Turkey is Getting off the U.S. Reservation
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:
Turkey was key in assisting Iran resist pre-JCPOA sanctions by laundering Iranian oil sales in physical gold through Turkish banks.
Turkey is highly dependent on foreign energy imports and is one of Iran's largest customers.
To alleviate this foreign-energy dependence Turkey, through Russia, are building nuclear power plants and the Turkish Stream pipeline.
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.
Turkey refuses to comply with Trump's edict to not buy Iranian oil in November.
Turkey is buying S-400 missile defense systems from Russia
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.
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.
By Tom Luongo
Source: Gold Goats n Guns
Post Tags: #BRICS#China#Currency#Russia#Trade#Turkey#US
Imperialists' Fear and Loathing. . . of Being Colonized
Did Iran Sponsor a Terrorist Attack in Tajikistan?
Debunking Alt-Media's Doublethink on Yemen
Many in the Alt-Media Community aren't aware of the doublethink that pervades the Iranian-influenced discourse on Yemen, and a critical analysis of the three most prominent examples of this in practice could assist Tehran in avoiding unnecessary narrative shortcomings and ultimately optimizing its regional message. The Alt-Media Community is a diverse network of multipolar-minded activists…
Read More Debunking Alt-Media's Doublethink on YemenContinue
Somehow the U.S. has Killed 70,000 ISIS Fighters — Twice as Many as It Says Exist
In June 2014, around the time ISIS was making headlines across the world, the Wall Street Journal reported that the terror group had 4,000 fighters in Iraq. In September 2014, the CIA released an estimate claiming ISIS had between 20,000 and 31,500 fighters combined in both Iraq and Syria, including 15,000 who were foreign fighters. Almost…
Read More Somehow the U.S. has Killed 70,000 ISIS Fighters — Twice as Many as It Says ExistContinue
The New York Times Simultaneously Wages Infowar on Trump & Maduro
The New York Times revealed that US officials previously met with Venezuelan coup plotters. It's not a secret that the US is conspiring to overthrow the democratically elected and legitimate government of Venezuela, nor that it probably at some point considered a military coup there just like the ones that it supported throughout Latin America…
Read More The New York Times Simultaneously Wages Infowar on Trump & MaduroContinue
Ramachandra Guha Is Wrong: India Should Be Proud of Its Principled Neutrality, Not Ashamed
Like many left- and liberal-leaning members of the Indian intelligentsia, he appears to have gotten carried away with his latest emotionally driven rant. What irritates him and his ideological ilk to no end is that India has flexed its strategic autonomy by practicing a policy of principled neutrality in line with its objective national interests….
Read More Ramachandra Guha Is Wrong: India Should Be Proud of Its Principled Neutrality, Not AshamedContinue
Will Saudi Arabia Take the Battle to Iran – with America's Blessing?
Saudi Deputy Crown Prince Mohammed bin Salman's extremely dangerous remarks concerning Iran this week signal a much harsher stance from the kingdom that go beyond the condemnation and severing of ties that took place in January 2016. Bin Salman's comments were made during an hour-long interview on Tuesday, broadcast simultaneously on several public and private…
Read More Will Saudi Arabia Take the Battle to Iran – with America's Blessing?Continue
Hold Alt-Media to Account for Getting It Wrong About Armenia & Azerbaijan!
How many remember reading that Azerbaijan was supposedly retreating, the world will recognize "Artsakh" soon, etc.? What about all that fake news about a supposedly "imminent" Russian military intervention in Armenia's support? None of it happened, it was all fake, all information warfare, and many were manipulated by the Alt-Media Community that they trusted. Those…
Read More Hold Alt-Media to Account for Getting It Wrong About Armenia & Azerbaijan!Continue
CIA Arrives in Libya to Manipulate Elections