BRICTS? That's what Turkey Thinks Should Happen

in news •  2 months ago

This year’s BRICS Summit was a big show. No question. The main event was provided by Turkish President cum Dictator Recep Tayyip Erdogan.

Erdogan wants to a a “T” to the acronym, making them the BRICTS.

Erdogan also made it very clear Turkey’s shift away from the West will proceed faster if the bullying and marginalization continue. For months now, Turkey has struggled with a crashing Lira and sovereign bond market.

The poster child for the unfolding sovereign debt crisis.

The Trump Administration knows that Turkey is slipping from its grasp. Do you ever wonder why certain countries’ currencies get trashed when others with worse balance sheets or balance of trade don’t?

You should. Because asking that simple question will lead you to asking “Why X? Why Now?”

And in Turkey’s case it is for many reasons:

  1. Turkey was key in assisting Iran resist pre-JCPOA sanctions by laundering Iranian oil sales in physical gold through Turkish banks.
  2. Turkey is highly dependent on foreign energy imports and is one of Iran’s largest customers.
  3. To alleviate this foreign-energy dependence Turkey, through Russia, are building nuclear power plants and the Turkish Stream pipeline.
  4. Turkish Stream will provide Russian Gas from Gazprom at an effective discount since most of its capacity is targeted for European destinations and Turkey will likely get transit fees for that gas offsetting some of the costs of the gas they buy from Gazprom.
  5. Turkey refuses to comply with Trump’s edict to not buy Iranian oil in November.
  6. Turkey is buying S-400 missile defense systems from Russia
  7. The U.S. blocked the sale of F-35s to Turkey as a retaliatory measure. Given the F-35’s cost/benefit ratio, I’d say Turkey wins on that front as well.
  8. Turkey’s occupation of Northern Syria was a blocking move to keep the U.S. from moving West to Afrin and uniting the Kurdish cantons.

I could go on, you get the point.

BRICTS of Trade

In the bigger picture, Turkey is still most important because of its geography. It’s really the only reason anyone puts up with Erdogan’s shiftiness in the first place.

But, Erdogan’s pushing for admittance into the BRICS is about far more than symbolism. it’s about access to development capital through their parallel institutions to the ones controlled by the U.S. — The IMF, The World Bank, Asian Development Bank, Ex-Im banks, etc.

To assist Turkey in its fight to stand firm on U.S. hybrid war tactics, accession into the BRICS gives them access to more sources of Chinese capital. China and Russia were, to no one’s surprise, receptive to the idea.

As I pointed out in an earlier post, China and Russia account for nearly 20% of Turkish imports, with Iran and India making up another 6.4%, larger than the U.S.’s contribution.

)

Turkish Imports by Country

Increasing Turkey’s exports to the other BRICS countries should be the priority. But, since net capital inflow into Turkey is and will remain positive, thanks to a much weaker Lira, the slow removal of dollar dependency can commence, thanks to its currency swap arrangements with Russia and China.

Also, don’t discount the large trade turnover between Turkey and Germany, another source of foreign currency and capital.

Watch the Currency

The Bank of Turkey’s response to the lira crisis has been the right one, to buy up dollar-denominated corporate paper and remove liquidity bottlenecks from the banking system. Those liabilities can then be retired over time while freeing the companies to realign their businesses away from the U.S. dollar.

This is Turkey’s Achilles’ heel, it’s large dollar-based corporates liabilities. And those liabilities could explode if Trump escalates the financial and diplomatic war against Turkey.

That’s what the market has been responding to.

Since Turkey has currency swap agreements in place with China any excess buildup of local currency can be mitigated. The next steps here would be for Turkey to sign one with Russia and/or India.

I’m not saying things won’t be difficult for Turkey. They are now.

I’m saying there’s a path out of this problem, just like there was for Russia in late 2014/15. And in some ways just like there is for China’s huge corporate debt problem.

)

Will the Lira Break Through this Resistance?

The headlines keep pushing for a further collapse of the Lira and its weakening may not be over. But, Triple Tops like we see here are usually reversal signals, because it says that the sellers (in this case) are lacking conviction to overwhelm the mix of market intervention by the central bank and speculative bulls.

The point of Trump’s full-court pressure campaign is to keep everyone, especially China, fighting more little fires than it can safely put out. That’s the key to understanding his Art of the Deal foreign policy.

The problem with this approach is that if you don’t get capitulation, you get nothing in the end. Because leverage is essentially a bluff. Turkey has friends, just like Iran does and just like Russia did.

Join my more than 130 Patrons in staying ahead of the curve of where geopolitics and investing meet and explode by signing up for the Gold Goats ‘n Guns Investment Newsletter.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Curated for #informationwar (by @commonlaw)

  • Our purpose is to encourage posts discussing Information War, Propaganda, Disinformation and other false narratives. We currently have over 7,500 Steem Power and 20+ people following the curation trail to support our mission.

  • Join our discord and chat with 200+ fellow Informationwar Activists.

  • Join our brand new reddit! and start sharing your Steemit posts directly to The_IW!

  • Connect with fellow Informationwar writers in our Roll Call! InformationWar - Contributing Writers/Supporters: Roll Call Pt 11

Ways you can help the @informationwar

  • Upvote this comment.
  • Delegate Steem Power. 25 SP 50 SP 100 SP
  • Join the curation trail here.
  • Tutorials on all ways to support us and useful resources here

Adding Turkey to the BRICS nations will be another blow to the US (IMO) , and only give more credence to China and Russia. I think just for that, China will be all too willing to welcome them

Thanks for sharing.........../

Turkey (Erdogan) seems unhappy that Trump is asking them to stop importing Iran's oil, and it seems like they are looking for ways to "diversify" their friends and also increase their options. I think they are trying to play both sides, trying to get the best out of the both worlds.
Do you think there will come a time where they have to decide for good?

I wish I read this article before as a Turkish citizen complaining from this problem , I really enjoyed reading this and your facts are quite valid. How can I reach more of your content ? You are not sharing a lot on steem blockchain ? or you create rare and solid content ?