ANKARA, Aug 14 – The currency plunge imperilling Turkey’s economy has been fuelled by a standoff between Donald Trump and Recep Tayyip Erdoğan over the fate of a Turkish woman detained in Israel whose freedom the US president brokered, and an American pastor held in Turkey whose release he demands in return, officials in Ankara have claimed.
Turkish leaders say a synchronised release of the pair – Ebru Özkan, jailed for alleged links to Hamas, and Andrew Brunson, a preacher from North Carolina – was discussed at a Nato summit on 11 July. The conversation predated the confidence crisis now enveloping the Turkish economy, but is seen as a political raison d’etre for a series of US measures that culminated in new tariffs imposed on Turkey on Friday.
Öskan, 27, was released the day after the summit, but Brunson remains under house arrest in the coastal city of İzmir. The pastor has been a central figure in a fast escalating crisis that saw the Turkish lira plunge to a new low of 7.2 to the dollar before stabilising later on Monday, amid broader fears that the country’s economy is seriously overheated and propped up by unsustainable levels of foreign debt.
While Turkey’s economic fundamentals have troubled global markets for some time, an apparent political backdrop to Turkey’s travails has been less clear. An informed Turkish observer close to decision-makers said the conversation between Trump and Erdoğan had been misconstrued by the US president, who believed he had secured a deal from his counterpart to free Brunson after persuading the Israeli leader, Benjamin Netanyahu, to seek Özkan’s release.
On the other hand, Erdoğan believed he had agreed to a process – transferring Brunson, a resident of Turkey for 23 years, from prison to house arrest – before his eventual release. The US pastor was indeed moved to house arrest on 25 July.
“It took place on the margins of the Nato summit,” the source told the Guardian. “Erdoğan asked Trump for help with the lady in prison in Israel. There was only the two of them and a translator. Trump said: ‘I need some traction on the pastor first.’ When Erdoğan said OK he meant that we are working on it. Then [US vice-president Mike] Pence, due to midterm election considerations, messed things up. Trump confused a process for an agreement.”
The release of Brunson has been a touchstone issue for US evangelicals, who form a cornerstone of Trump’s domestic base. Pence had taken up the cause of his release, warning last month that “if Turkey does not take immediate action to free this innocent man of faith and send him home to America, the United States will impose significant sanctions on Turkey”.
Pence and evangelicals had insisted Brunson’s arrest was because of his faith – a claim strongly denied in Ankara, which is sensitive to claims it has targeted Christians and worried that such allegations would damage the country’s still robust tourist sector.
Brunson was detained in October 2016, three months after a failed coup attempt against the Turkish president, widely believed to have been led by the exiled leader of the Gülen political movement, Fethullah Gülen, who has lived in the US state of Pennsylvania for the past two decades.
One year later, Erdoğan used a speech to demand the extradition of Gülen, a cleric and former political ally: “You have a pastor, and we also have one. I told [the US] give us the pastor, and we’ll give you the pastor. They told us ‘don’t go there’.”
Turkey on Monday denied it was planning to release Brunson, with Erdoğan remaining defiant in the face of the new tariffs on steel and aluminium and insisting that his highly unorthodox approach to economics remains the solution.
Erdoğan has insisted on maintaining low interest rates, despite steadily rising inflation – a position at odds with senior economists inside Turkey and abroad. He has also taken influence over the central bank and appointed his son-in-law, Berat Albayrak, as treasurer and finance minister. Both moves have been poorly received by global markets and are believed by senior economists to have contributed to falling confidence in the Turkish economy’s fundamentals.
Economists say a recession is almost inevitable in Turkey and, while it accounts for only 1% of the global economy, there are fears of contagionspreading to the nearby eurozone and other emerging market economies.
Fears of a full-blown currency crisis in emerging markets intensified late on Monday with a lack of a plan to stop the lira’s slide seen as deeply troubling by European investment houses.
Andrew Birch, the principal economist at IHS Markit, said: “The changes to reserve requirements in recent days and the government’s unspecified action plan has done little to stabilise the lira.