Disciplining Turkey with the foreign exchange rate - MEHMET ACET

Disciplining Turkey with the foreign exchange rate

When I was writing this column around 16:00 p.m. yesterday, the statement by the United States Embassy in Ankara was being broadcasted as breaking news on news channels.

The intention of the statement made by the U.S. embassy in Ankara, which has served for quite a while without an ambassador, seemed to quench the fire a bit.

"Despite current tensions, the United States remains a solid friend and ally to Turkey; our two nations enjoy a vibrant economic relationship," said the embassy and denied the statement that the "exchange rate of the dollar will be 7 liras" attributed to a U.S. official circulating the media, by calling it a false news.

At the same time, the Turkish Ministry of Foreign Affairs, which is spending a great deal of time trying to overcome the Brunson crisis, made a public announcement about who would head the delegation to Washington.

A delegation headed by Deputy Minister and Ambassador Sedat Önal will be sent to Washington.

This delegation is important, because if reports hadn’t surfaced the previous evening that a delegation composing of three figures in the justice, energy and foreign affairs ministry was headed to Washington, it would be much harder to predict where the dollar/lira parity, which had exceeded 5.40, would stop.

Impact the rising exchange rate has on the economy

Similarly, I talked to the veterans of economy when I was preparing this column yesterday.

I tried to understand the probable consequences, and the impact of the rising exchange rate, or "volatile rate" -as economist referred to it- on economy.

I can say that two main scenarios are anticipated.

1- If the volatility of such a floating exchange rate is short-term, then its effect on the economy will also be mild. The dollar rate, which momentarily rose to 5.40, may decline quickly and fall below 5. If this happens, the economy will not be affected much.

2- It is anticipated that it will be inevitable that this new situation will lead to a destruction of the economy if the current tendency is spread over a long term, or more precisely if the dollar stabilizes at its current rate.

Although it is not possible to ignore the impact of the economy's own dynamics on how things got so complicated, it is obvious that the political tension with the U.S. has triggered the rise in exchange rates.

Yet another aspect of it is that there is no spokesman of the mechanism that we refer to as the "markets."

The wording of the circumstances is done by market analysts.

An economist I spoke with continued his speech, "If we must verbalize it, we can describe the current situation in the form of the likelihood of the continuation of the U.S’s symbolic sanctions on Turkey, with an added effect of a Turkey in need, the difficulty of finding foreign capital, and the atmosphere of pessimism triggered by this situation."

Will everything be settled if the Brunson issue is resolved?

At this point, the main question is: Does the U.S. government intend to restrict the current tension to Pastor Brunson, or does it plan to use the financial stick on other matters after having enjoyed hurting Turkey?

U.S. Secretary of State Mike Pompeo, previously director of the Central Intelligence Agency, in the meeting in Singapore with his Turkish counterpart, Mevlüt Çavuşoğlu,, mentioned a condition that other figures being processed by Turkish judicial authorities should be released so that the sanctions could be withdrawn.

Assume for a moment that all these problems are solved, can we imagine the U.S. government saying fine, now we can go back to normal?

Or else, will it involve the F-35s, S-400s or some other issues?

At the beginning of the column, we talked about the statement that we think the U.S. embassy in Ankara made with the intention of easing tensions.

For the sake of striking a balance thereby, let me finalize my column with the statement made by Nicaraguan President Daniel Ortega to a Spanish broadcasting organization.

"U.S. foreign policy is based on expansionism and oppression. We have always tried to establish normal relations with the United States, but we see only aggression in return. At the end of the day, we understood that the United States does not want a normal relationship, but submission and even servility.”

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