Turkish Forum

Category: Saban Kardas

  • Turkey and Russia Developing a New Economic and Strategic Partnership

    Turkey and Russia Developing a New Economic and Strategic Partnership

    Turkey and Russia Developing a New Economic and Strategic Partnership

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 31
    February 17, 2009
    By: Saban Kardas

    Turkish president Abdullah Gul paid a four-day visit to the Russian Federation from February 12 to 15, marking the flourishing multidimensional relations between the two countries. Gul met with Russian president Dmitry Medvedev, Prime Minister Vladimir Putin, and other officials and also traveled to Kazan, the capital of Tatarstan, where he discussed joint investments. Gul was accompanied by Kursad Tuzmen, the state minister responsible for foreign trade, and Minister of Energy Hilmi Guler, as well as a large delegation of Turkish businessmen. Foreign Minister Ali Babacan joined the delegation for part of the trip.

    The Russian side elevated Gul’s trip from the previously announced status of an “official visit” to a “state visit,” the highest level of state protocol, indicating the value Moscow attaches to Turkey. Gul and Medvedev signed a joint declaration announcing their commitment to deepening mutual friendship and multi-dimensional cooperation. The declaration mirrors a previous “Joint Declaration on the Intensification of Friendship and Multidimensional Partnership,” signed during a landmark visit by then-President Putin in 2004 (Today’s Zaman, February 14).

    Indeed, Turkish-Russian economic ties have flourished over the past decade, with trade volume reaching $32 billion in 2008, making Russia Turkey’s number one partner. Given this background, bilateral economic ties were quite naturally a major item on Gul’s agenda and both leaders expressed their satisfaction with the growing commerce between their countries.

    Cooperation in energy is the major area of mutual economic activity. Turkey’s gas and oil imports from Russia account for most of the trade volume. Russian press reports indicate that the two sides are interested in improving cooperation in energy transportation lines carrying Russian gas to European markets through Turkey (www.cnnturk.com, February 14).

    Moreover, Russia is playing a major part in Turkey’s attempts to diversify its energy sources. Cooperation in nuclear energy is particularly important in light of Turkey’s plans to introduce nuclear power. A Russian-led consortium won the tender for the construction of Turkey’s first nuclear plant; but since the price the consortium offered for electricity was above world prices, the future of the project, which is awaiting parliamentary approval, remains unclear (EDM, January 26). Prior to Gul’s visit to Moscow, the Russian consortium submitted a revised offer, reducing the price by 30 percent (www.ntvmsnbc.com.tr, February 14). If this revision is found legal under the tender rules, the positive mood during Gul’s trip may indicate the Turkish government is ready to finally give the go-ahead for the project.

    The Russian market also plays a major role for Turkish overseas investments and exports. Russia is one of the main customers for Turkish construction firms and a major destination for Turkish exports. Similarly, millions of Russian tourists bring significant revenues to Turkey every year.

    Nonetheless, a huge trade imbalance in Russia’s favor due to Turkey’s heavy dependence on Russian gas and oil continues to be a major concern for the Turkish side. Despite commitments to fix the trade imbalance made during Putin’s 2004 visit, the gap is still there. It remains to be seen whether this trip will produce concrete results on that count, but so far the only news is that the two sides may start to use the Turkish lira and the Russian ruble in foreign trade, which might increase Turkish exports to Russia (Hurriyet, February 15).

    Other economic issues causing problems in Turkish-Russian commercial relations were also addressed. Ankara is particularly disturbed by difficulties encountered by Turkish goods at the Russian border. In response to Gul’s request for help on that issue, Medvedev reiterated the Russian position that strict inspection rules on trucks were being applied to all countries and Turkey was not specifically discriminated against. Nonetheless, he suggested the establishment of a joint technical delegation to examine the issue (Anadolu Ajansi, February 13). The parties had already agreed in September to simplify customs procedures and the new delegation might contribute to those efforts.

    A large part of Gul’s visit concerned the development of political ties between the two countries. Both leaders repeated the position that, as the two major powers in the area, cooperation between Russia and Turkey was essential to regional peace and stability. Noting he had held fruitful and sincere contacts with his Russian counterparts, Gul said “Russia and Turkey are neighboring countries that are developing their relations on the basis of mutual confidence. I hope this visit will in turn give a new character to our relations” (Hurriyet Daily News, February 13).

    For their part, the Russians praised Turkey’s diplomatic initiatives in the region. Medvedev particularly emphasized his satisfaction with Turkey’s actions during the Russian-Georgian war last summer and Turkey’s subsequent proposal for the establishment of a Caucasus Stability and Cooperation Platform (CSCP). Medvedev said the August crisis had demonstrated not only the need for coordination among regional countries to address local challenges, but also their ability to deal with such problems on their own without the involvement of outside powers (www.cnnturk.com, February 13).

    Medvedev was clearly referring to the exclusion of the United States from attempts to solve regional problems. Indeed, the ease with which Turkey went ahead with the CSCP, bypassing Washington and not seeking transatlantic consensus on Russia, prompted international and Turkish observers to question Turkey’s place in the West (EDM, September 2). Since then, attention has been focused on Turkey’s determination to follow an independent foreign policy.

    Economic dependence on Russia, however, reduces Ankara’s autonomy and options with regard to Russia in diplomatic affairs. During the Russia-Georgia war, this asymmetric dependence forced Turkey to follow an acquiescent policy toward Moscow. Prime Minister Recep Tayyip Erdogan acknowledged that dependence on Russia had tied Turkey’s hands (EDM, August 27; Milliyet, September 2).

    This dependence apparently did not bother Turkey very much. Following Gul’s visit, some have even described Turkish-Russian relations as a “strategic partnership,” a label traditionally used for Turkish-American relations. It remains to be seen how long Ankara can maintain a balancing act between the two major powers when controversial issues such as Russian plans for building a missile shield come onto the agenda.

    https://jamestown.org/program/turkey-and-russia-developing-a-new-economic-and-strategic-partnership/

  • Ankara Monitors French Plans

    Ankara Monitors French Plans

    Ankara Carefully Monitors French Plans to Rejoin NATO’s Military Command

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 26
    February 9, 2009
    By: Saban Kardas

    Determined to bring Paris into NATO’s military command after four decades of opting out, French President Nicholas Sarkozy is expected to announce France’s return to NATO’s military structures by April, when a NATO summit will mark the 60th anniversary of the Western alliance. Recent reports indicate that Paris secured U.S. support for the transfer of two senior command positions to the French. Nonetheless, discussions on the timing and modalities of France’s rejoining the alliance’s military structures will increase in the following weeks. Speaking at the annual Munich Security Conference, Sarkozy said that while pursuing this goal, he would not do anything that might jeopardize his country’s independence (www.euobserver.com, February 5; Reuters, February 6).

    Recent discussions on France’s return to NATO’s military structures have highlighted the intricate links between Turkish-French relations on the one hand and their implications for Turkey’s relationships with NATO and the European Union, on the other. Turkey is a full member of NATO and is negotiating accession terms for EU membership. Turkey’s EU membership process has been stalled recently, and Ankara puts a large portion of the blame on obstacles created by EU-members France and Greek Cyprus. In particular, Ankara is irked by the French and Cypriot objections to the EU’s efforts to open new negotiation chapters with Turkey (EDM, January 20).

    Turkey’s problematic relations with the EU may have negative repercussions for NATO-EU security cooperation. Paris has been pushing for strengthening the EU’s military capabilities without undermining NATO’s role in European security. For France, a greater European role in security and defense affairs would complement NATO’s collective security responsibilities. Despite the EU’s progress toward acquiring autonomous military capabilities, however, it still depends on NATO assets to carry out military missions.

    Turkey supports greater European autonomy in principle, but Ankara is troubled by its exclusion from the decision-making mechanisms of the European Security and Defense Policy (ESDP), the EU’s security arm. Being the largest non-EU contributor to the ESDP, Turkey demands greater participation of non-EU NATO allies in the European defense initiatives. Ankara supports NATO’s primacy in managing European security and objects to the development of EU-only capabilities that might undermine NATO.

    In an effort to retaliate for the Greek Cypriots’ objections to Turkish-EU cooperation, Turkey uses its position in NATO to prevent Greek Cypriot participation in EU operations utilizing NATO assets. Ankara maintains that since Cyprus does not have a security agreement with the alliance, it cannot have access to sensitive information. Sources argue that this situation “makes it difficult to work out detailed tactical arrangements between NATO and the EU. It is a potential burden on operation settings” (Hurriyet Daily News, February 2).

    Since decisions in NATO are taken unanimously, it has been suggested from time to time that Ankara could also use its position in NATO as leverage to remove obstacles in Turkish-EU negotiations, but Turkey has refrained from resorting to that option. Although Turkish diplomats carefully avoid giving the impression that Turkey might veto France’s reintegration when this issue comes on the agenda, some Turkish experts and academics call on the government to consider this option to counteract French policies against Turkish interests. Following the 2008 NATO summit, where Sarkozy announced his plans for reintegrating France into NATO’s military structures, a Turkish academic labeled a veto as a “low-risk” card and argued that “Ankara must ensure that Paris understands that rejoining France to the military wing of NATO will be possible only if France meets some of the Turkish demands. Negotiations on this issue must begin” (www.asam.org.tr, May 2).

    Given Turkey’s recent frustration with French policies, it has been speculated that Turkey might threaten a veto in NATO to bargain for a lifting of French obstacles in Turkish-EU negotiations. Some see this occasion as a new litmus test for Turkish diplomacy, because, following the Davos incident, the government is under pressure to play hard ball to protect its national interests. Opposition parties expect the government to use the veto trump effectively (Milliyet, February 7).

    Noting the eagerness of Paris to rejoin NATO, analysts argue that Prime Minister Recep Tayyip Erdogan will be caught in a dilemma as the April summit approaches. If Erdogan lets France have its way after having presented so many obstacles to Turkey, he might lose popularity at home. If Turkey uses its veto power as a bargaining chip, it might well backfire, because at a time when there is consensus on bringing France back into the organization, this move might isolate Turkey from its allies (Milliyet, February 6; www.cnnturk.com, February 6).

    The feasibility of a veto hinges, however, on whether a formal vote is needed for a French return. French diplomats and alliance officials believe that a unanimous decision is not required (Turkish Daily News, July 24; Reuters, February 6). Indeed, France is already active within NATO, and French troops serve in continuing NATO operations. A French return would largely concern French representation in the command structure.

    Before departing for the Munich Conference, Turkish Foreign Minister Ali Babacan told reporters that Turkey was still evaluating a French return to NATO. Babacan noted that Turkey would await clarification of whether a unanimous vote was necessary. Describing the situation of France as a unique case, Babacan added “the matter is more political than legal… The key concern here is for NATO to continue operating as a strong international organization. But, we will see how the French decision will be implemented… Here, the modalities of French participation are important, and we expect the French to present their modalities in the coming days” (ANKA, February 6).

    Though maintaining Turkey’s policy of ambiguity, Babacan avoided confrontational language. He gave indications that Turkey would prioritize alliance interests and go along with its NATO allies.

    Nonetheless, even if a unanimous decision might not be required, political bargaining would be needed for the distribution of command posts. Given the high premium NATO attaches to political consensus among its members, France and the United States will have to work hard to bring Turkey on board.

    https://jamestown.org/program/ankara-carefully-monitors-french-plans-to-rejoin-natos-military-command/

  • Gul Meets with King Abdullah as Turkey Seeks Saudi Investments

    Gul Meets with King Abdullah as Turkey Seeks Saudi Investments

    Gul Meets with King Abdullah as Turkey Seeks Saudi Investments

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 24
    February 5, 2009
    By: Saban Kardas 

    From February 3 to 5 Turkish President Abdullah Gul is visiting Saudi Arabia as King Abdullah’s official guest. Gul is accompanied by several members of the Turkish cabinet as well as about 150 Turkish businessmen. Since the visit comes amid discussions on how to bring calm to the Middle East in the wake of Israel’s Gaza offensive, it provides an opportunity for the leaders of the two major regional countries to discuss developments in their neighborhood. The visit also marks the deepening bilateral ties between Turkey and Saudi Arabia, which have gained momentum since the Justice and Development Party (AKP) came to power in 2002. In addition to bilateral and regional matters, Gul and his hosts discussed issues important to the Islamic world.

    Gul spoke at the Consultative Assembly of Saudi Arabia, which made him the first Muslim head-of-state to address the Saudi assembly. Regional peace and Gaza-related developments took up a major part of Gul’s speech. He praised King Abdullah’s work toward ensuring regional peace and stability and described Riyadh’s foreign policy as “constructive and responsible.” “We always maintain close political consultation about regional issues,” Gul added (www.ntvmsnbc.com, February 4).

    Gul complemented King Abdullah for his past efforts to resolve the Palestinian problem, and he gave his support to the Saudi peace plan, which called on Israel to withdraw to its 1967 borders in return for normalization of relations with its Arab neighbors. He also reiterated Turkey’s position that the solution of the conflict depends on ensuring reconciliation among Palestinian factions. As a successful example of mediation, Gul cited a meeting between Fatah and Hamas that was hosted by King Abdullah in Mecca in 2007. He asked the leaders of Arab and Muslim countries to work toward ensuring that Palestinians achieve a national unity government. In an Islamic internationalist tone, he presented the Palestinian problem as the responsibility of the Muslim nations: “The number one issue is the unity of the Palestinians, the unity of the Arab world, and the unity of the Muslim world, with all of us showing our responsibility and desire to act together when there are major issues” (Today’s Zaman, February 5).

    In his address to the Saudi assembly, Gul also touched upon another issue of common interest to Muslims worldwide. Gul expressed his concern about growing “Islamiphobia” in the West. Gul argued that the source of misperceptions and growing enmity toward Islam was the tendency in some circles to equate Islam with terrorism. Noting that terrorism may spring from any society and any religion, he described Islam as a religion of peace that urged its followers to respect others (Zaman, February 5).

    The visit also highlighted the flourishing Turkish-Saudi bilateral relationship. The Turkish president said that he felt at home on his the trip, calling Turkey and Saudi Arabia sister states and sister nations. Gul recalled that King Abdullah had gone to Turkey in 2006 and 2007 and that these two visits in such a short time had shown Riyadh’s “extraordinary attention and concern for Turkey.” Gul added that he had wanted to return the gesture by paying a visit without any delay to show the high esteem that Turkey attached to relations with Saudi Arabia (www.ntvmsnbc.com.tr, February 4). Diplomatic observers believe that Riyadh might be seeking to develop a strategic partnership with Turkey to counter the growing Iranian influence in the region (www.cnnturk.com, February 3).

    Bilateral economic cooperation was a major theme on Gul’s agenda. He emphasized that the two countries had already signed agreements covering tax exemption, investment protection, and transportation (ANKA, February 4) and expressed the hope that the two sides could extend this cooperation further. Turkish ministers and the businessmen accompanying Gul signed new agreements with their counterparts in such areas as educational exchange programs, cooperation in youth and sports, and maritime transportation (Hurriyet Daily News, February 4).

    Gul also spoke at a meeting of the Turkish-Saudi Business Council. Noting that structural reforms in Turkey had helped the country withstand the global crisis and created favorable conditions for foreign investors, Gul highlighted the strengths of the Turkish banking system. He invited Saudi businessmen to invest in Turkey. Given Saudi Arabia’s projected investments in infrastructure, Turkish businesses, especially contractors, view Saudi Arabia as a lucrative foreign market (Cihan Haber Ajansi, February 4).

    Despite the positive outlook for the economy and financial sector that Gul presented, Turkey urgently needs an injection of foreign capital to cushion the effects of the crisis. The government has been reluctant to sign a credit agreement with the IMF, because it would impose stringent conditions on government spending (EDM, January 29). There has been constant talk in Turkey about attracting petrodollars, or “Gulf capital” as the Turks like to call it, as a way to finance Turkey’s economic development. Turkish businessmen have hoped that Turkey might be able to attract Gulf capital leaving the Western banking system, especially after September 11. Lately, it has often been said that Gulf capital might make Istanbul a worldwide financial center, and end Turkey’s dependence on the IMF (Zaman, January 28, 2008). As a matter of fact, although the AKP government has been successful in boosting the volume of Arab investments in Turkey, it could not raise it to a level that would reduce Turkey’s dependence on money borrowed from Western financial institutions.

    Following Prime Minister Recep Tayyip Erdogan’s walkout from a meeting in Davos, the Turkish media was full of speculative reports that Middle Eastern countries, impressed by Erdogan’s stance, were preparing to invest further in Turkey. Reportedly, financial institutions in Saudi Arabia, Kuwait, and the United Arab Emirates might offer Turkey almost a “blank check,” which might relieve the Turkish economy (Yenicag, January 31). It remains to be seen, however, whether Gul can use Turkey’s new image in the Middle East and his personal ties to King Abdullah to bring home good news about Saudi investment.

  • Will the AKP’s Foreign and Economic Policies Help in Local Elections?

    Will the AKP’s Foreign and Economic Policies Help in Local Elections?

    Will the AKP’s Foreign and Economic Policies Help in Local Elections?

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 21
    February 2, 2009
    By: Saban Kardas

    Following his controversial remarks about Israel’s policies in Gaza made at the World Economic Forum (WEF) summit in Davos, Prime Minister Recep Tayyip Erdogan has refocused his attention on domestic politics. The municipal elections on March 29 are expected to be a major test of the policies of the Justice and Development Party (AKP). As the elections approach, the government is gearing its economic and foreign policies toward boosting the electoral performance of AKP candidates.

    In November Erdogan challenged his opponents, saying that if his party came in second in the elections, he would step down from the AKP chairmanship (Zaman, November 25). An earlier EDM analysis maintained that the March elections would be dominated by national political issues and the AKP might exploit its position as the incumbent to improve the chances of its candidates against their rivals (EDM, December 3).

    AKP representatives are capitalizing on Turkey’s new international profile to mobilize popular support. Deputy Speaker of Parliament Nevzat Pakdil told AKP party supporters that the coming elections were not just about voting for mayors or city council members but that the Turkish people would be asked to “approve Prime Minister Erdogan’s noble stance in Davos, which put Turkey on the map worldwide” (www.cnnturk.com, February 1).

    Indeed, most Turks view Erdogan’s walking out of the Davos meeting in protest over Israeli policies as a staunch defense of Turkey’s image and the rights of Palestinians in international forums (EDM, January 30). Erdogan’s team was successful in couching his policy in terms of conducting an independent foreign policy, and the Davos incident prompted the Turkish public to “rally ’round the flag.” Since the Turkish people historically have the impression of being treated as inferiors in international diplomacy, people from across the political spectrum expressed their support for Erdogan, welcoming him almost like a new national hero. Likewise, most party leaders affirmed Erdogan’s reaction, though expressing some reservations about his style.

    While Erdogan’s popularity has been boosted at home following the Davos incident, some critics charge that the government’s policies in the Middle East in general and Erdogan’s attitude in Davos in particular might be driven by populist concerns to secure victory in the elections. They also raise concerns that such short-sighted policies might undermine the country’s long-term interests (BirGun, Cumhuriyet, January 31).

    Analysts believe that that Davos incident will improve the AKP’s showing in the municipal elections. A survey conducted by the Metropoll polling company to measure the impact of the Davos incident revealed interesting results. As of January 31 Erdogan’s Davos position was supported by 78.3 percent of the respondents and Turkey’s Middle East policy by 82 percent. Compared with the results of Metropoll’s previous poll on January 24, the share of “those who approved the Prime Minister’s political style” increased from 55 to 74 percent. Moreover, when asked “what party would you vote for if there were an election this Sunday,” 49.3 percent said that they would vote for the AKP, in contrast to only 38.9 percent on January 24 (www.aktifhaber.com, January 31).

    The immediate impact of the Davos incident might have inflated the AKP’s support. Some analysts, including Tarhan Erdem of Konda polling company, believe that by the time of the elections the impact of Davos might have evaporated. Others, however, expect at least a 5 percent increase in the AKP’s vote in local elections. Observers point out in particular that through his Davos stance, Erdogan would probably undermine the performance of the Nationalist Action Party (MHP) and the Felicity Party (SP). The AKP is likely to prevent its nationalist and conservative voters from switching to the MHP and the SP, respectively, while attracting supporters from these two parties’ (www.haber3.com, January 31).

    After his abrupt return from Davos, Erdogan spent the weekend in Istanbul in a bid to throw his weight behind his party’s candidate for mayor of Istanbul, Kadir Topbas. He attended the opening ceremonies of several billion dollars worth of infrastructure investments in Istanbul, as well as AKP gatherings. He opened new lines extending Istanbul’s subway network and attended celebrations for the introduction of new ferries to Istanbul’s transportation fleet (Cihan Haber Ajansi, January 31; www.ntvmsnbc.com.tr, February 1).

    Speaking to large crowds, Erdogan touted the government’s successes in foreign policy, economy management, and tough bargaining with the International Monetary Fund (IMF). He accused the opposition, especially the leader of the main opposition Republican People’s Party (CHP), of populism and empty talk. He presented his own party as the only one that could “talk the talk and walk the walk,” noting improvements in the economic indicators.

    Although Erdogan promised that the AKP would not resort to populism, several of its policies and their timing raise questions about how sincere he was on that score. Providing free coal to low-income families has been a constant source of accusations that the AKP uses state money to solicit votes. Erdogan has responded to such criticism by claiming that the government was fulfilling the “social state’” requirement laid down in the constitution (Cihan Haber Ajansi, February 1).

    Erdogan also announced a price cut for natural gas by 17 percent for residences and 18 percent for industry effective on February 1 (www.cnnturk.com, February 1). In response to the falling energy prices on global markets, the government had been under pressure to reduce gas prices domestically. Although preparatory work on a formula to cut prices had been in progress for some time, the announcement of such a decision during the election campaign is significant.

    In a similar move, the Agricultural Minister announced that between January and March, the ministry would pay farmers half of the 5.026 billion lire ($3.023 billion) allocated for agricultural subsidies (www.dunyagazetesi.com.tr, January 31).

    It is perhaps unfair to charge the government with basing its economic and foreign policies on the short-term interest of winning the local elections; but undoubtedly the AKP skillfully capitalizes on its position as incumbent to the advantage of its own candidates, which raises the question: How level is the playing field for the opposition parties?

    https://jamestown.org/program/will-the-akps-foreign-and-economic-policies-help-in-local-elections/

  • Turkey and the IMF Take a Break to Review Remaining Disagreements

    Turkey and the IMF Take a Break to Review Remaining Disagreements

    Turkey and the IMF Take a Break to Review Remaining Disagreements

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 19
    January 29, 2009
    By: Saban Kardas

    After 18 days of intense negotiations on a new financial package, an International Monetary Fund (IMF) mission failed to reach an agreement with Turkey and left Ankara on Tuesday. Mehmet Simsek, the minister of state responsible for the economy, told reporters on Monday that the talks had briefly been halted and would resume “after the removal of some disagreements on remaining issues.” On Tuesday Prime Minister Recep Tayyip Erdogan said that the talks would continue after a 10-day break (Hurriyet Daily News, January 27).

    Since Turkey’s previous $10 billion standby loan agreement came to an end in May, the Justice and Development Party (AKP) government has resisted pressure from Turkish business circles, investors, and international financial/economic institutions to sign a new accord. Although the global financial crisis further heightened the urgency for an IMF program to inject additional funds and ensure trust in the markets, the government preferred to stall the negotiations, because it was reluctant to accept constraints on public spending before the coming elections. It has remained optimistic that it can weather the global crisis with its own resources (EDM, December 10).

    The decision to put the talks on hold came as a surprise. On January 25 the governor of the Central Bank, Durmus Yilmaz, estimated that Turkey would have a foreign financing gap of around $30 billion this year and called on the government to sign the letter of intention before the local elections slated for March. His remarks about the progress in the negotiations and his emphasis on ensuring fiscal discipline were interpreted as strong signals that an agreement might soon be reached. Markets responded to Yilmaz’s remarks with stock prices increasing the next morning. When the news about halting the talks arrived, however, stocks fell (Anadolu Ajansi, January 25; ANKA, January 26).

    News of an agreement had been expected before Erdogan and Simsek left for Davos to attend the World Economic Forum (WEF). In the meantime, there have been questions about the standing of the Turkish-IMF talks and whether Turkey could postpone an agreement until after the local elections in March.

    Disagreements over fiscal regulations and public-sector reforms were the major cause of the deadlock in the talks. Simsek said that although the government did not want to postpone an agreement until the elections, talks on some mid- and long-term structural reforms would continue. According to experts, differences of opinion persist on several issues: local administrations; reform of state-owned enterprises; and the requirements for “financial rule,” which is the IMF’s new criterion for financial discipline. Although the IMF and the Turkish treasury have held workshops about how to define this concept, it remains a mystery to many. One expert claimed that this new requirement included stringent regulations on the budgetary deficit, the interest-free budget surplus, and the ratio of debt stock to the gross national product. These demands will probably require the introduction of new legislation that might limit political influence on economic decisions and curb government spending (www.haberturk.com, January 28; Sabah, January 28).

    Some observers argue that although Simsek did his part in the negotiations, the talks hit a point at which Erdogan needs to be convinced (Milliyet, January 28). The likely constraints on the government demanded by the IMF appear to irritate Erdogan. Before leaving for Davos, he asked the IMF not to bring in new conditions for Turkey. Erdogan criticized the IMF for introducing new issues into the continuing negotiation process and reopening issues to which Turkey had already responded. Erdogan warned that this attitude increased Turkey’s concerns and sensitivity and asked the IMF to take Turkey’s unique conditions into account and stop treating it like any other country in the world (ANKA, January 28).

    These remarks reflect Erdogan’s belief that Turkey needs to invest to create more jobs in order to cushion the effects of the crisis. He evidently thinks that the IMF’s demands for increasing taxes, tightening the budget, and freezing government spending will limit investments and exacerbate the effects of the crisis on the Turkish people.

    Talks between the IMF and Turkey over the new loan agreement continued in Davos. Parallel to the meetings between the Turkish and the IMF teams, Erdogan met IMF Deputy Managing Director John Lipsky on January 28. Following the meeting, both Erdogan and Lipsky told reporters that they had had a fruitful discussion and would resume the talks after the 10-day break (Anadolu Ajansi, January 29).

    Meanwhile, WEF President Klaus Schwab described Turkey as the top country in its region, noting its strategic location on energy routes and recently heightened diplomatic profile. Schwab said that Turkey’s recent structural reforms would help it emerge from the global crisis much stronger than before (Anadolu Ajansi, January 28).

    Other experts also believe that Turkey is much stronger and better equipped to deal with the global crisis than it was with past economic crises. It was noted at a conference that the AKP government’s previous structural reforms might be paying off, particularly because the banking sector was now in good shape and the government had been relatively successful in reducing public debt, easing the inflation rate, and boosting public and foreign direct investments (Today’s Zaman, January 29).

    Nonetheless, most economists have draw attention to the contraction in the Turkish economy. Since the economy is integrated closely into world markets, it is vulnerable to the adverse effects of the crisis. Stagnation in global markets harms Turkish export industries such as textiles and the automotive industry. Consequent drops in industrial production and the utilization of capacity led to a shrinking of the Turkish economy toward the end of 2008, and the growth rate is likely to drop in 2009. Yilmaz urgently called for an IMF accord to avoid liquidity problems and improve credit conditions (www.ntvmsnbc.com, January 28).

    It will be interesting to see how long Erdogan will resist such pressures and insist on driving “a tough bargain” with the IMF.

    https://jamestown.org/program/turkey-and-the-imf-take-a-break-to-review-remaining-disagreements/

  • Is the Russian-Led Consortium Trying to Overcharge Turkey for Its First Nuclear Power Plant?

    Is the Russian-Led Consortium Trying to Overcharge Turkey for Its First Nuclear Power Plant?

    Is the Russian-Led Consortium Trying to Overcharge Turkey for Its First Nuclear Power Plant?

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 16
    January 26, 2009
    By: Saban Kardas

    Turkey is continuing to debate the construction of its first nuclear power plant in Akkuyu, Mersin. After the tender was launched in March 2008, 13 foreign and local companies purchased documents. All but one, however, failed to submit an offer, because they did not have sufficient time to prepare the necessary documentation. The government did not respond to their call for extending the September 2008 deadline; and only one consortium, a joint venture of Russia’s state-run Atomstroyexport, Inter RAO, and the private Turkish company Park Teknik submitted a bid (EDM, October 10).

    Although many within the energy sector called for the cancellation of the tender, the AKP government went ahead with the plans. The sole bidder submitted its offer to the Turkish government; and, upon technical evaluation, the Turkish Atomic Energy Agency (TAEK) concluded in December that the proposal met the necessary criteria.

    On January 19 the Energy Ministry opened the sealed letter with the offer, which also included the price. This was the third and final stage of the tender process. Energy Minister Hilmi Guler announced that the consortium had offered a price of 21.16 cents per kilowatt-hour (kWh) for the electricity it would sell to Turkey. In the coming days, the state-run Turkish Electricity Trading and Contracting Company (TETAS) will evaluate the proposal and present a report to the cabinet for final approval (Dogan Haber Ajansi, January 19).

    Under the bid, the consortium would build “four units of the Russian VVER-1200 pressurized water reactors that generate 1,200 megawatts of electricity each.” The plant would produce around 4,800 megawatts of electricity per year. Since the Turkish government must commit itself to buying electricity from the company for 15 years, it would be paying $86.3 billion for 415.5 billion kWh during that period (Hurriyet Daily News, January 20).

    Turkey is considering the construction of nuclear plants as a source of clean and cheap energy and as a means for reducing energy dependency. By 2020 it seeks to produce 8 percent of its electricity from nuclear plants and increase that amount to 20 percent by 2030 (www.ntvmsnbc.com, January 20).

    The price of electricity is a crucial factor. Earlier, Turkish officials had said that they expected the consortium to make a reasonable offer. Some observers had predicted a price offer in the vicinity of 12 to 15 cents. Many observers found the price excessive, arguing that 21.16 cents per kWh was above market prices. Experts and representatives from the energy sector noted concerns about a price that was almost four times higher than the current rates in the Turkish market, which varied from 4 cents to 14 cents. Some described it as the world’s most expensive electricity generated at a nuclear plant, arguing that the world average was around 10 to 15 cents per kWh. Others noted that Turkey had cancelled another tender for the construction of a coal-fired power plant, because even the anticipated 14.7 per kWh had been found too expensive. Turkey also is investing extensively in natural gas power plants, which reportedly produce electricity for around 7 to 10 cents per kWh (Referans, January 20; Today’s Zaman, January 20).

    The chairman of the Electricity Producers Association, however, cautioned that although the price was high, it was also important to remember that this tender model was a first in the world. Under this model, the private sector was assuming all the risks for such a large-scale investment, which might account for why the offer turned out so high. A board member of the Chamber of Electrical Engineers, however, said that since there was no competition, the chamber deemed the tender illegal and incompatible with Turkey’s national interests (ANKA, January 20).

    The same day, the consortium submitted another letter with a revised price. Since the 21.16 cents was offered in September, the company said it wanted to adjust the price, reflecting changes in the world economy and energy costs (www.cnnturk.com, January 19). Guler avoided commenting on the amount but said that there was no obstacle to renegotiating the price. TETAS, however, concluded that the rules regulating the tender prohibited submission of revised
    , because a new price would in essence constitute a new offer. On a TV show the same night, Guler said that the revised letter had been rejected (Anadolu Ajansi, January 19).

    The Turkish press speculated that in its report to the cabinet, TETAS would probably suggest rejecting the consortium’s offer (Vatan, January 21). Responding to questions on this subject, Guler told reporters that the tender process was proceeding well, and a cancellation was not on the agenda (Anadolu Ajansi, January 23).

    The government is keen on building nuclear power plants to diversify Turkey’s energy sources, and plans for the construction of two more plants are also underway. For obvious reasons, environmentalist groups have opposed Turkey’s nuclear energy projects since the beginning. Even the representatives of the energy sector continue to question the government’s policy on nuclear energy, in particular its hasty approach. Moreover, as Turkey is seeking to reduce its dependence on Russian gas, which accounts for 35 percent of Turkey’s electricity production, it would be ironic to award the tender to a Russian company. The government’s disregard of the global financial crisis and insistence on proceeding with these costly projects is also a cause of concern (Today’s Zaman, January 20).

    Guler continuously emphasizes that although Turkey is looking to increase its use of hydroelectric and renewable energy sources, it does not have the luxury to ignore nuclear energy. Nonetheless, it remains to be seen whether the government will be able to realize Turkey’s nuclear energy ambitions, which have been thwarted for decades. As things stand, most observers see little chance that the cabinet will approve the Russian offer for the Akkuyu plant. In the unlikely event that the cabinet does endorse the Russian offer, Turkey will most probably bargain to decrease the price before it signs the final agreement.

    The government, however, might have learned some lessons from its handling of the project so far. Preparations are reportedly under way to streamline the nuclear energy policy. As a first step, it would push for revising the Nuclear Tender Law. Since the current law prevents opening a second tender, allowing flexibility on that score would be the first rule to change. Also, the current competition model, which discourages many possible contenders from participating, is likely to be amended. Instead of a free market model of private companies undertaking construction, a model based on greater public involvement is likely to be considered (www.ntvmsnbc.com, January 21).

    https://jamestown.org/program/is-the-russian-led-consortium-trying-to-overcharge-turkey-for-its-first-nuclear-power-plant/