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Erdogan’s great game: Soldiers, spies and Turkey’s quest for power

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This is the first part of a series looking at Turkish president Recep Tayyip Erdogan’s geopolitical ambitions, from his renewed push in Africa and the fringes of Europe to his troubled relationship with the EU.

In Baku’s Freedom Square last month, thousands of marching Azeri soldiers in fur hats and braided coats celebrated their country’s victory in the Caucasus — and the man who made it possible: Turkey’s president Recep Tayyip Erdogan.

Invited as guest of honour, the Turkish leader looked on as drones he supplied to Baku as it battled to regain lands lost to Armenia in Nagorno-Karabakh were given a prominent place in the military parade. “Today is a day of victory and pride for all of us, for the whole Turkic world,” said Mr Erdogan, surrounded by Turkish and Azeri flags.

Recep Tayyip Erdogan, top left, with Ilham Aliyev. president of Azerbaijan, at a military parade in Baku last month © Roman Ismayilov/EPA-EFE/Shutterstock

Mr Erdogan’s decision to throw his full weight behind Azerbaijan even as western powers called for a ceasefire after a fresh outbreak of fighting last autumn was the latest manifestation of his increasingly muscular foreign policy stance, characterised by uncompromising rhetoric and the ready use of hard power. 

Over the past five years, Mr Erdogan has launched military incursions into Syria and northern Iraq, dispatched troops to Libya and engaged in naval stand-offs with Greece — interventions that have riled Turkey’s Nato allies, reignited old rivalries and generated new foes. 

Turkey military map: Turkey’s hard power drive, countries with a Turkish military presence

In recent weeks, as Mr Erdogan has come to terms with the US election defeat of his friend Donald Trump — and the need to lure back foreign capital to address Turkey’s mounting economic woes — he has said he would like to “turn a new page” with the west.

But it remains unclear whether Mr Erdogan is willing or able to compromise on the issues that plague Turkey’s relations with the EU, the US and Middle Eastern states — or whether the newfound conciliatory language will soon give way to renewed acrimony.

“There are small things [that Turkey has done] that could be considered an olive branch, but nothing substantial,” said a European diplomat. “If you look at the issues where we fundamentally disagree, both sides have the view that the ball is in the court of the other. So it’s very hard to go anywhere.”

Turkish soldiers in Taksim Square, Istanbul, in July 2016. An attempted coup by rogue military factions marked a rupture in the country’s dealings with the rest of the world, say analysts © Sedat Suna/EPA

The failed coup that changed Turkey

The 66-year-old Turkish president, whose party swept to power in 2002, has long sought to cast himself as a visionary who will — in the words of historian Soner Cagaptay— “make Turkey great again” both at home and abroad.

But a bloody attempted coup by rogue military factions in 2016 marked a rupture in Turkey’s dealings with the rest of the world, analysts say. It left Mr Erdogan even more suspicious of the west, pushed him closer to Russia’s Vladimir Putin, forced him to forge new political alliances at home and enabled him to take unprecedented control of the Turkish state.

In a speech three months after the attempted putsch, Mr Erdogan said the country would no longer wait for problems or adversaries to “knock on our door”. Turkey, he said, would instead “go and find them wherever they make their home and come down on them hard”.

Mr Erdogan at times plays to his religious conservative base by casting himself as leader of the Muslim world but also draws heavily on nationalist imagery and language. He likes to say that his nation is undergoing a sahlanis — a “rising” or “rearing up” — on the world stage.

Chart showing Erdogan has expanded Turkey’s diplomatic footprint, change in the number of embassies and consulates since 2002, height of bar = total number of embassies and consulates, 2020

Diplomats and analysts warn the strategy carries great risks, both for the economy and relations with regional and global powers. While 10 years ago, the guiding principle of Turkish foreign policy was “zero problems with neighbours”, Turkish analysts now joke that the new mantra is “zero neighbours without problems”.

Mr Erdogan’s foreign policy is described by his critics as “neo-Ottoman”, in reference to the empire that spanned southern Europe, western Asia and north Africa and preceded the modern republic. Turkish officials say their country is simply protecting its interests. “When France intervenes, it is just France — no one calls them Napoleonic,” one said.

The approach has come at a cost. “I don’t think Turkey has been this isolated in its history,” said Sinem Adar, a researcher at the German Institute for International and Security Affairs in Berlin. “There is an expanding front of countries that are confrontational toward Turkey.”

Kurdish demonstrators hurl rocks at a Turkish military vehicle in November 2019 during a joint Turkish-Russian patrol on Syria’s border with Turkey © Souleiman/AFP via Getty

The purge, a president and a centralised state

The 2016 coup attempt, and the purge that followed it, allowed Mr Erdogan to take greater control of the armed forces. He also forged an electoral alliance with the ultra-nationalist party MHP, adopting its hawkish rightwing outlook on national security, especially Kurdish separatism.

“They have a similar idea, which is that Turkey must rise. It must increase its power,” said Evren Balta, a professor of international relations at Ozyegin University in Istanbul. “Both the AKP and MHP [also] share this basic idea that Turkey is under attack from inside and outside.”

At the same time, the transition in 2018 to a presidential system weakened the role of the country’s foreign ministry, traditionally the home of mandarins who saw Turkey’s natural orientation as towards the west. 

Many are critical of what one former ambassador terms a reliance on “soldiers and spies” rather than diplomacy. On foreign trips, Mr Erdogan is rarely seen without intelligence chief Hakan Fidan and defence minister Hulusi Akar at his side.

Hulusi Akar, left, Turkey’s defence minister, and the country’s intelligence chief Hakan Fidan, right, wait to attend talks with Russian President Vladimir Putin at the Kremlin in August 2018 © Alexander Zemlianichenko/AP

The overseas adventurism has also had little pushback from political rivals. While the Republican People’s party (CHP) — established by Turkey’s founding father Mustafa Kemal Ataturk, whose motto was “peace at home, peace in the world” — has criticised “undiplomatic language”, the party has appeared reluctant to come out against policies that have proved popular with the public.

Mr Erdogan, who most analysts believe wants to remain in power for as long as possible, has used foreign policy for domestic political gain — going as far as to compare the German government to the Nazis and to advise the French president Emmanuel Macron to seek “mental treatment”. This attitude, however, has not gone down well in European capitals. One EU diplomat accused Turkey’s leader of acting like “a schoolyard bully”.

Map showing Turkey’s diplomatic missions worldwide

Terror, refugees and an international backlash

Mr Erdogan’s drive to make Turkey a regional power — reflected in a dramatic expansion of Turkey’s diplomatic ties with the Middle East, Africa and Latin America in the mid-2000s through trade and aid — quickly became fraught.

The country’s hopes of joining the EU faded amid mistrust and accusations of bad faith on both sides. A plan to build stronger ties with its Arab neighbours backfired as popular uprisings swept across the region. The Syrian war spilled into Turkey in the form of terror attacks and the arrival of millions of refugees. Turkish military operations in Syria and Libya — and its support for the Muslim Brotherhood — pitched Ankara against a powerful Arab alliance led by the United Arab Emirates and Saudi Arabia.

Emmanuel Macron, right, president of France, and Mr Erdogan during a press conference in Paris in January 2018. The Turkish leader’s approach has not gone down well in European capitals © POOL/AFP via Getty Images

Now Europe despairs at the decline in human rights in a country that is technically still a candidate to join the bloc. Washington is fuming at Mr Erdogan’s decision to buy an S-400 air defence system from Russia, which last month triggered long-awaited US sanctions. 

Turkey’s relationship with newer partners is not straightforward either. His ties with Mr Putin are complex and often fraught, as made clear when 34 Turkish soldiers were killed in Syria last year in an attack that the US blamed on Moscow. 

Still, Mr Erdogan has chalked up some successes. Turkish support turned the tide of the civil war in Libya. In Nagorno-Karabakh, Ankara’s backing of Azerbaijan has exposed the limits of Russian influence in the Caucasus.

The first batch of equipment for a Russian-made S-400 missile defence system at Murted air base in Ankara last July © Turkeys National Defense Ministry / Handout/Anadolu Agency/Getty

Economic woes and softer rhetoric

The turbulent foreign policy has deterred much-needed foreign direct investment and, combined with concerns about Mr Erdogan’s management of the economy, been a source of pressure on the Turkish lira. The German carmaker Volkswagen suspended — and later cancelled — a plan to build a new factory after an international outcry at a Turkish assault on Syrian Kurdish forces in 2019.

Critics say that, for all the bombastic rhetoric, Turkey’s antagonistic foreign relations harm its interests. Sinan Ulgen, a former Turkish diplomat and chairman of Istanbul think-tank Edam, said: “The way I would judge the success of foreign policy is whether it helps Turkey to better protect its national interest and whether it helps Turkey to ensure more sustainable economic growth. On those criteria, it’s not a big success.”

Line chart of Foreign Direct Investment inward flows as a % of GDP showing Foreign investment into Turkey has slowed

The perilous state of the country’s $750bn economy — exacerbated by the coronavirus crisis — triggered a shake-up in November that resulted in the departure of Mr Erdogan’s son-in-law Berat Albayrak as finance minister.

Since then, and with the election of Joe Biden as US president, Mr Erdogan has made overtures to the west. In a video call with Ursula von der Leyen, president of the European Commission, on Saturday, Mr Erdogan said that “Turkey’s future is in Europe” and called for greater co-operation on issues including migration and trade.

The Turkish president has long been a pragmatist willing to make tough choices if necessary to sustain his hold on power. But some analysts suspect Mr Erdogan will be unwilling to make the compromises required to improve relations with Nato allies, in particular the US.

“I think that the goal of having an independent, strong foreign policy — whilst staying within Nato — will remain,” said Alan Makovsky, a former US state department official now at the Center for American Progress, a think-tank. “Maybe he’ll temper the rhetoric but I don’t think he’ll temper the vision.”

Additional reporting by Michael Peel, Simeon Kerr and Max Seddon



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ECB signals rising concern about eurozone bond market sell-off

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The European Central Bank has indicated it will increase the pace of its emergency bond purchases to counter the recent sell-off in eurozone sovereign debt markets if borrowing costs for governments, companies and households continue to rise.

Philip Lane, chief economist of the ECB, said on Thursday that the central bank was “closely monitoring the evolution of longer-term nominal bond yields” and its asset purchases “will be conducted to preserve favourable financing conditions over the pandemic period”.

The ECB has pledged to ensure financial conditions encourage investment and spending, helping the eurozone economy to make a swift recovery and lifting inflation towards the central bank objective of just below 2 per cent.

To achieve this, Lane signalled that it would rely on its pandemic emergency purchase programme, under which it plans to spend up to €1.85tn on buying bonds by March 2022. There is just under €1tn of that amount left to spend.

“We will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation,” he said.

Eurozone government bonds fell to their lowest levels for almost six months this week, and while Lane’s comments caused a brief rally on Thursday afternoon, prices then resumed their downward path.

Bond yields move inversely to prices, so the sell-off is pushing up the cost of borrowing for governments, which must sell vast amounts of extra debt this year to cover the cost of the coronavirus pandemic and its consequences.

Germany’s 10-year bond yield has risen to its highest level since last March, while the French equivalent returned to a positive yield for the first time since June and Italian sovereign yields hit their highest level since November.

ECB president Christine Lagarde said in a speech on Monday that policymakers were “closely monitoring” the rises. 

Isabel Schnabel, another ECB executive board member, said in an interview with Latvian news agency Leta published on Thursday: “A too-abrupt increase in real interest rates on the back of improving global growth prospects could jeopardise the economic recovery.”

Lane gave more detail of how the ECB defines “favourable” financing conditions, saying it would track the availability and cost of bank lending and market-based funding — in particular, the risk-free overnight index swap curve and the GDP-weighted eurozone sovereign bond yield curve, which have both risen in recent days.

He warned of the need to avoid “a mutually-reinforcing adverse loop” in which banks interpret lower borrowing demand as a negative signal about the economy and companies interpret a tightening of bank lending conditions as a worrying sign about the outlook. 

Eurozone bank lending to the private sector grew by just under €12bn in January, down 75 per cent from the average monthly loan growth last year according to data published on Thursday.

Much of the slowdown was because of a sharp fall in net lending to insurers and pension funds. Lending to non-financial companies also retreated slightly, while lending to households still grew but at its slowest rate since last April.

Krishna Guha, vice-president at Evercore ISI, said “ECB jawboning” was “having little effect” and “the next step — in our view presaged by Lane — is for the ECB to dial up the pace of its [bond] purchases”.

Last week the ECB spent a net €17.3bn on its emergency bond purchase programme, up slightly from the previous week but still well below the levels of last April, during the previous sell-off in government bond markets.

Frederik Ducrozet, strategist at Pictet Wealth Management, said the ECB was likely to wait until it was clear the bond market sell-off was a lasting shift before increasing its emergency bond buying above €20bn per week. But he said that “will bring the risk of disappointment [for investors] — because you have to walk the walk as well as talk the talk as a central bank”.



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Armenia’s prime minister claims military is plotting a coup

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Armenia’s prime minister has claimed the country’s military is plotting a “coup,” and taken to the streets with his supporters after senior army figures in the former Soviet republic called on him to resign.

Nikol Pashinyan has faced months of protests demanding he step down after the defeat of Armenian forces in a six-week war with neighbouring Azerbaijan that ended in November.

The army weighed in on Thursday, calling on the prime minister to quit after he fired the first deputy chief of staff for criticising him.

A letter to the prime minister signed by 40 senior officers warned Pashinyan not to use force against demonstrators, but did not say whether the army would act to remove him from power.

“The current government’s ineffective management and serious mistakes in foreign policy have put the country on the brink of collapse,” the officers wrote on Facebook.

Pashinyan later fired the chief of the general staff, Onik Gasparyan, ordered police to secure government buildings in Yerevan and told his supporters in the capital’s Republic Square to avoid violent clashes.

Demonstrators at an opposition rally in Yerevan demand the resignation of Nikol Pashinyan. They cheered as a fighter jet flew overhead © Artem Mikryukov/Reuters

Describing the situation as “manageable” the prime minister denied he was planning to flee the country and said the army’s statement was an “emotional reaction” to a dispute over the defeat in the Nagorno-Karabakh conflict.

“We have no enemies in Armenia. I am calling for calm,” Pashinyan said, according to Russian news agency Interfax. “Of course, the situation is tense, but we need dialogue, not confrontation.”

He later took to the streets with several thousand supporters and a megaphone — an echo of the 2018 “velvet revolution” that swept him to power following a march across the country that galvanised popular support. A few thousand opposition supporters gathered at a different square and cheered as a fighter jet flew overhead.

Pashinyan has fought off calls for his resignation since signing a Moscow-brokered peace deal in November that cemented territorial gains for Azerbaijan in Nagorno-Karabakh. The mountainous enclave in the South Caucasus is internationally recognised as part of Azerbaijan, but is populated by ethnic Armenians who seized control after a war that broke out in the dying days of the Soviet Union.

Azerbaijan, a mostly Muslim country and a close ally of Turkey, launched an offensive in September with the aim of retaking the entire enclave. Armenia’s army was ill prepared for oil-rich Azerbaijan’s modern drone fleet and significant backing from Ankara.

More than 3,300 Armenian soldiers died in the conflict, with a further 9,000 wounded. Thousands of civilians were displaced, including some who set their own homes on fire as they fled land now under control of Azerbaijan.

Russia, the traditional regional power broker and Armenia’s most important ally, remained neutral even as several previous ceasefires failed and has deployed 2,000 peacekeepers to secure the region.

Pashinyan admitted the terms were “unbelievably painful for me and my people” but argued the concessions were necessary to prevent further losses.

The devastating defeat sparked fury among Armenians who stormed the country’s parliament and attacked its speaker, demanding the prime minister’s resignation.

Pashinyan backtracked on a pledge to step down after snap elections earlier this month and remained in office in the face of opposition from Armenia’s ceremonial president, three parliamentary opposition parties, and key church leaders.

The Kremlin said on Thursday it was “following events in Armenia with caution” but considered them “exclusively Armenia’s internal matter”.

Dmitry Peskov, President Vladimir Putin’s spokesman, told reporters Russia was “calling on everyone to be calm” and said “the situation should remain within constitutional limits,” according to Interfax.



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German accounting watchdog chief to step down in wake of Wirecard

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The head of Germany’s accounting watchdog is to step down following mounting political pressure over corporate governance shortcomings exposed by the Wirecard fraud.

Edgar Ernst, the president of the Financial Reporting Enforcement Panel (FREP), said on Wednesday he would depart by the end of this year. He is the third head of a regulatory body to lose his job in the wake of one of Germany’s biggest postwar accounting scandals.

The collapse of Wirecard, which last summer filed for insolvency after uncovering a €1.9bn cash hole, triggered an earthquake in Germany’s financial and political establishment.

Felix Hufeld, president of BaFin, the financial regulatory authority, and his deputy Elisabeth Roegele were pushed out by the German government in January for failing to act on early red flags suggesting misconduct at Wirecard. Ralf Bose, the head of Germany’s auditors supervisor Apas, was fired after disclosing he traded Wirecard shares while this authority was investigating the company’s auditor, EY. The German government is also working to revamp the country’s accounting supervision and financial oversight.

Meanwhile, criminal prosecutors in Frankfurt are evaluating a potential criminal investigation into BaFin’s inner workings and on Wednesday asked the market authority to hand over comprehensive documents, the prosecutors office told the FT, confirming an earlier report by Handelsblatt. The potential scope of any investigation as well as the individuals who might be targeted is still unclear. BaFin declined to comment.

Ernst came under pressure as the parliamentary inquiry commission uncovered that he joined the supervisory board of German wholesaler Metro AG in an apparent violation of internal governance rules, which from 2016 banned FREP staff from taking on new supervisory board roles.

Last week, the former chief financial officer of Deutsche Post filed a legal opinion to parliament defending his move. He argued that his employment contract was older than the 2016 ban on board seats and hence trumped the tightened governance regulations.

The German government had subsequently threatened to ditch the private-sector body which currently has quasi-official powers.

In a statement published on Wednesday evening, FREP said that Ernst wants to open the door for a “fresh start” that would be untainted by the discussions around his supervisory board mandates. “FREP is losing a well-versed expert in capital markets,” the body said.



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