MONTREAL - The realities of Turkey's
economy and politics would alone have killed off
the summer revival in the country's stock markets.
Russia's invasion of Georgia, on Turkey's back
doorstep, made sure.
The benchmark ISE
National 100 Index gained as much as 28% from the
start of July to August 4 in the run-up to the
Constitutional Court decision not to ban the
Justice and Development Party of Prime Minister
Recep Tayyip Erdogan. The index has since fallen
from around the 43,000 mark to under the 41,500
level I identified this month as the lower bound
of a band of resistances stretching up to 45,500
and dating from the first half of 2006. (See Turkey
ruling spurs (brief) stock revival, Asia Times
Online, August 8, 2008).
Turkey is trying
to elaborate a new and autonomous foreign policy
in unprecedented
conditions. For this to be successful, two things
are necessary. These are a settling-down of its
international region - the Georgia invasion making
that look even less likely than previously - and a
settling-down of its domestic politics. That also
is not certain.
The government is seeking
to deepen its energy ties with Iran in the hope
that Europe will decide to decrease its energy
dependence on Russia by increasing such dependence
on Iran. Yet Iran is conspicuous by its absence
from Turkey's recent proposal to establish a
Caucasus Stability and Cooperation Platform
(CSCP), which would include Turkey, Russia and the
three South Caucasus states, and perhaps others
such as the US, at least as observers.
Such a forum is not a new idea. The CSCP
is the same idea that Turkey's president Suleiman
Demirel proposed in 1999-2000, when it was called
the Caucasus Stability Pact, only to see it
abandoned by the subsequent government in Ankara
headed by his longtime rival Bulent Ecevit.
What is clear is that the CSCP initiative
was a surprise to many players. This is not a
fatal flaw but is surely a sign that it has not
been adequately prepared. Especially, it is not
clear where it would fit into the alphabet soup of
regional and transregional organizations already
concerned with the region, or in the current
parlance what its "added value" would be.
One Turkish analyst has suggested that
Erdogan is looking for political cover to improve
relations with eastern neighbor Armenia, to
ameliorate the economic situation in eastern
Turkey. This would be why he visited Baku to
discuss the proposal with Armenia's own eastern
neighbor, Azerbaijan, which seems less
antagonistic to the idea than earlier in the
decade, because it is clear that Turkey's blockade
of Armenia only increases the latter's dependence
on Russia.
(The blockade was instituted in
the early 1990s initially due to a dispute
involving the Nagorno Karabagh region.) But
Erdogan risks creating the impression that he
welcomes Russia's participation in the CSCP to
decrease Western influence in the region.
That impression is enhanced by the warmth
of his welcome last week to Iran's President
Mahmud Ahmadinejad, whom he permitted among other
things to avoid paying respects at the Ataturk
monument, a visit that is diplomatically de
rigueur for all foreign heads of state as a mark
of respect to the founder of the Republic of
Turkey, and to be filmed at length by television
cameras at prayer in a major Turkish mosque.
Turkish commentators have remarked that this
latter gesture, beyond disrespecting the
secularism of Turkish political modernity,
violates the intimacy of prayer under Islamic
religious tradition.
That meeting did not
lead to the conclusion of an energy contract, but
one should not think that that failure is the
result of pressure from the US, which is hostile
to Iran's nuclear program. Rather, as the Turkish
energy ministry stated, the problem is with the
conditions of Tehran's buy-back contracts. The
Iranian oil minister retorted that Turkey was "not
informed about the culture of the buy-back
contracts". According to him, "the price ceiling
of the contract is determined after carrying out
tenders". Almost needless to say, this is an
unorthodox perspective. Nor is Turkey uninformed
after years of experience with problems of Iranian
(non)fulfillment of past contracts.
Turkish economic advisors correctly see
dangers arising from commodity price increases,
financing costs and the absence of production
guarantees and insurance costs. Also the present
constitution of the Iranian state forbids
recognition of jurisdiction of any international
court or arbitration procedure. Not just Turkey
but every potential foreign investor in the energy
sector in Iran faces all these hurdles. Iran has
only itself to blame for the absence of Western
investment.
The CSCP initiative is
Turkey's attempt to provide that Russia's invasion
of Georgia does not make additional South Caucasus
energy pipelines impossible. That Russian troops
did not destroy Azerbaijan-owned energy
infrastructure on Georgia's Black Sea coast, but
some reports have put that down only to a saving
telephone call from Azerbaijan's President Ilham
Aliev to his Russian counterpart Dmitry Medvedev.
The Baku-Tbilisi-Ceyhan (BTC) pipeline,
terminating on the Turkish Mediterranean coast,
was closed when Russia launched its invasion
because of a Kurdish-claimed sabotage of the
pipeline, although it is scheduled to reopen in
the near future.
Oil from Kazakhstan, to
the east of the Caspian Sea, crosses Georgia by
rail for export. Just this week such a train
exploded after hitting a mine on the newly
restored main east-west railway in the country, a
mine that was not there before the Russian
invasion. After years of discussion, Kazakhstan
agreed just this summer with Azerbaijan on the
terms for contributing crude from the Tengiz and
Kashagan deposits in Kazakhstan into the BTC.
That is in greater doubt now, as is a
trans-Caspian gas pipeline from Kazakhstan's
southern neighbor Turkmenistan crossing the South
Caucasus into Turkey and from there to Europe.
Likewise, Russian energy giant Gazprom's
now-repeated offer to buy all of Azerbaijan’s
natural gas production, for piping through Russia
to foreign markets, acquires a new profile under
conditions of continuing Russian occupation of
Georgian territory.
Turkey had a rough
economic road ahead even before the Russian
invasion of Georgia. The country's long-term
foreign currency debt is rated several notches
below investment grade. No current initiative will
contribute to solving the most glaring economic
problem facing the government, the current account
deficit, which was US$1.5 billion in 2002 (the
year that Erdogan's party came to power), rose to
$37 billion in 2007 and is estimated to exceed $50
billion by the end of the current year.
These days, especially in the
Caspian/Black Sea region, pipelines are not big
moneymakers. Rather, they are treated as services
to the consortium that owns the gas or oil being
transported. The CSCP will not solve Turkey's
basic economic problems, which arise from its
domestic financial and social evolution over the
past six years. The outlook cannot be optimistic
in the context of the worldwide economic downturn
now beginning.
Robert M Cutleris Senior
Research Fellow, Institute of European, Russian
and Eurasian Studies, Carleton University,
Canada.
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