Turkey's lira continues to trade near record lows against the dollar. Bloomberg
Turkey's lira continues to trade near record lows against the dollar. Bloomberg
Turkey's lira continues to trade near record lows against the dollar. Bloomberg
Turkey's lira continues to trade near record lows against the dollar. Bloomberg


Turkish politics enters autumn with geopolitical intrigue and mud-slinging


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September 06, 2022

Summer’s end arrived in Istanbul like a warm breeze last week. After a pandemic-driven sabbatical, the Orient Express pulled into town for the first time since 2019, welcomed to Bakirkoy Station by an Ottoman-style band after a five-day journey from Paris.

The celebration seemed fitting; the streets of Turkey’s financial and cultural capital have thronged with visitors in recent weeks, including French filmmaker Gerard Depardieu, who took in the views, and reportedly a good deal of seafood, at a well-known rooftop restaurant near Taksim Square.

Tourist arrivals to Istanbul exceeded pre-pandemic levels this summer, hitting a 10-year high and driving a 190 per cent surge in national tourist revenues. After years of complaints – that it’s too big, too far from the centre, and poorly run – Istanbul’s huge airport achieved its aim of becoming Europe’s busiest.

This helped drive Turkey’s economy to strong 7.6 per cent growth in the second quarter, besting forecasts and most peers. Buoyed by this growth, and diplomatic coups like the recent Russia-Ukraine grain deal, Turkey’s ruling AKP – which will mark 20 years in power in November – saw its polling numbers reverse a downward slide.

For the first time in months, backing for the AKP and its parliamentary partner the far-right MHP (at 35 per cent) topped support for the two main opposition parties, CHP and IYI (32 per cent). Further boosting confidence, reports from the frontlines in Ukraine had Turkey’s Bayraktar drones wiping out tens of millions’ worth of Russian hardware in a few days.

But there are signs of trouble ahead. A ship ferrying 3,000 tonnes of corn from Ukraine, thanks to the grain deal, ran aground in the Bosphorus on September 1, halting maritime traffic for hours and perhaps signalling a change in the weather. About 30 hours later, a cargo ship headed for Ukraine to pick up grain struggled with engine trouble in the same section of the Bosphorus, again halting traffic on the key regional shipping corridor.

On the weekend, reports emerged of troubling criminal activity. Istanbul police nabbed a terror suspect who they said had received training at a refugee camp near Athens run by the Kurdish militant PKK and supported by the Greek government – which, if accurate, would mark a troubling new collaboration.

Also, a top western news outlet reported that Ankara – which Kyiv has praised for barring the wartime passage of Russian naval vessels through the Turkish Straits – may be allowing Russia to transit weapons and armoured vehicles through the Bosphorus and into the Black Sea via Russian commercial vessels.

This is technically not a violation of the Montreux Convention as the ships are non-military, top Bosphorus watcher and maritime expert Yoruk Isik explained to The Wall Street Journal. But he added that if it had the political will, Turkey could make clear to Russia that such evasions were unacceptable. The fact that it had yet to do so suggests Ankara may have hoped to quietly aid Moscow.

It wouldn’t be the ruling party’s first attempt at sleight-of-hand. Turkish mafioso Sedat Peker became an online sensation last year with a series of viral videos detailing purported government corruption. In a 50-tweet thread under the Twitter handle “Crazy Sergeant”, he resumed his act last week and added to the air of foreboding with a series of new allegations involving advisers of President Recep Tayyip Erdogan.

Turkish mob boss Sedat Peker is once again stirring up scandal in Ankara's corridors of power. Getty
Turkish mob boss Sedat Peker is once again stirring up scandal in Ankara's corridors of power. Getty
There are signs of trouble ahead

Former journalist-turned-politician Ahmet Sik, an opposition-party member of parliament for Istanbul who has written a book about corruption, said in an interview days later that Peker had highlighted hundreds of alleged crimes yet Turkey’s judiciary had taken no action. “The AKP will be shut down as a criminal organisation," Sik predicted.

He may find a sympathetic ear among many Turkish citizens struggling to pay their bills and muddling through a seemingly endless economic crisis. Despite the economic expansion, inflation in Istanbul sits at nearly 100 per cent, above the national rate of about 80 per cent, and the lira hit 18.2 to the US dollar over the weekend, threatening to fall to yet another record low.

Investor services such as Moody’s continue to downgrade the country’s already junk-level credit ratings. Credit card spending quietly leapt 112 per cent in the second quarter, underscoring the growing desperation. And analysts expect Turkey’s economic growth to slow sharply to about 1 per cent by the year’s end, due in part to a possible recession in Europe.

The day after Sik’s remark, the AKP filed a suit against him, seeking 100,000 liras in damages for his attack on the party’s “respectability”. That same day, in something of a surprise, Korkmaz Karaca, a member of Mr Erdogan’s economic policy council named in the new Peker allegations, resigned of all his duties.

The first AKP figure felled by Peker’s online assault, Mr Karaca said he had never taken any bribes but that the online “lynching” spurred by Peker’s tweets posed a threat to his health. Two days later, on September 1, the second AKP domino fell as Mr Erdogan dismissed senior adviser Serkan Taranoglu, also implicated in Peker’s corruption accusations.

Turkey’s long-time leader has so far refrained from criticising former AKP ally Peker, who in turn has avoided implicating Mr Erdogan in any chicanery. But Mr Erdogan is rarely shy about going after journalists and political foes – and Sik could be seen as both. “He is a terrorist,” Turkey’s leader said on the weekend. “Let’s see how he will save himself.”

Sik has already saved himself repeatedly, having faced criminal charges for his reporting four times in the AKP era, and served two stints in jail, before winning a parliamentary seat in 2018. Responding on Twitter, Sik asserted that in a post-AKP Turkey, the judiciary “will decide who is the terrorist”.

Peker has repeatedly asserted that he is saving his juiciest allegations for the right moment, which most observers assume refers to the lead-up to Turkey’s looming parliamentary election, set for next June. Rumours have swirled about which figure he might take down, and whether he could emerge as a kingmaker.

Who in the end will triumph? Stay tuned.

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Trippier bio

Date of birth September 19, 1990

Place of birth Bury, United Kingdom

Age 26

Height 1.74 metres

Nationality England

Position Right-back

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While you're here
If you go

The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.

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Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

MATCH INFO

Uefa Champions League semi-final, second leg result:

Ajax 2-3 Tottenham

Tottenham advance on away goals rule after tie ends 3-3 on aggregate

Final: June 1, Madrid

Brief scores:

Day 1

Toss: India, chose to bat

India (1st innings): 215-2 (89 ov)

Agarwal 76, Pujara 68 not out; Cummins 2-40

New Zealand 21 British & Irish Lions 24

New Zealand
Penalties: Barrett (7)

British & Irish Lions
Tries: Faletau, Murray
Penalties: Farrell (4)
Conversions: Farrell 
 

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Updated: September 06, 2022, 4:00 AM