Was Trump’s attack on the lira Putin’s idea?

 

Trump Impeachment Odds Slashed to Shortest Ever After ...

What did Trump and Putin agree in their secret meeting in Helsinki in July? Trump’s attack on the Turkish economy has given Putin just the leverage he needs with Erdogan over Idlib.

Trump’s critics warn us that his belligerent policies towards Iran and Turkey are pushing them into Moscow’s arms, even as they seek evidence of ‘Russian collusion’ in all the wrong places. This collusion is not to be found in shady backroom campaign meetings; it is hiding in plain sight.

“He does things the right way” Trump said of Erdogan last month. It shouldn’t have been a surprise; the two men have much in common after all: nationalist tubthumping autocrats with a contempt for constitutional limits on presidential might, who see few problems which cannot be solved through the right combination of willpower and firepower. His comment specifically referred to Erdogan’s ability to ignore his own parliament, and was followed up with a mutually aggrandising fistbump. Yet the budding bromance was to be short-lived.

 

Days later, Trump entered his now infamous two-hour private meeting with Putin in Helsinki. According to their own account, one of the main items on the agenda was Syria, which for seven years has been the battleground for a proxy war between (among others) the two men’s respective countries. In this war, Turkey and the US were supposed to be on the same side; yet Trump, on Syria as so many issues, has been ambivalent as to US goals in the conflict. The original objective, of course, was to transform Syria – an independent regional power allied to both Iran and Hezbollah – into a failed state on the Iraqi/ Libyan/ Afghan model. Yet the Syrian state – with a level of popular support surprising to those western observers susceptible to their own propaganda – stubbornly refused to be destroyed. Russian intervention helped turn the tide in September 2015, and since then, one victory after another – most notably in Aleppo – has made it clear that not only will the Syrian government survive, but that it will very likely restore its authority nationwide. Most rebel-held cities have now been retaken by the Syrian Arab Army (SAA), whilst the Kurdish YPG – who have always, correctly, feared the US-backed sectarian insurgency far more than they have feared Assad – have entered into negotiations with the government, leading to a growing role for the SAA in YPG-held areas as well. The only major population centre still fully outside government control, then, is Idlib, home to almost 3 million, and largely under the control of Hay’et Tahrir Al Sham, the latest rebrand of Syria’s Al Qaeda franchise.

 

All the signs are that a government offensive on this last rebel stronghold is imminent, with government forces amassing at the western edge of the province near Jisr al Shughour. Yet one major obstacle remains. Turkey.

 

Turkish troops are now present on the ground in Idlib at around a dozen ‘observation posts’ set up under the terms of the ‘de-escalation zones’ agreed by Iran, Turkey and Russia at the Astana conference, making a direct assault on the governorate very difficult without risking a major escalation with Turkey – still, despite everything, a NATO member. Furthermore, Turkey wields extensive influence over many of the rebel groups present in Idlib. Back in May, Turkey formed a coalition of around a dozen anti-government militias there under the banner of the ‘National Liberation Front’. Earlier this month, they persuaded two HTS splinters – Nour al-Din al-Zenki, the US-UK-funded group infamous for their livestream beheading of an 11 year old, and Ahrar al-Sham, another Al-Qaeda in all but name and attitude to the west – to sign up. Through this force, Turkey now claims to control up to 100,000 fighters in Idlib, in addition to its own troops on the ground. In other words – Turkey has positioned itself to act as a major spoiler to any forthcoming Idlib operation.

 

Russia, then, seeks to pressure Turkey into agreeing to, if not a surrender of the province, then at least the removal of its troops, and a negotiated settlement with its NLF proxies – perhaps even a joint operation against HTS by the SAA, the NLF and Russia. This might be acceptable to Turkey – given a guarantee of influence in the aftermath – and Russia, but would be very hard to swallow for the Syrian government, who have no desire to share power with Al Qaeda lite. What Russia needs, then, in order to oversee an Idlib settlement on its own terms, is some kind of leverage over Turkey.

 

Enter Trump. Trump’s attack on the Turkish currency – already under pressure from the rising dollar due to its huge mountain of debt – precipitated an unprecedented decline in its value, only stemmed by a $15 billion loan from Qatar. But this is likely to only be a temporary solution. Cut out of US markets, and facing further sanctions over its purchases of Iranian oil, what Erdogan needs is a new, more dependable ally than his volatile erstwhile buddy in the White House.

 

Enter Putin. On August 10th, following the Trump tweet that triggered the lira’s plunge, Erdogan immediately spoke to Putin to discuss “trade and economic cooperation”. 3 days later, Erdogan explained that he had “made advancements in our ties with Russia in accordance to our benefits and interests”. This was followed up with a visit to Ankara by Foreign Minister Lavrov the next day and then, at the end of last week, Turkish Foreign Minister Mevlut Cavusoglu was received in Moscow by Putin himself. Russia had already reaffirmed its commitment to the delivery of its much-feared S-400 missile system by early next year, and made some vague promises to use the lira in its transactions with Turkey at some unspecified point in the future. But nothing new, nothing concrete. Russia was signalling that it was ready to come to Turkey’s aid; but at a price. That price may well be Turkish support for Russian proposals in Idlib, which Putin will be hoping to finalise in the forthcoming Syria summit between Turkey, Russia and Iran next week. Already, the statements coming out of Turkey following the various meetings which have taken place have indicated something of a shift in the Turkish position, with Cavusoglu admitting the presence of “terrorist groups” in Idlib, which need to “neutralised” – “to alleviate the concerns of our Russian counterparts”. At the same time, Putin can use the prospect of Turkish acquiescence to an operation in Idlib as leverage on the Syrian government to accept both its own proposals for recognition of Kurdish autonomy and Israeli demands on the Iranian presence in Syria. Such an outcome would allow both Netanyahu and Trump to claim a much-needed victory in their campaign to ‘rollback’ Iran, whilst simultaneously increasing Iranian and Syrian dependence on Russia. Trump’s attack on the lira, in other words, by throwing Turkey into Moscow’s arms, may have been the key to unlock the final stages of a Syria settlement under Russian tutelage. This is the real Trump-Russia collusion: not in backroom campaign meetings, but hiding in plain sight.

This article was originally published on Middle East Eye 

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Turkey and Qatar are being punished for refusing to do Washington’s bidding on Iran

 

Turkey and Iran reject 13 demands to Qatar | Vestnik Kavkaza

For years, Turkey and Qatar were at the vanguard of the western imperial project in the Middle East. Having had their fingers burnt in Syria, however, they are now refusing to facilitate Washington’s Iran plans – and paying the price.

Trump’s visit to Saudi Arabia in May last year – his first foreign trip as President – was significant for two main reasons: first, the $110 billion arms deal it produced, and secondly, the regional blockade of Qatar it heralded – widely seen as having been greenlighted by Trump during his visit. The impact of the blockade – implemented by Saudi Arabia, the UAE, Bahrain and Egypt – was, however, immediately mitigated by increased trade with Iran and Turkey in particular, limiting its overall impact.

 

This month’s attack on the Turkish economy, however, has had far more devastating results. Trump’s tweet on Friday August 10th – announcing a doubling of steel and aluminium tariffs on an economy already hit hard by his trade war – sent the Turkish currency into freefall. By the end of the day’s trading, it had lost 16% of its value, reaching a nadir of 7.2 to the dollar two days later; before his tweet, it had never fallen below 6 to the dollar. Trump’s move came on the back of Federal Reserve policies that were already threatening to provoke financial crises in over-indebted emerging markets such as Turkey. These are harsh punishments for countries long considered prime US allies in the region.

 

A NATO member since 1952 (following Turkish involvement in the Korean war on the side of the US), Turkey has hosted a major US airbase at Incirlik since 1954, essential to US operations in the region, and even housed the US nuclear missiles which triggered the Cuban missile crisis. Incirlik was crucial to the US-UK terror bombing of Iraq in 1991, and, although the Turkish parliament narrowly prevented its use for the 2003 redux, Turkey has been the launchpad for subsequent US strikes both in Iraq and in Afghanistan.

 

Qatar, meanwhile, is, to this day, run by the family – the al-Thanis – appointed as Britain’s proxies in the nineteenth century. Granted formal independence only in 1971, the country has remained deeply tied into western foreign policy since then. Both its ‘post-independence’ rulers were educated at the UK’s Sandhurst military academy, and it, like Turkey, hosts a major US base, whilst it’s ruling family, like those of the other Gulf monarchies, are dependent on western arms transfers to maintain their power. In 2011, Qatar played a major role in NATO’s Libya operation, providing airstrikes, military training, $400million of funding to insurgent groups, and even ground forces – not to mention the major propaganda role played by the Qatari-owned network Al Jazeera.

 

Then, in mid-2011, both countries threw themselves headlong into the war to overthrow the Syrian government. Turkish president Erdogan had previously enjoyed relatively warm relations with his Southern neighbour, but at some stage decided that the western-backed rebellion was going to win, and he wanted in on it. Turkey’s collaboration was crucial for the London-Washington Syria project, not only to give it a semblance of regional legitimacy, but more importantly because its 800km border with the country was to be the conduit for the tens of thousands of armed fighters on which the insurgency would depend.

 

Unwilling – and, following the decimation of their armies in Iraq and Afghanistan, probably unable – to provide the ground forces necessary to destroy the Syrian Arab Army themselves, the ‘regime-change regimes’ of the west relied on states like Qatar and Turkey to act as intermediaries – to facilitate weapons transfers, provide finance and smooth the passage of foreign fighters. Both states, heady with the prospects of the economic and geopolitical rewards that would follow Assad’s removal, and believing their own networks’ fantasies about an imminent collapse, were more than happy to act as accomplices. Over the years that followed, the resources they committed – and the devastation that resulted – were immense. In the case of Turkey, in particular, the spillover would prove disastrous.

 

Less than three years into the war, the International Crisis Group estimated that Turkey had spent $3billion on the war on Syria. Yet this figure, high as it is, represents a fraction of the true costs involved. A detailed report in Newsweek in 2015 noted the huge increase in military spending following the start of the Syria war, rising from $17 billion per year in 2010, to $22.6 billion in 2014, an increase of 25%. Furthermore, Turkey has been the first port of call for millions of Syrians fleeing the war. This alone had cost the country an estimated $8billion by 2015. Added to this, the report says, are the ‘collateral costs’ resulting from the deterioration of relations with Russia following Turkey’s downing of a Russian jet in 2015, which it estimated could be as high as $3.7 billion due to lost Russian tourism, investment and trade. Trade with Syria, of course, also slumped by “70 percent as a direct effect from the Syrian war,” from $1.8billion worth of exports in 2010 to $497 million two years later. In place of this legitimate trade – much of it in energy resources – however, came a flourishing new illicit trade. This new trade imposed “an additional cost to the Turkish economy: a growing, untaxed, hard-to-control black market economy. To combat its effect on government revenue, Turkey’s Energy Market Regulatory Agency declared an increase in inspections and control mechanisms in Turkey.” Ultimately, however, the government opted to facilitate, rather than attempt to control, this burgeoning black market, issuing in April 2015 “new border regulations that enabled Turkey to open its borders to uncontrolled cash inflow and remittances. According to the new law, travelers no longer had to declare transported currency or profit amounts at the customs booth.” This policy would, noted former governor of Turkey’s central bank Durmus Yilmaz, “attract black money to flow into Turkey.”

 

“In sum”, concluded the report, “as Turkey incrementally left its prior foreign policy agenda of “Zero Problems with Neighbors” and moved towards an Assad-centric policy, the costs imposed on its economy multiplied. This can be observed directly from the refugee costs, military spending, border security costs and the changing composition of trade volume and quality of liquidity flows in the economy.” Furthermore,The data suggest…that the more aggressive Turkey gets in its Syria policy in terms of military involvement, the more aggressively these costs rise.” Erdogan’s enthusiastic collaboration with the regime-changers in Washington and London had crippled his country’s economy – not to mention spawning a new era of sectarian militancy in the form of ISIS, which would launch multiple terror attacks within Turkey itself.

 

Being far removed from the conflict, the Syrian war’s impact on Qatar was not nearly as severe. Nevertheless, Qatar, too, pumped billions into the insurgency: noted the Financial Times in 2013, “The gas-rich state of Qatar has spent as much as $3bn over the past two years supporting the rebellion in Syria, far exceeding any other government”  It added that “Qatar has sent the most weapons deliveries to Syria, with more than 70 military cargo flights into neighbouring Turkey between April 2012 and March this year,” showing clearly the division of labour between Qatari finance and Turkish logistics.

 

Turkey and Qatar have thus put themselves right at the forefront of western efforts to overthrow the Syrian state. To date, however – other than an ever-growing pile of burnt Syrian corpses and a huge hole in their own finances – they have nothing to show for it.

 

In hindsight, the Turkish downing of a Russian jet in November 2015 can be seen as a last-ditch attempt to test the resolve, not of Russia, but of the west. Erdogan wanted to know whether or not the US was going to put their money where their mouth was and put some decisive muscle into the conflict. In the escalation that followed the attack, Turkey immediately put forward plans for a ‘no fly zone’ – euphemism for the sort of all-out aerial bombardment that befell Libya. But nothing came of it. That was the moment Turkey realised the west were not about to commit anything like the resources necessary to actually bring about victory. Assad was here to stay. Turkey would have to deal with that. And that meant dealing with Russia. The slow realignment of Turkish foreign policy had begun. And earlier this year, with tails no doubt firmly between their legs, even Qatar re-established relations with the Syrian government.

 

So when Trump came knocking for buyers for the west’s next brilliant idea – war on Iran, beginning with a brutal economic siege  – neither Turkey nor Qatar were exactly chomping at the bit to sign up. The suggestion was even less appealing than the disastrous Syria gambit, targeting an even more important trading partner, and with even less chance of influence over some mythical future government. Qatar shares a major gas field – South Pars – with Iran, and is dependent on Iran for accessing eastern energy markets, whilst Iran is the major source of Turkish energy imports. Following Syria, neither country has much nose left to cut off, even if they had wanted to spite their own face. Trump’s merciless attack on their economies is yet another sign of the increasing US inability to bend once-pliable clients to its will. For all his bluster, it is a clear admission of weakness and failure.

This piece was originally published on RT.com

Trump’s attack on the lira – a new financial war on the Global South

Trump’s attack on the Turkish lira, combined with recent Federal Reserve moves to choke off dollar supply, are pushing the world towards a rerun of the 1997 currency crisis. This may well be the whole point.

Image result for turkey lira trump

Last Friday, Donald Trump announced new sanctions on Turkey – comprising a doubling of the steel and aluminium tariffs he had introduced earlier this year. Turkey’s currency was already struggling, but these new sanctions “are the straw that broke the camel’s back”, commented Edward Park of the UK investment management firm Brooks Macdonald. The same day, the Turkish lira fell to more than 6 to the dollar, the first time it had ever done so, hitting a low point of 7.21 to the dollar on Sunday. Following Turkish caps on currency swaps, it slightly regained some of its lost value, and was trading at 6.12 by Wednesday, still way below the 4.75 to the dollar it was worth last week. Whilst the Turkish move has had some effect, this should not be overstated: simply banning the trading of lira above certain limits, which is effectively what Turkey has done, is hardly a sustainable means of revalorising the currency; andaccording to the FT, investors “are still ratcheting up bets against Turkey in other ways, such as through credit default swaps that pay out in the case of a debt default”. Turkish bank shares now stand at their lowest level since 2003.

Underlying the currency’s vulnerability are the country’s massive dollar debts. Turkish companies now owe almost $300 billion in foreign-denominated debt, a figure which stands at over half its GDP. The question is – how did this happen, and why has it suddenlynow become a problem?

During the era of Quantitative Easing, the US Federal Reserve flooded US financial institutions with $3.5trillion in new dollars, much of which poured into so-called ‘emerging markets’ such as Turkey. So long as the music kept playing, this was fine – near-zero interest rates, combined with a weak dollar, made these debts affordable. But since the Federal Reserve ended its programme of QE last year – and then started to reverse it, selling off the financial assets it had purchased (and thus effectively taking dollars out of the financial system) – the dollar’s value has started to rise again, making debt repayments less affordable. This appreciation of the dollar has been compounded by two successive interest rate rises by the Reserve; but it has also been compounded by Trump’s actions. Paradoxically, Trump’s trade wars have led to a further rise in the dollar, as investors have viewed it as a ‘safe haven’ compared to other currencies deemed less able to withstand the unpredictable turbulence he has unleashed. Even the yen and the Swiss franc, traditionally viewed as ‘good as gold’ have weakened against the dollar – as, indeed, has gold itself. As Aly-Khan Satchu, financial analyst at Rich Management, has put it the “US dollar has been weaponised – either deliberately or by design” (is there a difference?), adding that the “dollar is basically knee-capping countries”, warning that other countries will face the same treatment “if they continue to pursue the policies that Erdogan is seeking to pursue”.

Thus Turkey has been hit by a quadruple whammy by the US – interest rate hikes and the choking off of dollars from the Fed; tariffs and sanctions from Trump. The result is a loss in the lira’s value of almost 40% since the start of the year.

And the effects are already being felt far beyond Turkey’s borders; the South African rand fell to a two-year low on Monday, and the Indian rupee, Mexican peso and Indonesian rupiah have all been hard hit. This is unsurprising, as the ballooning of dollar-denominated debts – from $2trillion 15 years ago to $9trillion today, largely in the global South – combined with the reversal of QE was a crisis waiting to happen. All the conditions which prefigured the 1997 East Asian currency crisis are now effectively in place. All that’s needed is a push – which is exactly what Trump has just given.

This is textbook stuff – or should be, if economics textbooks bore any relation to reality (which they don’t). The last ten years are virtually an exact replay of the decade or so running up to the 1997 crisis. Whilst the 1985 ‘Plaza Accord’ dollar devaluation was not exactly Quantitative Easing, it had the same intent and results – a flood of cheap money and dollar debt, and therefore growing global dependence on the dollar and vulnerability to US monetary and economic policy. This vulnerability was then effectively ‘cashed in’ with the ‘reverse Plaza accord’ ten years later, which, as with the current reversal of QE, choked off credit and ramped up interest rates, making markets more jumpy and bankruptcies more likely. In the end, the trigger was the collapse of the baht – the currency of a country (Thailand) with a GDP half that of Turkey – which spiralled into a crisis that ultimately spread across all of Asia, sabotaging the continent’s development and allowing US corporations to buy up some of the most advanced industrial plant in the world for a fraction of its value.

It is not hard, then, to see why Trump and the Fed might well wish to trigger such a crisis today. The more the currencies of dollar-indebted countries slide, the more real goods and services they have to pay in tribute to the US to service the same paper-dollar debts – whilst those who cannot keep up will be gobbled up for pennies on the dollar. Yet beyond these purely economic gains lies also the geopolitical imperative – to maintain and extend US domination by scuppering its rivals. Trump is, after all, about nothing if not the conversion of all possible means of power into leverage to obliterate his opponents. Forcing one country after another to the brink of bankruptcy – and therefore to the IMF for a bailout – is a means of cashing in the dollar-dependency built up over the past decade into raw power. One can easily imagine the demands the US might make in return for its support in securing an IMF bailout – end oil imports from Iran, discontinue involvement with China’s Belt and Road Initiative… the potential is vast. Already direct threats are being made against Turkey about ‘what it needs to do’ to ‘reassure the markets’ – the Times on Tuesday, for example, demanding that “Erdogan should end his spat with the West if he wants to avert a deeper crisis…his course of action should be clear: he should raise interest rates [that is, promise a bigger cut of the Turkish economy to international currency speculators], heed competent economists, explicitly guarantee the independence of the central bank [that is, remove it from democratic oversight], and make up with President Trump” – as, after all, “US support will be needed if the IMF of World Bank is to step in”. Indeed, the targeting of Turkey may well be a response to Erdogan’s insubordination in relation to Iran: noted Robert Fisk this week, “Erdogan is helping Iran to dodge US sanctions which were imposed after Trump flagrantly tore up the 2015 nuclear agreement, and – in a decision demonstrating the cowardly response of the EU’s own oil conglomerates to Trump’s insanity – has announced that he will continue to import Iranian oil. Thus will Washington’s further threat of increased oil sanctions against Iran be blunted.” Trump may well hope – as I argued recently – that tariffs can serve as a weapon to bring recalcitrant states back in line with his Iran policy.

Indeed, it is here that the false dichotomy between the ‘globalists’ and the ‘economic nationalists’ in the Trump White House – and the country at large – is, once again, exposed. When it comes to pushing the global South into bankruptcy, their interests are perfectly aligned. However much Goldman Sachs’ press releases may cry wolf about Trump’s tariffs, the reality is that the trade war is the icing on the cake of the Fed’s own policy of squeezing the ‘emerging markets’. Indeed, Wall st depends on precisely the kind of financial instability which Trump’s trade wars have triggered. As Peter Gowan has noted, “the US economy depends…upon constantly reproduced international monetary and financial turbulence” – while Wall St in particular “depends upon chaotic instabilities in ‘emerging market’ financial systems.” But by draping these actions in the flag, and parading them alongside a chorus of pseudo-shock from the ‘globalists’, their true nature is obscured. The global South now stands on the precipice – with ‘establishment liberals’ and ‘nationalist insurgents’ alike lining up to give them a shove.

An earlier version of this article originally appeared on RT.com 

European identity is founded on hostility to Islam in general and Turkey in particular

My commentary on the news that Turkey is pulling 40 soldiers out of a NATO exercise in Norway after Erdogan’s name appeared in a list of enemies on a poster at the drill. Erdogan said an “enemy poster”, featuring his name on one side and a picture of modern Turkey’s founder, Mustafa Kemal Ataturk, on the other, was unfurled at the training exercise in Norway, prompting a decision by Turkey’s military chief and European Union minister to pull the troops out.