Home Research Briefings 14 October 2014 News Round-up
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14 October 2014 News Round-up

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Islamic State’s (ISIS) advancement in Kobane with drastic repercussions for Turkey and Turkey’s Resolution Process with Kurds of Turkey have dominated headlines this week. Results of the Supreme Board of Judges and Prosecutors (HSYK) elections occupied Turkish domestic news. Meanwhile, the TRY’s depreciation against the Dollar is increasing concerns of the effects of the FED’s interest rate hike, which is expected in 2015.

[tabby title=”Conflict in Syria and Iraq”]

Since the law that authorised Turkish troops for operations across its borders in Syria and Iraq has been passed, the conflict around Kobane has intensified. The Turkish government placed tanks at the border, but has not intervened yet.

Approximately 1000 people were detained, 31 people were killed and 42 people arrested as a result of the demonstrations that swept Turkey this week. The demonstrations began with mostly pro-Kurdish groups protesting the government’s inaction towards the ISIS’ military campaign into Kobane and the lack of assistance it provided to the Kurds requesting to cross the border  to Kobane and fight ISIS. Curfews were imposed in several cities. However, the demonstrations quickly turned violent for a number of reasons;

  • Government’s use of police force
  • Unidentified individuals have taken arms and opened fire against the crowds, which included an attempt to assassinate the Chief Constable of Bingol’s Police Force
  • The rise of nationalist groups that led to street fighting between Turkish nationalists and Kurdish groups
  • Infighting between different Kurdish groups, such as the street fight between members of the People’s Democracy Party (HDP) and HUDA-PAR in Diyarbakir that left 10 people dead.

Universities in Istanbul have also suffered from the instability. Students in Istanbul University were attacked three times in the past week by ISIS supporters. After 42 arrests, police forces have been located in the campus for security reasons.

Co-chair of theHDP, Demirtas, urged protestors to refrain from violence and to stay calm. Demirtas asked the Kurdish Communities Union (KCK) to decrease the tension. He said that moderate language and actions would prevent provocations and massacres. HDP deputies had met Deputy PM Akdogan regarding the protests. The HDP announced that imprisoned Kurdistan Worker’s Party (PKK) leader, Ocalan, warned that there might be massacres unless negotiations for the Resolutions Process are sped up by all parties.

Londoners staged several protests in solidarity with Kurds of Kobane in North and Central London. Protesters composed of Kurds and others accused Turkey of supporting ISIS and chanted for support for Kurds in the region.

PM Davutoglu asserted that Turkey will only consider a ground operation against ISIS if the US shares the same ambition of toppling al- Assad in his interview with CNN.

Meanwhile, leader of the Republican People’s Party (CHP) Kilicdaroglu now supports a ground military operation only to Kobane to save the town from ISIS, noting that the motion should not aim to topple al-Assad. Kilicdaroglu said that he is in favour of operations against terror organisations of ISIS and the PKK, but the motion that was passed by the parliament is quite ambiguous for its broader intentions. He asserted that Turkey should not open its military bases and air space to foreign military forces.

President Erdogan, however, accused both the CHP and the HDP of not co-operating with the government and of instigating the unrest over Kobane. He compared the situation to the Gezi Protests in June 2013 and alleged corruption operations against the government. Erdogan declared that a new security bill will be discussed in the parliament on Tuesday, 14 October to give further powers to the security forces during public protests.

Meanwhile, the tensions between the Hezbollah and the Kurds have re-kindled. The Islamist organisation Hezbollah which are known to have murdered Kurdish activists in 1990s announced that they will respond to the PKK’s attacks on them. Hezbollah on a website affiliated to them expressed that they will take up arms against the PKK.

Also, a group of people was reported to have attempted to assassinate Chief Constable of Bingol, Atalay Urker on 9 October. Urker was injured, but his deputy and a police officer were killed. It was later reported that the group was caught within two hours and killed by the police on the spot. The PKK has denied any involvement in this attack. The perpetrators of the assassination remain unclear.

[tabby title=”Other Domestic Developments”]

ISIS’s attack on Kobane introduced new elements of tensions between the Turkish government and Kurdish factions in Turkey, undermining the Peace Process domestically. The HDP Group Deputy Chairman Pervin Buldan stated that “If Kobane falls, the peace process ends.” However, Idris Baluken of the HDP stated that the HDP has been given a draft ‘road map’ for the Resolution Process by the government. He said that as a political counterpart of the process, the HDP is assessing the draft and that the process is not hampered and both sides remain on the negotiations table. According to the roadmap, the PKK is expected to withdraw from Turkey in February of 2015.

However, Turkish fighter jets have bombed two PKK targets in Hakkari of Turkey. It is reported that the police station in the Daglica town of Hakkari has been attacked by PKK forces for three days before the Turkish army responded.

Education Minister Nabi Avci announced that Christian pupils will receive religious education tailored to Christianity. He added that the same will, in the future, apply to the Jewish students. Religious education will remain to be compulsory for every pupil unless they attend a minority Christian or Jewish school.

Alevi associations held a rally in Ankara to protest against ISIS and compulsory religious education.

Critical Supreme Board of Judges and Prosecutors (HSYK) elections on the 12th of October resulted in favour of the government. The Unity in the Judiciary Platform won the elections where 10 members of the council were chosen. The government had wanted a majority in the board against alleged Fettulah Gulen followers in the judiciary. This is said to be a great victory for the AKP against, what the AKP calls, the ‘parallel state’ in state bodies.

All operations in the Soma Coal mine where approximately 300 workers had died early this year, have been suspended.

[tabby title=”Economy”]

Last week, busy data flow before the Eid led both domestic and global markets. IMF Global Economic Watch, minutes of Federal Open Market Committee and Medium-Term Programme in Turkey were closely watched. In addition, Fitch affirmed Turkey’s sovereign rate, but warned against the loss of appetite for higher risks in the global investors.

The Turkish Lira continued to depreciate this past week against the US dollar. The main reason for this depreciation was the continuing strengthening of the dollar as indicators revealed improvements in the US economy. The increase in non-agricultural employment became at 248 thousand and the unemployment retreated to 5.9%. As this data was better than expected, the expectations for the US Federal reserve to increase its interest rates solidified, increasing the demand for the dollar. The US dollar appreciated against almost all currencies in the world, and particularly TRY. USDTRY peaked to 2.3049.

However, the minutes of FOMC meeting on 16-17 September revealed that the committee is concerned about the global economy much more than the markets expected. In the minutes, it was reported that a strong USD would pose risks to the US economy and the FED would increase rates according to the global economic conditions. The sentiment in the minutes increased risk appetite and triggered an inflow towards Emerging Markets. USDTRY closed the week at 2.2872.

IMF, on the other hand, warned against the downward risks on global economic growth. In the Global Economic Watch, it was reported the developed economies recorded slower economic growth than expectations in the first half of 2014 and increasing geopolitical and financial risks threaten even further slowing down. In this framework, IMF increased its expectations for Turkey’s economic growth for 2014 to 3% from 2.3% but decreased it to 3% from 3.1% for 2015.

Likewise, Fitch Ratings warned Turkey against the loss of risk appetite by global investors and noted that Turkey has no extra measures to protect against such scenarios. With a loss of risk appetite in global investors, the amount of foreign money flowing into Turkey is likely to decrease, as Turkey’s investment environment is riskier than many European countries and stable emerging markets. A fall in foreign inflows will not only risk the value of the Turkish lira but will also question Turkey’s ability to fund its current account deficit. However, the rating agency confirmed Turkey’s sovereign rate as BBB- and the outlook as stable due the rebalancing current account deficit (as imports have been declining) and loan growth.

On the domestic end;

  • The consumer price index retreated to 8.86% in September.
  • Data showed that in August exports increased 2.9% and imports 7% annually, bringing the trade deficit to USD 8 billion.
  • Meanwhile industrial production increased 5.2 percent annually but decreased 1.4 % on a monthly basis.

The risks ahead of Turkey and the current economic situations are reflected in the Medium Term Programme which was released last week. The targets and expectations of the programme are as follows:

(%) 2014 2015 2016 2017
GDP Growth 3.3 4 5 5
Unemployment 9.6 9.5 9.2 9.1
Inflation 9.1 6 5.3 5

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