Erdogan’s crackdown hurting Turkey’s investment opportunities
When Turkish President Recep Tayyip Erdogan rose to address the World Petroleum Congress meeting in Istanbul, he wanted to present an image of Turkey as the new “Silk Road” of energy. He said Turkey was a “natural bridge” between energy producers and consumers.
While not a country rich in energy resources, Erdogan wanted to sell delegates, who gathered in early July, the idea of Turkey as an energy hub and an important crossroads of key supply routes.
Erdogan cited his country’s stability as one reason investors should support oil and gas projects linked to Turkey. He added that the security of energy resources is connected to the elimination of terrorist organisations.
Perhaps Erdogan should have quit while he was ahead. The idea of Turkey as a new Silk Road of energy is interesting. Turkey’s location makes it a natural bridge between Europe, the Eastern Mediterranean region and Africa.
Turkey is not the first country, however, that comes to mind when one thinks of political stability. Erdogan seems to label every domestic opponent a terrorist. Just recently, for example, the chair and director of Amnesty International Turkey and seven other activists were arrested and accused of being members of a terrorist group. It is difficult to discern Erdogan’s views on who is a terrorist and who is a political opponent he just wants to silence.
Turkey is a potentially attractive market for oil and gas funds. Investors, however, appreciate stability more than anything else. Erdogan’s aggressive, bombastic and harsh stance towards any opponent — real or imagined, domestic or international — has led many investors in Turkey to shy away from putting funds into the country. The March for Justice demonstration and rally July 9 in Istanbul by more than 1 million Turks opposed to Erdogan’s policies was a dramatic example of the continuing upheaval in Turkish politics after the coup attempt of 2016.
The result is that most investors are staying put and hoping that the situation does not damage investments they already made. It is extremely unlikely that they can be cajoled into investing in new projects until after the Turkish presidential elections in 2019.
Investors have an even greater concern. They fear that if they do come into conflict with the Turkish government over investment projects, they will not get a fair shake from Turkish courts. Once known for its independent nature, the judicial system in Turkey has been reshaped by Erdogan into a mere extension of his regime. Judges who have tried to remain independent have faced enormous pressures from the government to toe the administration’s line.
In a situation of political instability when investors cannot be sure of what will happen, it is unlikely they can be convinced to make large long-term investments in Turkey.
The thinly veiled threat in Erdogan’s speech to the World Petroleum Congress that he made against any oil or natural gas company that would work with the Greek Cypriots on Cyprus probably did not help his cause.
After peace talks between Turkish and Greek Cypriots broke down this month, the island’s internationally recognised Greek Cypriot government said it was going to go ahead with oil and gas exploration off its southern coast. Several large international firms have indicated they are interested in pursuing this option and spokesmen for the companies indicated little concern about the Turkish stance.
If Erdogan really wants to make Turkey the new Silk Road of energy, he needs to restore democratic institutions and ideals, not smother them. Oil and gas companies are not saints. They have long histories of working with autocratic regimes or dictatorships. For them, it is all about the money.
Turkey, however, is a country with a history of democratic and sectarian ideals, such as a free press and an independent judiciary. Erdogan’s plans for one-man rule promise more protests, continued upheaval and fewer investors in the long run.