Turkey seeks quid pro quo arrangement with US over pandemic aid

Ankara has economic concerns, S-400 row in mind.
Wednesday 29/04/2020
Turkish Ambassador to the United States, center, stands on a tarmac as a military aircraft carrying a donation of medical supplies from Turkey is unloaded, April 28, 2020, at US Andrews Air Force Base, Maryland. (AP)
Aid for aid. Turkish Ambassador to the United States, center, stands on a tarmac as a military aircraft carrying a donation of medical supplies from Turkey is unloaded, April 28, 2020, at US Andrews Air Force Base, Maryland. (AP)

ISTANBUL--The coronavirus pandemic has offered Turkey the opportunity to try to improve ties with the United States so as to better cope with potential economic problems and defuse contentious issues in the relationship.

Ankara sent a military transport plane to Washington on April 28 carrying medical supplies for the fight against the coronavirus. It is the second such delivery to the US since the pandemic began earlier this year.

In a letter accompanying the supplies, President Recep Tayyip Erdogan told his counterpart Donald Trump that Turkey wanted to develop its relations with the US “in all areas,” pointing to a joint decision to boost bilateral trade to $100 billion a year.

Erdogan’s letter also made clear that Turkey expects its support for the US against the coronavirus to dampen criticism levelled against Ankara in Washington.

“I hope that in the upcoming period, with the spirit of solidarity we have displayed during the pandemic, Congress and the US media will better understand the strategic importance of our relations,” the letter said.

He said he hoped that they acted “in a way that our common fight against our common problems necessitates.”

US Secretary of State Mike Pompeo thanked Turkey via Twitter. “Americans are grateful for your friendship, partnership and support,” Pompeo wrote.

For Turkey, which has sent coronavirus aid supplies to many other countries, the show of support to the US has special significance as Ankara faces the prospect of new economic turbulence ahead.

It is also looking for US help at a time when ties between the two NATO allies are strained over differences in Syria and over Turkey’s decision to buy the Russian S-400 missile defence system.

Turkish officials said earlier this month that their country had held talks with the United States about securing a swap line from the US Federal Reserve and discussed other funding options to mitigate fallout from the coronavirus outbreak. In a swap, the Federal Reserve accepts other currencies in exchange for dollars. It has added temporary lines to central banks including those of Brazil, South Korea and Mexico but has made no decision in the case of Turkey.

Financial help from the US would be crucial for Ankara as Erdogan, who prides himself in having ended Turkey’s long history of relying on the International Monetary Fund, has ruled out calling on the IMF for help.

The Fund expects Turkey’s economy to shrink by 5% this year and unemployment to increase to 17% as the pandemic chokes economic activity and paralyses the country’s tourism industry, a key source of foreign currency. It would be Turkey’s second recession in fewer than two years.

Analysts have also raised concerns that a draw-down in foreign reserves could hamper Turkey’s response to the pandemic, increasing the need for external funding. The Central Bank in Ankara has been spending billions of dollars to shore up the Lira, a development that has depleted reserves. The bank’s reserves stood at $92.1 billion as of the end of March, a 14.5% drop since February, according to the state-run Anadolu news agency.

The draw-down has spooked investors, who worry that Turkey may not have enough of a cushion to shoulder a disruption in external financing.

“The main worry is that there is a pick-up in external debt repayments ahead while the tourism sector is not in a position to attract flows due to the lockdown,” Kaan Nazli, a senior economist and portfolio manager helping oversee $26 billion of assets at Neuberger Berman in The Hague, told Bloomberg. Despite the Central Bank’s efforts, the lira has lost almost 15% of its value against the US dollar since the start of the year.

Aykan Erdemir, senior director of the Turkey Programme at the Foundation for Defense of Democracies, a Washington think-tank, said the Erdogan government was aware of the economic dangers ahead.

“Erdogan fears the economic fallout from the coronavirus pandemic more than the public health consequences, given his ability to control the flow of news and manipulate the case and fatality numbers,” Erdemir said via email. “At this point, the Turkish president is just beginning to feel the real pressure.”

“The Turkish government’s publicity stunts through televised coronavirus aid around the globe can offer no remedy to the country’s looming balance of payments crisis and the ensuing fallout from a currency meltdown,” Erdemir added.

The pandemic also offered Turkey a chance to cool down another point of friction with the US.

Earlier this month, Ankara said it had postponed plans to activate the S-400 batteries, bought from Russia for $2.5 billion, because of the coronavirus crisis. The reason given for the delay was unconvincing because the pandemic has not disturbed any other areas of Turkey’s military operations.

Under the original plan, Turkey was to switch on the Russian systems this month, making them operational. The US said activation of the S-400 could trigger economic sanctions. Washington argues that the S-400 can be used to spy on NATO military equipment and has said Turkey will not be able to buy a new fighter jet, the F-35.

By postponing the activation of the S-400, Turkey is giving the US more time to come up with an alternative plan that could see Ankara buying the US-made Patriot system. No new date to unpack the S-400, which were delivered to Turkey last year, has been announced.