Erdogan's campaign in Syria has consequences
Surprisingly, the Turkish army's offensive in northern Syria, which began last week, is not coming. For months, President Erdogan has announced his intention to establish a buffer zone on Syrian territory at the Turkish border. So far the terrain has been controlled by Kurdish militias, the Democratic Forces of Syria (SDF). In Turkey's eyes, this group is a terrorist organisation. The invasion of Turkish troops was only made possible by the withdrawal of the most important ally of the SDF. US President Trump recently surprisingly announced the withdrawal of the remaining military members of his country from northern Syria. Not only the Kurds considered this announcement a stab in the back, even in the USA there was much criticism of Trump's actions.
For President Erdogan, domestic political motives might play a role in the campaign. After the poor performance of his AKP in the local elections in spring as well as the still troubled economic situation of his country, the head of state can show strength in the conflict with the Kurds and hope for a quick success. The fact that he will succeed in the latter will not be a success. Although the Turkish military is superior to the Kurds, there may be very different coalitions that could change the balance of power. The situation is and should remain confusing.
From the perspective of the lira there is still a much bigger problem. The campaign on Syrian territory is met with strong international criticism. The European Union, Germany, France and the Arab League have sharply criticised the military action. US President Trump also indicated that his country would be prepared to take very extensive economic sanctions if the Turkish military did something that in his opinion was "taboo". The Turkish national currency is accompanying Ankara's impending political isolation with increasing concern, as is the credible threat of sanctions from the White House. It has lost around 5.5% against the euro since the end of September.
Verbal criticism still remains. However, it is clear that tangible sanctions, especially from the USA, and speculations about limited access for the Turkish economy to the international capital market have the potential to trigger a new lira crisis. This has been demonstrated by last year's experience. At that time, the decisive action of the Turkish central bank under its chairman Cetinkaya contributed above all to calming the situation. The extent to which the current central bank chairman Uysal would be prepared to do so remains questionable.
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