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Turkey Takes a Big Step Backwards

December 16, 2009


In a recent post that updated past topics on which I’ve written, I noted that some very positive things were happening in Turkey (More Updates: Turkey and the PKK/Investing in Iraq/Nigeria). I concluded that update this way:


Coupled with recent positive peace overtures to the Armenians, Turkey’s outreach to the Kurds reflects a consistent policy of trying to bring stability and economic growth to Turkey. Handled correctly, the moment might be ripe for serious negotiations with PKK leaders.”


It turns out my optimism was premature. Turkey’s constitutional court has derailed Turkish Prime Minister Recep Tayyip Erdogan’s outreach to the Kurds by banning the Kurd’s main political party from politics [“Turkey bars main pro-Kurdish party,” by Delphine Strauss, Financial Times, 12 December 2009]. Strauss reports:


Turkey’s constitutional court ordered the closure of the country’s main pro-Kurdish party yesterday in a ruling that could kill off reforms aimed at ending decades of conflict. Hasim Kilic, the court’s top judge, said the Democratic Society party (DTP) had become ‘a focus of actions against the unity of the nation’, citing its links to the rebel Kurdistan Workers’ party (PKK), which is listed as terrorist by the European Union and US as well as Turkey. The court also banned 37 DTP members from politics for five years, including Ahmet Turk, the party’s chairman. Recep Tayyip Erdogan, prime minister, took a gamble this autumn in launching reforms to extend Kurdish rights that are unpopular with much of the Turkish public, aimed at ending a war that has claimed 40,000 lives. The change, giving more freedom to speak Kurdish and more protection against abuses, won praise from the EU and US, keen to see reforms that could also aid stability in Iraq. The DTP, the fourth party in Turkey’s parliament, supported that initiative but criticized its lack of ambition. The court’s verdict follows a week in which the funerals of nine soldiers killed in a PKK attack … received blanket media coverage. ‘Despite all the developments, we believe that Turkey will one day seize peace,’ Mr Turk said after the verdict. ‘Turkey cannot solve its problems by closing parties.’ He did not say whether DTP deputies, elected as independents, would act on a threat to resign en masse if any were banned. Many Turkish political parties have been closed down or ousted by military coups in past decades. Wolfango Piccoli, analyst at Eurasia group, said the ruling would stoke ethnic tensions.”


Of course the early December PKK attack against Turkish troops did nothing to improve the environment in which the court made its ruling and much of blame for this reversal of fortune can be laid at the feet of the PKK. Mr. Turk’s restraint (and note of hope) following the ruling were laudable and one can only hope that other Kurds will follow his lead. Unfortunately, the ruling did lead to protests and violence [“Two killed at pro-Kurdish protest,” BBC News, 15 December 2009]. The violence took place in the predominantly Kurdish province of Mus when a shopkeeper fired into a crowd of Kurds after his shop was attacked.


The ruling was also a personal setback for Prime Minister Erdogan, who was not pleased with the ruling [“Turkey’s Erdogan criticizes ban on Kurdish party,” Reuters, 14 December 2009]. “Our position against the closure of the DTP is clear … We are against the closure of parties. We think individuals should be punished, not a (party) identity,” Erdogan told parliament. In a plea to the Kurds for patience, Erdogan told reporters, “We will overcome these problems as long as our nation is united and in solidarity” [“Clashes as Kurdish MPs meet,” Al Jazeera, 14 December 2009].


The court’s ruling is not just a setback for Erdogan, the Kurds, and for Turkey. It is a setback for the entire region. It might also have set back Turkey’s efforts to join the European Union. “The European Union … criticized the Turkish government for banning the DTP, calling for the ‘utmost restraint’ while adding that banning political parties was ‘an exceptional measure'” [“Turkey’s Kurd initiative goes up in smoke,” by Stephen Starr, Asian Times, 16 December 2009]. One can only hope that peace efforts won’t cease as a result of the court’s ruling and that the Prime Minister will continue to pursue to a peace deal with the Kurds. Turkish leaders understand that its economic future depends on promoting a more stable society and fostering better relations with its neighbors. Tired of being ignored by the European Union, Turkey has set out a course for itself to become a leader in the Middle East [“Ankara pursues lead role in Middle East,” by Roula Khalaf, Financial Times, 17 November 2009]. Khalaf reports:


Driven by the ambitions of the ruling Justice and Development (AK) party, which has Islamist roots, and Turkish disappointment with Europe’s reluctance to embrace it, Ankara embarked on its Middle East journey with a soft approach: the export of weepy soap operas that have captured the Arab world’s imagination. Its charm offensive was followed with strident criticism of Israel during the December Gaza offensive, which strained relations with the Jewish state but went down well with the Arab public.”


One of the results of turning its attention to its Islamic neighbors is that Turkey has become a prime destination for Arab tourists. The ambitions of Turkish leaders goes far beyond entertaining its Middle Eastern neighbors. Khalaf continues:


Its effort to play a bigger regional role in Middle Eastern politics has been stepped up more recently. [In October,] Turkey cancelled air force exercises with Israel. A few weeks later Recep Tayyip Erdogan, the prime minister, arrived in Tehran to declare Iran’s nuclear program ‘peaceful and humanitarian’ – not the message that western powers negotiating with the Islamic republic wanted Ankara to deliver. Around the same time, Turkey removed border restrictions with Syria, confirming the advance in relations with a difficult neighbor. Ankara has even improved relations with the Iraqi Kurdish minority whose autonomy in the northern region has long been seen by Turkish governments as a threat. These days, whenever tensions erupt in the region, including between Arab states, Turkey is certain to be offering itself as a mediator.”


And its offers have been taken up. Take Syria, for example. That country has eschewed bilateral talks with Israel and has insisted that any such talks be mediated by Turkey. Khalaf continues:


Two fundamental political factors have made Turkey more welcome as a regional player, both by the public and by regional governments. First, Ankara’s diplomatic outreach has stood in contrast to the more assertive Iran, which has pursued influence in the region by backing radical organisations and policies that puts it at odds with some of the leading Arab governments. Second, Turkey’s pursuit of a role has been facilitated by the region’s power vacuum. The ability of traditional powers – essentially Egypt and Saudi Arabia – to shape events has diminished, as has that of the US, the main outside power. Turkey’s advances in the Middle East come at a time when US attempts to breath new life into Palestinian-Israeli peace talks have faltered, undermining America’s Arab allies, who have little to show for their support of a negotiated solution to the Arab-Israeli conflict. … Paul Salem, director of the Carnegie Middle East Center in Beirut, argues that Turkey now is well placed to make a bid for a pre-eminent leadership role within the Muslim and Arab world. Egypt’s dominance has faded, he says, and Iran’s influence is constrained by its Shia identity in a mainly Sunni Arab world and its increasingly dysfunctional clerical leadership. ‘Turkey is the only country in the Middle East that has integrated with modernity,’ Mr Salem wrote in the pan-Arab daily al-Hayat. ‘Iran, Egypt and other Arab countries are not the future. Turkey might well be. As a large Sunni country with deep historical roots in the region, this could be the beginning of Turkey’s century in the Middle East.'”


In an earlier article, Delphine Strauss observes that “the speed and scope of Turkey’s diplomatic endeavors have left both Turkish and western observers wondering whether it can juggle all its new interests. In a month of frenetic activity, Mr Davutoglu has staged a show of friendship with Syria, ending visa restrictions on a border once patrolled by Turkish tanks; paid a high-profile visit to Iraq’s Kurdistan region, long shunned as a threat to Turkish unity; and signed a landmark deal to mend relations with Armenia” [“Ottoman mission,” Financial Times, 24 November 2009]. Although Turkey has clearly turned towards the Middle East, as the accompanying graphic shows, Europe remains Turkey’s largest trading partner. An interesting twist in Turkey’s saga with the EU is that it may actually be getting closer to EU membership even as it turns more towards the Middle East [“Turkey’s Shift to a More Open Economy,” by Stanley Reed, BusinessWeek, 1 October 2009]. Reed reports:


Turkey has a well-educated workforce, proximity to Europe, and a shrewd management class. But financial fragility, including a meltdown that sparked riots in 2001, has kept it from entering the first rank of emerging market economies. … [Recently, however,] Turkey has welcomed investment and stepped up efforts to become a real player in the global economy. This change in attitude has raised Turkey in the eyes of multinationals. Foreign direct investment surged from $1.1 billion in 2001 to $22 billion in 2007, before dropping back to $18 billion in 2008. Even though the figure is expected to fall to $9.1 billion this year, executives seem confident Turkey will bounce back. With a population of 76 million, Turkey is an attractive consumer market, and all those youthful workers at Europe’s doorstep have turned the country into a workshop for export industries such as cars, aerospace, appliances, and textiles. … Two things have made Turkey more of a player. The enforced discipline of applying for European Union membership has worked wonders. And Prime Minister Recep Tayyip Erdogan, who has headed a moderately Islamist government since 2003, has pushed largely pro-business policies.”


Among the other things that Turkey has going for it is its location. Reed continues:


Turkey’s trump card is its location. … The country is not just close to Europe but also to the former Soviet Union and the Middle East. The area from the Balkans to Kazakhstan has the potential to be fast-growing for years to come. Ferdinando Beccalli-Falco, Brussels-based CEO of GE International, sees Turkey as a ‘staging ground’ for penetrating the region. Yesim Toduk, founder of Istanbul executive search firm Amrop International, says she spends much of her time finding Turks to work for companies in Azerbaijan, Kazakhstan, Russia, and Saudi Arabia.”


Of course, one of Turkey’s closest neighbors is Iraq (more specifically, the Kurdish region of northern Iraq). As I’ve noted in my numerous posts about Turkey and Iraq, Turkey is well-situated to take advantage of a growing northern Iraq economy [“Links growing beyond aid and smuggling,” by Alex Barker, Financial Times, 27 November 2009]. Barker reports:


Pass a big construction site in Erbil, Suleimaniya or Dohuk – the booming cities of Iraqi Kurdistan – and it is most likely that the workers will be toiling away for a Turkish company. In good times and bad, merchants from Turkey have beaten a path over the long, mountainous and disputed border with Iraq, looking to sell their wares or tap the region’s great and largely unrealised commercial potential. From oil to construction, Turkish entrepreneurs have amassed some of the political clout and business hardiness necessary to cope with the Kurdish region’s rocky regulatory terrain – turning them into valued partners for others. When European or US companies are contemplating a move into Iraqi Kurdistan, their first port of call is often Istanbul.”


Building on current ties and expanding the economic boom in northern Iraq into the Kurdish region of Turkey is part of the motivation behind peace negotiations with Kurdish rebels. Peace in the cross-border Kurdish region will enhance prospects of spreading economic prosperity. Barker continues:


For many years, the flow across the border mainly amounted to food (often aid), Turkish troops, units of the rebel Kurdish Workers Party insurgents and hidden loads of ‘mazout’ – illegal smuggled fuel. Now Turkey is preparing to open two more border gates and a consulate in Erbil – an unthinkable political step five or 10 years ago. International oil companies are working in tandem with Turkish groups to legitimately pump oil across the border. There is even talk of reviving the great Ottoman dream of a railway linking Baghdad and Berlin via Istanbul.”


Having spent a good deal of time in the Kurdistan region of Iraq, I know how prevalent Turkish companies and workers are. If the border between Turkey and Iraq becomes more open, the chances of regional economic growth will increase.


To date construction has been the dominant business area. Big public infrastructure contracts – from airports and universities to roads and new housing developments – have invariably gone to Turkish groups able to draw on a skilled, often ethnically Kurdish workforce that are willing to tolerate a tough and sometimes dangerous working environment. A further $180m road-building contract was awarded to Yüksel Insaat [in October], a group with experience in construction projects from Kabul to Qatar.”


You can’t talk about regional prosperity without talking about oil. As Barker notes, “Those seeking their fortune in Northern Iraq tend to be firmly focused on the region’s abundance of oil.” But full exploitation of those resources is years away. Barker writes:


Development is still severely hampered by the lack of export routes, legal uncertainty and wrangling between Erbil and Baghdad over sharing oil revenue. Two Turkish companies – Genel Enerji and Petoil – were again among the first to attempt to overcome these obstacles, taking poll positions in key concessions. Both are also now examples of Turkish groups acting as a bridgehead for international investors – a rough model of co-operation that could apply to many other sectors as the region’s economy develops. Genel Enerji, owned by the powerful Cukurova group, is in partnership with Heritage Oil of the UK and has plans to merge, should the deal be given a green light by regulators and the Kurdish authorities. Meanwhile Petoil, which secured license agreements in Northern Iraq a few months before the US invasion, is now working with Prime Natural Resources of the US and Oil Search of Australia to develop fields. Yet the problems faced by these energy groups underline how difficult and unpredictable business can be in northern Iraq. Genel in recent months has been forced to halt production from its Taq Taq field following a dispute between the Kurds and Baghdad over payment mechanisms, dealing a serious blow to its cashflow. There is evidence of similar problems in areas such as construction. Ilnur Çevik, a former newspaper proprietor and businessmen who worked in northern Iraq, says the risks of working in such a fledgling economy are often unbearable.”


Doing business in a frontier economy is not for the faint of heart. As Barker notes from interviews, business deals can be overturned by arbitrary decisions, corruption is omnipresent, and the Kurdish region doesn’t have a banking or regulatory system. These challenges have kept most large international companies from investing. Smaller Turkish companies, however, have done fairly well considering the circumstances.


The result of Turkey’s economic reforms, as well as its outreach both east and west, has been to make the country more economic independent than it has been in decades [“Chance to assert economic independence,” by Delphine Strauss, Financial Times, 27 November 2009]. She reports that Turkey has “finally broken free from the IMF’s tutelage, after a half century as a serial recipient of funds and advice, lurching from one bail-out to the next.” Some analysts are ready to promote Turkey into the ranks of countries like Brazil, Russia, India, and China. Others, however, remain more skeptical. Strauss continues:


Turkey’s modernization process is likely to be highly volatile and prone to intense power struggles between competing interest groups,” writes Ahmet Akarli at Goldman Sachs. Without a ‘benevolent’ power such as the EU to smooth the process, he adds, ‘it may prove difficult to avoid frequent political setbacks and, in the extreme, acute social conflict, leading to extended periods of uncertainty.'”


Although Turkey’s ride into the future might be bumpy, I expect Turkey to continue climbing the ladder of prosperity.

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