TURKEY, LIRA, ERDOGAN: Swamps of Greatness
Azerbaijan and Armenia are at war – again. Who started it – doesn’t matter anymore. What matters is who wants what and what position every side takes in this conflict. And there is definitely more than just Armenia and Azerbaijan – about these, you wouldn’t probably hear in another 10 years, if not the conflict. As you understand – there is Turkey.
At least because the Turkish President clearly expressed his view on the situation. There is also Russia. And Europe. And even the US – in fact, half of the world may be involved in this small regional conflict of the two nations which don’t have any sound weight on a global scale.
Azerbaijan is a Turkic-speaking nation, Muslims. Within their territory, there is a region of Karabakh where Armenians live – a different language, background, and Christians. Armenians of Karabakh say “we have nothing to do with Azerbaijan, we want to be separate”. Azerbaijan says “that’s our land – if you want to stay on it, it will remain ours”.
So for Azerbaijan, Armenians of Karabakh are separatists and terrorists. For the Armenians of Karabakh, Azerbaijan is an oppressor state trying to expel you from your homeland, at the very least. A clear stalemate – or a balance, if you prefer.
The state of Armenia which borders Azerbaijan obviously supports the Armenians of Karabakh inside of Azerbaijan. In the meantime, Turkey clearly supports Azerbaijan as these are the two nations of similar blood, culture, and language.
Now, if it was only between Armenia, Azerbaijan, and Turkey – Armenia with Karabakh obviously have no chance: neither demographically, nor militarily, economically, or strategically. But there is a Russian military base in Armenia: Armenia is, or has been until now, a strategic vanguard post of Russian power projection into the Middle East since the conquest of Caucasus by the Russian Empire in the XIX century.
That means, although the time of old empires is gone, the two nations – namely, Russia and Turkey – still clash in this region. Now, Turkey is NATO, but it has been behaving not exactly pro-NATO lately: especially, the US has not been very happy with Turkey. In the meantime, Russia, even despite having a military base in Armenia, prefers to stay out of the battle as it sells arms to and has economic ties with both Armenia and Azerbaijan.
The Turkish President is pushing Turkey into yet another unsolvable conflict. As patriotic as it may appear to some Turks, in supporting their brother nation against Armenians, economically, it is yet another burden on the Turkish lira: war needs money, money needs to be loaned – or, printed.
Geostrategically, it alienates Turkey even more – at least, from Europe. Because Europe, as much as it would like to see Russia lose some weight, doesn’t want to see Turkey rise as a regional power to become undisputed in the Middle East. And the latter – becoming undisputed in the Middle East – is exactly the aspiration of the Turkish President.
Erdogan wants to make Turkey great again (sounds familiar, right?), like how it was in the time of the great Ottoman sultans who projected their power as far as until Vienna, in their best times. Now, as the wealthier classes disapprove of Erdogan’s autocratic and religion-imposing grip, the poorer classes mostly support him on patriotic feelings. These feelings need to feed on something – and what may be better than another patriotic war to make the poor people yell “hooray” to their president?
Up means less
The 100-MA and 200-MA have been almost identically looking upwards on the weekly chart. That means the TRY has been losing value against the USD across the years, with minor deviations. In addition to that, the trajectory seems to be accelerating its upward slope vertically – the Turkish lira is increasing the pace of depreciation.
The historical level of 8.00 appears to be just around the corner – maybe, by New Year, we will see it crossed. Technically, going that far away from the Moving Averages would be a ground to expect a nearing correction downwards. But if and when it happens, it will be a temporary technical downturn compared to the strategic upward pressure Erdogan’s politics are exerting on USD/JPY.
What does it mean for Turkey? Poverty. Same as for any other developing nation that gets driven into yet another line of old-victories-based patriotism while the developed world gets more developed and the USD keeps gaining against the TRY. Turkey is becoming a poor self-locked nation. Its people will see less wealth, less financial capacity, less financial freedom (as well as any other freedom) in commemoration of the glorious days of the Ottoman sultans.
What does it mean for you? A guarantee that your position game with USD/TRY will see no glitch: TRY will keep losing – Erdogan guarantees that. Even if he miraculously realizes how deep he pushed Turkey into the swamps of surrounding conflicts, the long-term damage to the Turkish economy is already inflicted and will be increasing.
And that’s in addition to the virus damage that decimated international tourism, and other long-term consequences related to Turkey’s international prestige. Ties with Europe and loosening – the chart of EUR/TRY looks almost the same. So it will be safe to extrapolate the trajectory as far as you need – the Turkish lira’s chance to rise is now as low as zero.
It’s always interesting to watch the change of paradigms. Erdogan is trying to project an image of a strong leader. He wants to be something separate from the line of his predecessors – including Mustafa Kemal Ataturk, whose photos, pictures, and images are almost in every home, shop, or office in Turkey. And that’s for a reason. Your people will call you “the father of Turks” (as this is what “Ataturk” stands for) when you accomplish something no less than making a nation: re-building the entire country from zero, collecting the nation on the ruins of the vast Ottoman Empire, fighting back the victorious enemy empires slicing your country, and finding a new way for a new state so that your people can carry on with their lives.
That new way was secularism: putting religion out of public conscience and state affairs in the name of progress and economic development. And that new direction worked. For almost a century, Turkey has been following the direction set by Ataturk to become a strong regional power that no state can deny. And very importantly, a state that other countries are willing to interact too. Now, Erdogan’s direction is fundamentally different from that of Mustafa Kemal. Erdogan is bringing back religion and gradually turning Turkey away from the outer world, particularly Europe and the US. What’s his direction then? Isolation.
What’s the leader image he wants to be affiliated with now? Mehmet Fatih, the great sultan who finally conquered Constantinople and converted the emblematic Byzantine church of Hagia Sophia into a mosque. Erdogan just did the same, probably hoping that Turkish people will think of him the same as what they think of Mehmet Fatih. And some do. But the difference is: these are not the times of empire expansion.
Erdogan is sourcing stronger social momentum from his people, but this momentum has no outer space to propel through, no outer lands to conquer, no room for expanding state frontiers. In other words, no extensive way of development, like it was in the Ottoman empire. Neither does he provide inner space for intensive development and inner improvements – in fact, he is doing all the opposite: limits freedoms, makes the social structures more rigid and tense.
So the picture is becoming like this: the internal pressure in Turkey increases, while there are no ways to channel that pressure, neither outside nor inside. Now, what happens when you keep increasing the pressure in a rigid metal structure? Implosion. Or explosion. Doesn’t matter: nothing good happens. Let’s hope that no such thing happens to Turkey. Otherwise, it will need another Ataturk to build it back from the ashes. This time – economical.
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