Face the bear

Both the new Cabinet and the military assault of a country with the world’s second-largest army mark two substantial breaking points for Turkey’s near future. If the tension between Russia and Turkey continues to escalate, which seems quite likely given the initial reactions of Russian statesmen and officials, this government will be in position to face it.

The incident will have immediate and long-term ramifications on Turkey’s foreign policy affairs, as well as its economy. I will briefly discuss the possible reflections of this new situation on the Turkish economy and its commercial ties with the Russians.

On Tuesday morning markets were warily waiting for Davutoglu’s press conference to see if Ali Babacan and Mehmet Simsek would be chosen for the Cabinet. The meeting was scheduled to start at 11 a.m., but the shock came at 9:30 a.m. when television stations started showing a fighter jet, shot down by the Turkish Air Force, falling in flames. Initial speculation was that the jet belonged to Russia, but their reaction stayed controlled since there was still a good possibility that it may be one of Syria’s own aircraft. After half an hour, it became clear that Russia for the first time since 1952 had been directly assaulted by a NATO member country.

The dollar rose to near 2.88 against the lira from around 2.84 while the benchmark Treasury bill interest rate hit 10.5 percent. Financial markets were considering the new government structure while keeping an eye on the Fed’s normalization of its monetary policy when this sinister byproduct of the witch’s cauldron called the Syrian civil war jolted them.

How will Russia retaliate? First off, the Russian state will at least even the score, but let’s hope this will be restricted to the economic field alone. But they usually inflict at least twice as much damage as they suffer. Russian President Vladimir Putin, Prime Minister Dmitry Medvedev, Foreign Minister Sergey Lavrov and other prominent members of the top echelons of the Russian state mechanism sent harsh messages to Turkey, making clear that Turkish-Russian relations would be severely affected. Putin used the term “stab in the back” and accused Turkey of being an accomplice of the terrorists, referring to the Islamic State in Iraq and the Levant (ISIL). He even hinted Russia has documents substantiating the involvement of some Turkish officials in oil trade with ISIL.

Medvedev said the Russian government will consider scrapping some important projects they are undertaking or planning to undertake in Turkey. The Akkuyu nuclear energy power plant and the Turkish Stream projects are the first to come to mind. Medvedev said Turkish companies doing business with or operating in Russia will lose ground and may face barriers. Poultry imports from Turkey may end by January of next year. Lavrov warned Russian citizens to cancel their trips to Turkey, promising a hard hit to Turkey’s tourism business. Some even suggested cutting natural gas sales to Turkey, but I don’t think this may be put into action since it would have equally high costs for the Russians, too.

The reasonable way forward would be to reduce the tension for the best interests of both nations. But is this likely under the existing conditions? It doesn’t seem so unless Russia ends its incursions on Syrian Turkmens and stops bombing moderate opposition forces.

What will happen now? Relations between the two countries will not normalize any time soon, but will they get worse? If so, how destructive will the Russian retaliation be? Was this latest incident a spark that will eventually cause the ignition of a third world war? Let’s not be so pessimistic for the time being. Yes, the chaos in Syria is extremely ominous, and it is not hard to see the seeds of a greater conflict developing in the Syrian marsh with major rival camps in the region following their lofty ideals. But they know what a disaster it would be to cause destruction such that even World War II would look moderate in comparison. At least I hope so.

Other than that, Russia has a colossal propaganda machine in the wings, working effectively as a fifth column worldwide to persuade especially Western public opinion and political circles about the legitimacy of its actions. We saw it when criticism of Putin’s autocracy became louder and when his troops shelled Georgia. We saw how effective it was during the annexation of Crimea. Seeing his prestige tarnished by a downed jet by a NATO member, Putin will employ the influential power of this propaganda machine once more. Will the new Turkish Cabinet be able to handle it effectively?


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