Business risk: Risk of cutting of market access or tariffs on Turkish products heading to the US + Risk of increased economic and exchange crisis in Turkey.
Russsian S-400 missiles during a rehearsal for a 2014 Victory-Day-Parade.
Tensions between the US and its NATO ally Turkey have been tense for quite some time now. But recently three issues have further heightened them:
Russian arms sales: Turkey plans to buy a Russian S-400 missile defence system. This would be a risk for the Western alliance as they are, according to the US, not compatible with NATO systems. The US has offered to sell Turkey Patriot systems instead and at the same time threatened with sanctions and a halt in the sale of F-35 fighter jets.
Syria: Turkey has threated to strike at the (Kurdish) Syrian Democratic Forces, who assisted Western Forces in battling Islamic State. Ankara sees them as terrorists linked to the separatist PKK in Turkey. US Secretary of State warned of “Potentially devastating consequences of unilateral Turkish military action in the region.”:
Detainees: Turkey detains several US citizens and local US consulate staff. Senators Roger Wicker (Rep.) and Ben Cardin (Dem.) introduced a bill to sanction those Turkish officials who are responsible for these detentions.
But Turkey has not given any ground on these issues, and Erdogan has stated that the missile defence deal is sealed. The prospect of US sanctions on Turkey, therefore, does not seem far away. Last year the US already sanctioned Turkey over the detention of Pastor Andrew Brunson. These sanctions led the Turkish lira into freefall.
But that was before the local elections. At this moment Turkey is in a severe economic downturn. The lira lost 28% in 2018 and Turkey is facing its first recession in a decade with unemployment at a nine-year high. Now that the local elections are over and Erdogan’s AKP Party suffered some severe setbacks in the big cities, it might get more concerned about bread and butter issues, and become more willing to compromise with the US.
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