Khaleej
Times: Talking Turkey: Sovereign
meltdown on the Bosphorus? By Matein Khalid 28 May 2006
LIFE imitates art all too often on the ancient
shores of the Bosphorus.
Orhan Pamuk, the Turkish novelist who was castigated
by the Kemalist establishment because he dared to question the
historical whitewash of the Armenian genocide, wrote a beautiful
novel, Snow, about the passions and ideological hatreds in a
provincial Anatolian town. In Snow, an Islamist assassinates the
principal of a Turkish college because he enforced the secular state’s
ban against girls wearing headscarves. Istanbul lawyer Alparslan
Arslan might well have read Pamuk’s Snow. Last week, Arslan walked
into Turkey’s highest courtroom and shot five judges, declaring he
was a "soldier of Allah" who sought to punish the judges who
ruled against a woman teacher who wore a headscarf in violation of
laws dating back to the establishment of the secular Turkish Republic
by Mustafa Kemal Pasha in 1924.
The killings in the Istanbul courtroom awakened the
demons of the post-Kemalist past, triggering demonstrations against
the government of Prime Minister Recep Erdogan and a public spat with
General Hilmi, the Army chief. The military’s rebuke is ominous
because the armed forces are passionate guardians of the state’s
secular Kemalist legacy. After all, a Turkish military court sentenced
Prime Minister Adnan Menderes to death in 1957 (ignoring a plea for
the doomed leader’s life from a young Pakistani diplomat named Z A
Bhutto, himself destined to face his own tryst with destiny and a
Praetorian dictator’s vengeance twenty years later) and removed
Islamist Prime Minister Nuruddin Erbakan from office in the 1990’s.
A confrontation between the Army and a non-secular civilian government
in Turkey can have only one endgame. A military coup d’etat.
Political risk is rising dangerously fast in Turkey.
Three years ago, Erdogan was hailed as a hero in the Middle East for
his moderate religious agenda, for refusing to join Blair and Bush in
the invasion of Iraq, for accelerating the EU accession agenda, for
epic banking reforms, agreements with the IMF, for the plunge in
inflation and interest rates, the resurrection of the lira from the
2001 currency meltdown, for defusing the geopolitical time bombs in
Cyprus and Kurdistan, for triggering a spectacular bull market on the
Istanbul Stock Exchange.
Yet Prime Minister Erdogan now faces a grim summer
of discontent. Despite his parliamentary majority, his Justice and
Development Party (AKP) is assailed by corruption scandals, the
outbreak of secessionist Kurdish violence in Anatolia and a global
emerging markets panic that eviscerated 25 per cent from the market
capitalisation of the ISE. Ankara’s relationship with Washington
never really recovered from Erdogan’s refusal to send Turkish troops
into Iraq and his policy to engage Syria and Iran was derailed by the
assassination of Rafik Hariri and the looming nuclear crisis with
Teheran.
Nato, the EU, IMF, the PKK, the Turkish general
staff, London and Washington are formidable adversaries for any
Turkish Prime Minister to have to confront. In fact, Erdogan’s
insistence on an executive from a Sharia compliant finance house to
succeed the incumbent governor of the Central Bank outraged the
offshore money managers who own Turkish shares and Eurobonds,
triggering a panic sell-off on the ISE even worse than India’s
Sensex trauma. When the Turkish President, a secular stalwart, vetoed
Erdogan’s central bank nominee, a constitutional crisis ensued.
Moreover, AKP mayors amplified the crisis by enforcing alcohol free
red zones even in the cosmopolitan, tourist dependent Istanbul and the
sun-drenched playgrounds of the Aegean coast.
Erdogan is no Khoemini, even if his enemies portray
him as a backward foe of the Kemalist ethos. He is merely trying to
mobilise his constituency in rural Turkey to win the 2007 election in
a landslide, to succeed Ahmed Nezer as President and preempt a
military coup against an Islamist head of state. His effort to promote
his Islamist agenda backfired because it coincided with an embryonic
political economic and financial crisis in Turkey reminiscent of the
Mexican meltdown in 1994. Wall Street was horrified by the tequila
crisis in the Latin American financial markets twelve years ago. Is
history setting the stage for the next global emerging market blow up
— the baklava crisis on the Bosphorus?
It is such a pity that a moderate Islamist
government in Turkey could well fall victim to global financial
hurricanes, a leveraged daisy chain of hedge fund hot money that once
crippled Southeast Asia in 1998. Erdogan’s election ended a
generation of unstable coalition governments, a cold war with Greece
over Cyprus, a secessionist war in Eastern Anatolia waged by
"mountain Turks" (Kemalist doublespeak for Kurds),
hyperinflation and capital markets chaos. Yet with its current account
deficit and colossal Eurobond borrowing programme, Turkey is hostage
to the ebb and flow of hot capital that literally moves across the
world’s financial markets at the speed of light.
Turkey offered the perfect synthesis between a
moderate Islamist ethos and the democratic ideal. It could so easily
have morphed into a Muslim version of Catholic Ireland or Chile, a
parliamentary democracy where religion and freedom could coexist. If
Erdogan falls, it would mean the loss of the West’s natural
strategic ally in the Islamic world at a time when Iraq has
degenerated into civil war and Tomahawk cruise missiles and Stealth
bombers could soon streak across the skies of Iran. A world on the
brink of Armageddon cannot afford yet another sanguinary "clash
of civilisations".
Matein Khalid is a Dubai-based investment banker
^GOX
Gold,
