by instituDE, published on 29 May 2023


Erdogan wins presidential runoff, Kilicdaroglu says to continue struggle

The second round of the presidential election on May 28 extended President Erdogan's two-decade rule. Early results showed a sharply divided country as opposition presidential candidate Kilicdaroglu received 47.9% of the vote versus Erdogan's 52.1%.

 "Turkey is the only winner today," Erdogan said and "I thank every single one of our people who once again given us the duty to rule the country for five more years," he added.

On the other hand, Kilicdaroglu claimed that the results demonstrated the public's desire to overthrow an autocratic regime. "I will continue to lead my struggle." he continued.

Kilicdaroglu calls Erdogan 'fabricator' over montage video, files criminal complaint

On May 22, Erdogan stated during a live broadcast on the government-run TRT, "The CHP leader relied on the PKK terrorist organization. Kilicdaroglu has video shoots with those in Kandil. (PKK executives sang Kilicdaroglu's song). Montage or not. PKK members supported (the opposition) with videos."

On May 22, after Erdogan's remarks, Kilicdaroglu referred to Erdogan as a "fraudulent video fabricator." on his Twitter account.

The criminal complaint was filed against President Erdogan over his comments regarding the montage video linking the Republican People's Party (CHP) and the PKK, as well as against those who generated and spread the video, said Muharrem Erkek, CHP's deputy chair in charge of legal and election affairs.


Turkish central bank requests banks to purchase Eurobonds to stabilize borrowing costs

According to people familiar with the matter who spoke to Bloomberg on the condition of anonymity, Turkey's central bank requested several local lenders this week to step in and purchase the country's dollar bonds. The move aims to prevent a spike in credit-default swap prices in private markets and to keep borrowing costs stable before the second round of the presidential election on May 28. The central bank declined to comment on the matter.

After rising to over 700 basis points this week, Turkey's five-year credit default swaps fell to 663 following the central bank's move. Turkey's longest-maturity debt also fell back below 10%.

Central bank holds policy rate steady; lira hits record low level

On May 25, as expected, the Turkish central bank kept its policy rate at 8.5%, remaining unchanged for a third consecutive month. The central bank stated that the underlying trend of inflation continued to improve.

Due to expensive market interventions and other measures to reduce forex demand, the central bank's foreign exchange reserves have declined recently. The net foreign exchange reserves of the Turkish central bank fell into the negative territory for the first time since 2002, reaching -151.3 million dollars on May 19.

On the other hand, the Turkish Lira recorded its lowest level and touched 20 against the US dollar on May 26. On the assumption that the lira will continue to fall, there has been an increase in forex demand before the presidential runoff on May 28.

"Currency fears grow ahead of presidential runoff" by Mustafa Sonmez, Al-Monitor

Turkish markets remain on edge ahead of Sunday's presidential election runoff as apprehension builds up that President Recep Tayyip Erdogan's reelection would spell deeper economic woes and send the Turkish lira into a new tailspin. 

The vote was followed by a market rout as the prospect of Erdogan winning the runoff dampened hopes for an end to his unorthodox policies. Erdogan asserted to CNN last week that he would make no change to his economic policy if he wins a third term to govern the country.

Has Turkey's foreign exchange crunch become so grave that the authorities would limit even cash withdrawals from credit cards to keep the lira from plunging? The fragility is that alarming indeed and many fear it could become unmanageable soon. 

Lying at the core of the fears is the near-exhaustion of the central bank's foreign exchange ammunition. As of May 12, the bank's gross gold and foreign exchange reserves totaled $105.1 billion and its net international reserves amounted to a mere $2.3 billion, the lowest levels since 2002.

The drain in the central bank reserves owes also to the bank's sale of gold to the market to meet surging local demand in recent weeks as people scramble to protect the value of their savings. The central bank's gold reserves stood at 687 tons on May 12, down from 844 tons on March 10.  


Turkish drone strikes YSB headquarters, kills 3

On May 23, a Turkish drone attacked a Sinjar Resistance Units (YBS) headquarters in northern Iraq, killing three YBS members.

Ankara regards Kurdistan Workers Party (PKK) and YPG as terrorist groups and considers the YBS an organization connected to the PKK and YPG.

Iraq launches a major rail and road project to connect Europe and Asia

On May 27, Iraq announced a 17-billion-dollar project to connect a large commodities port on its southern coast to the Turkish border by rail and roadways. The Development Road aims to connect Iraq's oil-rich south to Turkey and compete with the Suez Canal by reducing travel time between Asia and Europe.  

Through high-speed trains, the initiative also aims to transform the country's economy and turn it into a transit hub after decades of war and conflicts. The project is expected to be completed in 2029.


"Sinan Ogan: Exploring the New Generation Ultra-Nationalist's Outlook on Turkish Foreign Policy" by Hasim Tekines, Institute for Diplomacy and Economy

Despite Ogan's well-known prioritization of hardline policies towards Kurds and refugees, it is worth noting that his interests also extend to matters of foreign policy. He harbors a deep suspicion of the United States and the West while fostering close ties with Moscow. He recognizes that Turkish-Russian interests often clash across various domains, indicating a potential for conflict.

He asserts that Turkey may encounter more perilous situations in its dealings with Russia and emphasizes the significance of Turkey's NATO membership, recognizing it as a crucial safeguard against potential Russian threats.

As an ultra-nationalist, Ogan shares deep anti-Americanism within Turkish society and political elites. However, despite his anti-American stance, Ogan recognizes the importance of engaging with the US, particularly regarding matters concerning the Kurds and Greece. 

According to Ogan, Turkey's confrontations with Egypt, Israel, and the Gulf countries resulted in no tangible gains, only leading to a loss of these nations to the Greek side. Consequently, he supports Turkey's efforts to normalize relations with Arab countries. 

Ogan's friendly ties with Baku cause eyebrows to raise. Ogan's critics depict him as Aliyev's man in Ankara – who mediates between two leaders. Azerbaijani opposition even argues that President Aliyev might have played a role in Ogan's decision to support Erdogan.

"Recep Tayyip Erdogan is re-elected as Turkey's president", The Economist

Using the same playbook that has helped him win election after election, Turkey's strongman won again by fanning the flames of Turkey's culture wars and depicting the opposition as a threat to Turkish culture and national security. 

A chance to repair Turkey's democracy and its economy has been lost. The opposition had promised to reverse Mr Erdogan's creation of a powerful executive presidency, a blueprint for one-man rule. Mr Erdogan now retains a free hand to rule as he pleases, using the unchecked powers he has accumulated to keep the courts, the central bank, and his own party in line.

Mr Erdogan has suggested this will be his last term. That does not necessarily have to be true. According to constitutional amendments that Mr Erdogan pushed through in 2017, a president in his second term can run for a third if parliament calls a snap election before the end of his mandate. Assuming his health holds up, Mr Erdogan, who is 69, could remain in power well into the 2030s.

"Strongmen are riskier the more they stay in power" by Hugo Dixon, Reuters

The longer authoritarian leaders stay in power, the greater the risk they will make decisions that damage their economies. Investors are often enthusiastic when authoritarian leaders initially take power, figuring they will do things that are good for business. For example, the Turkish stock market rose nine-fold in dollar terms during Erdogan's first decade in charge.

One reason authoritarian leaders do better at the start is they need time to establish one-man rule. In their early days, they are forced to listen to colleagues, which can prevent them going wildly off course. But as they become more entrenched, they often silence those who disagree with them. They instead surround themselves with sycophants who are too scared to challenge them.

Erdogan shows that even democratic systems cannot always constrain autocratic tendencies. Investors should remember that strongmen eventually tend to suffer from diminishing, or even negative, returns.

"Erdogan Is a Key Player in Ukraine - on Both Sides" by Maxim Edwards, Foreign Policy

An October 2022 poll by Rating Group, a Ukrainian research agency, found that 39 percent of Ukrainians described Turkey as "neutral" rather than an ally or enemy—the largest such rating for neutrality among any of the NATO member states given as options. (Viktor Orban's Hungary, in contrast, was seen overwhelmingly as an enemy.)

For the Ukrainian public, there may be less patience for the raw pragmatism of statements such as those made by Erdogan's spokesman Ibrahim Kalin, who spoke earlier this month of a need for an "honorable way out" for both sides in the war. And while these declarations of the need for diplomacy can and have gotten both sides talking, "they don't have a detailed plan or what the requirements for both sides should be," says Tarasiuk.

"We have shelling of civilians every day and a genocidal type war against our population. Then Ukrainians hear the rhetoric of the Turkish leadership about a 'need to move from the U.S.-led world order,' about the West's fault for protracting the conflict, of course this not seen in any positive way in Ukraine, because we don't see any fair interests of Russia which need defending in the context of a full-scale invasion," Gaber concluded.