Friday, 17 August 2018

Turkey’s recently reelected president, Recep Tayyip Erdoğan, is blaming the sudden and dramatic decline of the Turkish lira on an international conspiracy, variously railing against an “economic war” and a “currency plot”.

On the surface, this looks like a reaction to US president Trump’s steel and aluminium sanctions, which are ostensibly designed to press Turkey to release American pastor Andrew Brunson, who is in custody on terrorism charges.

But Turkey’s financial crisis has not been caused by its refusal to release an evangelical pastor. The US’s new sanctions have merely inflamed a crisis that’s been a long time coming. And while Turkey’s woes are mostly homemade, they are nevertheless embedded in a fragile global political economy – meaning there is a serious risk of contagion. This is therefore not the time to merely point fingers at the structural deficiencies of Turkey’s political economy; Turkey is just the proverbial canary in the coal mine. This is a local manifestation of global problems and an indication of looming ones as well.

Turkey has for years been a poster child for international investors. Once described as the “China of Europe”, it has long attracted substantial capital from forthcoming global markets. Thanks to solid financial restructuring engineered by the former World Bank executive Kemal Derviş in 2001-2, outside markets had little reason to worry about lending to its well-regulated banking sector. And while many of Turkey’s longstanding structural issues were well known, they weren’t considered noteworthy risks, even when it went into recession after the 2008 global financial crisis.

But while foreign exchange markets are always speculative, the global capital glut that financed Turkey’s growth has dried up. Not only is there less capital going around, but the US’s federal reserve’s rate changes mean that lending to emerging markets is now less attractive.

This problem has only been exacerbated by Erdoğan’s moves to consolidate his personal power. Markets usually don’t have a problem with authoritarianism in principle, but they do get skittish when autocrats make questionable decisions. Hence the worries caused by Erdoğan’s decision to replace the respected economist Mehmet Şimşek with his own son-in-law, effectively removing a safety valve that kept Turkey in line with the markets’ expectations.

But this isn’t just about markets and capital; the crisis is more embedded in geopolitics than it might seem.

Turkey in the world

Many of Turkey’s problems hinge on relations with the US, and they’re by no means limited to the fate of the pastor. The relationship between these two longtime allies has been deteriorating since the 2011 Arab uprisings, when Turkey began pursuing a leadership position in the Middle East. Seven years later, the two have conflicting stakes in the Syrian Civil War.

On that front, they have fallen out over the US’s support for the Syrian Democratic Forces (SDF) led by Kurdish factions, which Turkey considers offshoots of the militant PKK movement.

Turkey’s response was to seize control of pockets of territory in northwest Syria, first around the cities of al-Bab and Jarablus and eventually driving Kurdish forces out of the northwestern canton of Afrin. This clear divergence in Turkey-US interests was carefully maintained and exploited by Moscow while its own relations with Ankara were further improved via energy and arms deals.

The upshot is that Turkey now has a front row seat in discussing the future of its neighbour. That’s useful enough, but it doesn’t solve Turkey’s Syrian problems. Relations with Russia now face a new test: Syrian government forces are starting to move into the Turkish protectorate in the northwest, even as the terms of Turkey’s withdrawal from Idlib, Afrin and al-Bab remain unclear.

To make things even more complicated, the future of the 3.5m Syrian refugee population within Turkey remains an open question. And then came the lira crisis. Large parts of northwestern Syria now directly depend on Turkish services, meaning the currency’s troubles have immediate implications for the Syrian conflict more widely.

While this geopolitical risk exposure was already “priced into” the lira to some extent, the real impact of Turkey’s involvement in Syria is indirect and hard to mitigate. And that makes the country’s various disagreements with the US even harder to resolve.

Turning away?

Venezuela’s president Nicolás Maduro has called Erdoğan one of the leaders of the “new multipolar world”. In many ways, this is true – at least in aspiration. Beyond its immediate environment, Turkey has long worked to extend its global influence, including via its international development agency, TIKA. Turkey is now second only to the US in the percentage of GDP it allocates to foreign aid.

The Trump administration has helped by turning away from many of its traditional commitments, retreating from active military involvement in the Middle East, starting various trade wars, defecting from international accords such as the Paris Climate Agreement and the Iran Nuclear Deal, and generally being erratic and unaccommodating. Its behaviour has opened up spaces for other powers to flex their muscles, most notably China.

Turkey has long aspired to join the Shanghai Cooperation Organisation, a strategic group of Eurasian and Asian powers including China and Russia, and has recently lobbied to be formally admitted to the BRICS group of major emerging economies. Having secured close ties with Moscow and a central location on China’s Belt and Road Initiative, Turkey is understandably tempted by a full defection from an American-led international order. Turkey has publicly defied the US on Iranian sanctions while moving away from dollar denominated trade positions and inviting others to do just the same – a rare challenge to the dollar’s role as the international reserve currency.

Is this enough for the US to launch a rogue economic war against Turkey? Perhaps not. Nonetheless, this dire situation is part of a crisis-ridden transition towards a new, multipolar world order where all powers, and above all the US, will have to carve out a new space.

The lira crisis proves that Turkey is not immune to the fallout from this change, and its location at the flashpoint of various conflicts and competitions has seen it hit the hardest. But it is also actively working to undermine US leadership of the “liberal international order”. Its vital importance to the rest of the world is on full display: as the news of the lira’s demise broke, the Yuan was up and the Euro was down. Whatever is to blame for this currency crisis, the world has no choice but to take notice.


Clemens Hoffmann, Lecturer in International Politics, University of Stirling and Can Cemgil, Assistant Professor of International Relations, Istanbul Bilgi University

This article was originally published on The Conversation. Read the original article.

Published in World

Cryptocurrencies are now one of the most talked about technological shifts of recent times, with new companies announcing regularly that they are either going to start accepting them for their goods and services, or even going to start paying their employees with them.

With this uptake and increasing global acceptance of cryptocurrencies, we wanted to find out what percentage of people would accept them as part or all of their salary. From interviewing 1,000 people, we found that 31% WOULD be happy to be paid in a cryptocurrency.

So, how do the numbers break down? The current landscape of Bitcoin ownership shows that 90% of those with them are male. Therefore, it’s largely unsurprising that males are more likely to answer ‘yes’ to our survey. However, we found that 25% of women are interested in cryptocurrencies, they just may not own any yet.

There were also some surprising results within age groups. As expected, the most interested age group for being paid in cryptocurrencies were between 25 - 34 years old, leading the charge with 33%. This steadily decreased as respondents were older. However, those in the 65+ age group were more likely to answer ‘yes’ than those in the age group below, 55 - 64 years old.

During our investigation, we also wanted to find out what percentage of income people would be interested in receiving in this new form of currency. The majority here were on the risk-averse side, with 37% answering between 1 -20% of their income, favouring the majority of their income be paid in fiat money. The numbers again slightly decreased until we approached the higher end of the scale, where a total of 15% answered that they would be interested in 80 - 100% of their income as a cryptocurrency, demonstrating that the higher end if the scale is dominated by people ‘all-in’ on the new wave of currency.

For more information, have a read through our infographic below.

Cryptocurrency Salary - A Sage Infographic

Published in Bank & Finance

The Nigerian National Petroleum Corporation (NNPC) has announced plans to relocate a brownfied refinery from Turkey to Nigeria.

The refinery, which is expected to be sited near the Port Harcourt Refinery in Rivers State under the NNPC refinery collocation initiative, would have a capacity of 100,000 barrels per day (bpd).

In a statement on Tuesday, the corporation’s spokesman, Ndu Ughamadu, said the Group Managing Director of NNPC, Maikanti Baru, made the disclosure while speaking on efforts being made to achieve self-sufficiency in local refining besides the rehabilitation of the refineries.

Baru hinted that a group of investors had commenced the process of relocating the refinery that used to be owned by BP to Nigeria from the Asian country.

The NNPC helmsman explained that a similar plan to establish a brownfield refinery near the Warri Refinery was also in the offing.

According to the statement, the effort was part of the corporation’s refinery collocation initiative designed to boost local refining capacity to end the era of petroleum products importation.

The statement quoted Baru as saying, “Our collocation initiative aimed at getting private sector investors to bring in brownfield refineries so that they can share facilities is also yielding results.

“For example, there is one that is going to be brought in from Turkey to be located near the Port-Harcourt Refinery. It’s not a modular refinery; it’s a normal refinery with about 100,00bpd capacity. It was owned by BP, but it has been sold off now to the companies that want to bring it over from Turkey to install it here.

“There is another one of about the same size being looked at to be sited near the Warri Refinery. But the one for Port-Harcourt is at a more advanced stage. Our drive at the NNPC, as a leader in the industry, is to expand our local refining capacity and make Nigeria a global refining hub.”



Published in Business
Nigeria’s dependence on the oil sector as its major source of foreign exchange earnings was responsible for the country’s high unemployment rate, a former United Nations Permanent Representative and Under Secretary-General to the world body, Prof. Ibrahim Gambari, as well as heads of other organisations, have said.

According to the National Bureau of Statistics (NBS), the nation’s unemployment rate had soared steadily from 7.5 percent in the first quarter of 2015 to 18.8 percent in the third quarter of 2017.

Gambari, while speaking at the 2018 Leadership Impact and Sustainability Awards in Abuja on Wednesday, called for the need to diversify the nation’s economy, noting that earnings from crude oil sales were no longer sustainable.

He said the sector was not capable of providing employments for the growing unemployed population in the country.

The former representative of the world body pointed out that the instability in crude oil prices occasioned by geo political tensions has shown it was improper to depend on the sector as a major source of revenue generation.

“We can’t afford to fully embark on the process of diversifying the Nigerian economy. This is because revenue from crude oil sale is no longer sustainable.

“And for us to diversify, we have to invest in research and development so as to acquire the right knowledge and skills. We cannot continue to depend on crude oil for our foreign exchange earnings. When you look at it critically, how many people does the oil sector employ?

“You will agree with me that the biggest challenge we have now is youth unemployment, not just in Nigeria, but in Africa and to some extent globally.

“So we have to diversify into the industrial sector, service provision, research and development, education and agriculture, because those are the sectors that have the capacity to employ more people,” he said.

In June, the Minister of Budget and National Planning, Sen. Udoma Udo Udoma, while giving a breakdown of the 2018 Budget had said a total of N2.99 trillion was projected as funding in the Budget from oil revenue.

The amount indicates about 42 percent of the total of N7.1 trillion revenue funding estimated in the budget.


The Ripples

Published in Country Profiles
  1. Opinions and Analysis


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