Recep Erdogan has warned the US that Turkey would seek “new friends and allies”, as it looked for help to halt a full blown currency crisis that has been made worse by an intensifying row with its Nato ally.
In an editorial in the New York Times, the Turkish president said the partnership was in jeopardy, and urged the US to respect its longtime ally’s sovereignty “before it’s too late.”
“Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives,” Mr Erdogan wrote. “Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies.”
The lira tumbled more than 14 per cent on Friday, its sharpest fall since a 2001 financial crisis, dragging down other emerging markets and weighing on US and European stocks, after Washington mposed sanctions and tariffs to compel it to turn over a jailed American pastor.
Investors are concerned about Turkish banks and companies’ ability to finance more than $350bn in foreign debt as inflation soars.
Mr Erdogan has cast the sell-off in financial markets as an economic war, stoking nationalist sentiment among Turks who are suspicious that foreign powers are trying to undermine national unity. Turks face sharp price rises from food and fuel to medicines if the crunch worsens.
The country — situated between Europe, countries of the former Soviet Union and Middle East — has weathered several boom-and-bust cycles over the decades but has traditionally always had Washington’s staunch support.
However, as Mr Erdogan faces the most acute financial crisis since taking office in 2003, he finds himself at odds with the US. The two disagree over closer ties between Ankara and Russia and Iran, as well as US support for Kurdish militants in Syria that Ankara considers terrorists and Washington’s refusal to extradite Fethullah Gulen, whom Mr Erdogan says masterminded a failed coup attempt in 2016.
Now Donald Trump may be seeking to exploit Ankara’s vulnerabilities for domestic political purposes over the fate of Andrew Brunson, an Evangelical preacher arrested on espionage and terrorism charges.
On Friday Mr Trump tweeted that his administration would double tariffs on Turkish metal imports “as the Turkish lira slides rapidly against our very strong dollar!”
Mr Brunson’s lawyer, Ismail Cem Halavurt, said he would ask a court on Monday or Tuesday to release Mr Brunson, who was moved to house arrest last month, and lift a ban on travel. He described his client as “nervous and anxious” but in generally good spirits.
“He is following new events closely,” Mr Halavurt said. “This is a situation that transcends Brunson’s case.”
The EU has signalled growing concern over the crisis, including over the exposure of major European banks with investments in Turkey. The EU also has a $6bn deal with Ankara to stem migration to the bloc.
Berat Albayrak, the finance minister appointed last month by his father-in-law Mr Erdogan, on Friday promised steps to rebalance Turkey’s overheating economy and reduce deficits, including a yawning current account gap of $57.4bn — equivalent to 6.5 per cent of its economy.
But Mr Albayrak stopped short of saying the central bank could raise interest rates, disappointing investors who see it as the first step the government can take to rein in the lira’s freefall. Mr Erdogan, a pious Muslim, describes interest as the mother and father of all evil.
The president has discarded pro-market ministers from his cabinet after assuming a new super-charged executive presidency that gives him sweeping powers following June elections.
“This is not a central banking problem. A one-time interest rate increase of any magnitude is only going to be a stop-gap measure,” said Refet Gurkaynak, an economist at Bilkent university in Ankara. “This is the manifestation of the lack of leadership and policy. If you are heavily indebted and insist on employing an inane policy framework, this is the outcome. Turkey is not governable with a one-man regime.”