, not a tribal state,” he said.

Relations have soured since the foiled coup, which Erdogan blames on a self-exiled cleric based in the US, Fethullah Gulen. The US has refused Turkey’s request to extradite Gulen, citing lack of evidence. Justice Minister Abdulhamit Gul on Monday rejected the US ambassador’s request for a meeting as prosecutors “invited” another consulate worker in to testify, AHaber TV reported. The pro-government channel said the employee’s wife and child had been detained, but it didn’t specify the worker’s whereabouts.

The US Embassy’s press service in the capital Ankara declined to comment.

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“Problems that have been accumulating between the countries for a long time are starting to snowball,” Tuncay Ozilhan, head of the advisory council of Tusiad, one of of Turkey’s most influential business lobbies, said by phone.

The lira dropped 3.2 percent to 3.7334 against the dollar as of 5:23 p.m. in Istanbul, after plunging as much as 6.6 percent. The benchmark Borsa Istanbul 100 Index of stocks declined 3 percent.


Trump, Extradition

Both sides said “recent events” had forced them to “reassess the commitment” of the other to the security of diplomatic facilities and personnel. Only two weeks ago, President Donald Trump praised Erdogan when they met at the United Nations in New York, saying that he’s “becoming a friend of mine” and that “frankly, he’s getting high marks.”

The US last week called the charges against the worker “wholly without merit,” saying it was “deeply disturbed” by the arrest and “by leaks from Turkish government sources seemingly aimed at trying the employee in the media rather than a court of law.” Turkey responded by saying the arrested citizen wasn’t part of the regular diplomatic corps but a “local employee.”

Topics: erdogan, Turkey

“If this fight with the US continues, country risk won’t decline regardless of policies in other areas,” said Ozlem Derici, founder of Spinn Consulting in Istanbul.

The visa spat comes as Turkish troops are preparing to deepen their involvement next door in Syria, where Turkey is planning a joint mission with Russia and Iran to create a combat-free zone in the Idlib province. Erdogan vowed Sunday to prevent stateless Kurds, who’ve been battling Turkish forces for decades, from creating a “terror corridor” from Iraq to the Mediterranean.

Turkey has also rebuffed the US over charges that a former economy minister and a state bank conspired to help Iran launder hundreds of millions of dollars through the US financial system, as well as its decision to buy a Russian missile-defense system that isn’t compatible with NATO.

“I would expect that there will be some sort of de-escalation at the leadership level — Trump and Erdogan will speak or meet,” said Murat Yurtbilir, who specializes in Turkish affairs at the Australian National University. “But the underlying problems won’t go away: the Gulen issue, Turkey’s slow switch toward Russia’s policy in Syria, and the economy. ”

State Department spokeswoman Heather Nauert said at a briefing on Sept. 27 that the US had received “several requests” for Gulen’s extradition, but that it had been “a while” since officials talked about the issue.


Russia, Iran

Erdogan in July accused foreigners of attempting to break Turkey apart and vowed to crush “agents” acting against his country. He gained sweeping powers in April after a tight referendum that critics said was fraudulent. A Council of Europe agency has since put Turkey on its watchlist, saying crackdowns on opponents have compromised human rights and the rule of law.

In recent months, Erdogan has increased coordination with Russia and Iran amid deepening tensions with the US, exacerbated by Washington’s decision to deliver arms to Kurdish groups that Turkey views as terrorists.

More than 37,000 US citizens traveled to Turkey in 2016, about 1.7 percent of the total and down from 88,301 in 2015, according to the Ministry of Culture and Tourism. Turkey has been attracting fewer visitors since 2014 amid concerns about terrorism, regional instability and the failed coup. The US tourist office doesn’t break out the number of Turkish visitors on its website.

The Trump administration’s visa ban puts Turkey in the same boat as Chad, Iran, Libya, North Korea, Syria, Venezuela and Yemen, which have all had US travel restrictions imposed over terrorism concerns.

“Turkey, which has been in the western camp since the 1940s, is lumped together with these countries?” said Yurtbilir. “This is the lowest level in Turkish-US relations.”

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